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Engage and Retain Clients During Market Volatility with ESG Investing

Published on

March 26, 2020

Client retention is one of the biggest challenges facing advisors as they expand their practices. In fact, advisors named client retention their top concern of 2020, according to a recent survey conducted by E*Trade.  In the midst of widespread investor uncertainty and market volatility, shifting the conversation to ESG opportunities can help advisors reassure their clients while keeping the focus on the fundamentals of a smart, resilient, and long-term investment strategy. 

Understandably, many investors panic during market volatility, and it is the financial advisor’s job to reassure them that they are prepared to weather the storm.  Taking the opportunity to look closer at their portfolios’ ESG scores can reassure investors their investments are well-positioned: McKinsey describes the evidence converging on the finding that ESG investments are more resilient to market shocks than traditional funds as “overwhelming.” (See our previous blog, “Investors look to ESG investing during market volatility.”)

Having a conversation about ESG investing also allows advisors to demonstrate the value of personalized service and attention — a critical driver of client satisfaction and retention.  Research shows that signaling “shared values” around the broad philosophy or higher purpose of a business is extremely important to client loyalty.  Having a conversation about the impact a client’s investments can have on society – for example, on the climate, diversity in the boardroom, or gender equality – is a clear, actionable way to deepen customer relationships.   

This kind of personalized attention is particularly important to keep clients happy and business humming: a recent study in the financial services sector indicates a 5% increase in customer retention produces a 25% increase in profit, while Harvard Business Review reports that acquiring a new client is anywhere from five to twenty-five times more expensive than retaining an existing client.

Lastly, a conversation about ESG allows you to focus on the long-term. As younger cohorts come to represent a larger and larger share of the wealth management client base, adapting to their well-documented preference for conscious consumerism is critical to maintaining market relevance.  This is a key long-term trend that will only continue as an unprecedented $30 trillion is passed down and inherited from older generations over the next several decades - along with the advisor relationships that manage them.  

OpenInvest’s platform makes it easy for advisors to start the conversation about ESG investing with clients around the impact their investments can have. With portfolio transition tools that visualize investment impact across several dimensions and shareholder engagement tools like proxy voting with a swipe, OpenInvest makes it easier for advisors to customize portfolios that match their clients’ values. 

Investment in securities involves the risk of loss. Past performance is no guarantee of future returns. One cannot invest directly in an Index. Any opinions, estimates and forecasts offered in this document constitute judgment as of the date of the materials and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. We believe the information contained in this document to be reliable but do not warrant its accuracy or completeness. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be suitable for all investors. This material has been prepared for informational purposes only and it is not intended to provide and should not be relied on for investment, accounting, legal or tax advice. OpenInvest may not have verified (and disclaims any obligation to verify) the accuracy or completeness of any information herein that has been provided or obtained by third parties.

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