getTagNameMorningstarCorporate:blog/inpractice
How We’re Exploring Advisors’ Interest in Sustainable Funds
What we found when we examined our messaging for sustainable investing
Studies often characterize sustainable investing as having an
“advisor gap.” That means while individual investors generally express
an interest in sustainable funds, advisors are often deemed less receptive. For example, a survey conducted by Morgan Stanley found that even though there is a
relatively strong overall interest in sustainable investing,
particularly among millennials and women, slightly more than 60% of
financial advisors reported little or no interest. One possible explanation is that advisors lack concise information
on sustainable investing. In a survey of 1,913 financial professionals, almost
half do not and have not offered sustainable funds to their clients
now or in the past. And among them, almost 60% cite a lack of
information and familiarity on sustainable funds as the primary reason
why. However, it is unclear what specific topics on sustainable
investing would prompt financial professionals to learn more about it. To better understand which messaging for sustainable funds
resonates with advisors, Morningstar ran an experiment on the
effectiveness of four targeted messages and one general message sent
to 6,936 Registered Investment Advisors, out of which 264 responded. The targeted messages were based on themes our preliminary research
indicated would resonate with advisors. The themes were performance,
broaching the topic with clients, understanding trends, and how to
identify sustainable funds. In contrast, the general messaging was
devoid of any themes and was simply, “Sign up to receive research on
sustainable investing.” Overall, we found that the simple, general message generated the
most interest among advisors. Our results indicate that the four
targeted appeals about sustainability did not resonate nearly as well.
In fact, more targeted content appeared to backfire. The diagram below
shows the results of our experiment. The click rates for the general messaging were the highest at about
7.5%. That’s almost twice the number of click rates as the next
highest topic. The difference in click rates between the general
messaging and the rest was statistically significant, at 95%
confidence level. Also, the click rates between each of the targeted
appeals were statistically indistinguishable from one another,
suggesting that none of them resonated better with advisors relative
to the others. This indicates that careful analysis and experimentation in the
field is necessary to craft content about sustainability that truly
resonates with advisors. Prior research showing that advisors are
disinterested in sustainability should not be treated as a given. With
the right messaging, advisors could actually be quite interested. For professionals in the sustainable investment industry, how you
talk about sustainable investing matters. A general introduction can
be effective, but there is much more we can do to understand how to
talk about sustainable investing with advisors. It is not that advisors are disinterested in sustainable funds, but
that the industry’s common messaging may not resonate with them. Most
importantly, the “advisor gap” in sustainable investing could very
well be a myth. Investors’ interest in sustainable funds shows no sign of abating.
Moreover, the two most interested parties—women and millennials—are
vastly underrepresented in investing. As women and millennials
continue gaining space in the world economy, sustainable funds will
only grow in importance—making it essential that advisors feel
comfortable working with these types of investments or risk losing
potential clients. Closing this information gap between advisors and sustainable
investing is necessary for both advisors and the institutions who
support them. Ready to get started? Read more about the benefits of incorporating ESG
into your practice.Ray Sin, Samantha Lamas, Caroline Brooks
How we experimented with words
What we learned about messaging for sustainable investing
What does this mean for advisors interested in incorporating
sustainability into their practice?
Learn about the nuances of sustainable
investing. Download “What's in a Name? The Many Dimensions of
Sustainable Investing.”