Advisor Insights

The ESG Revolution

Don Phillips

The times are a-changing, the tables are turning. Investor concerns, which have long taken a back seat in the retail asset-management process, are gaining momentum. Wall Street is at long last being prodded, to an admittedly still-small measure, to address the concerns of those they serve. Slowly, the asset-management industry is conceding a fact it has long denied: It’s the investor’s money and it’s the investor who deserves to call the shots.

We’ve already witnessed a power shift in the flow of monies in the retail investment world. Thirty years ago, assets went almost as readily to high-cost funds as to low-cost ones, to ones with good risk controls as to those with poor ones. Today, that’s no longer the case. Now, assets flow to funds with better practices and lower fees. Investors and their advocates (financial planners, the press, and regulators) have demanded better value from fund companies— and fund companies, to their credit, have responded. Where once retail funds were sold, not bought, and assets went to those firms with the biggest salesforces or marketing budgets, today assets flow to those firms that serve investors best—ones that create better investor outcomes. The industry is more a meritocracy, rather than the marketing machine it once was. In the process, the investor has been raised from the lowly position of consumer (buyer beware!) to the elevated status of owner. It’s a nobler structure.