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How advisors can guide clients with personalized portfolios

Sustainable Investing

Help Your Clients Tackle Food Insecurity With Personalized Portfolios

Key Takeaways

  • News stories and trending topics can break the ice on sustainable investing.
  • Transparent conversations and metrics can help clear the confusion around environmental, social, and governance risk factors and sustainable impact.
  • The personal relationship between client values, financial goals, and risk tolerance defines how you manage ESG portfolios.

Read Time: 5 Minutes

At the Bayview Hills YMCA, near the air station made famous by Top Gun, up to 300 military families pick up food donations each month. Tens of thousands of service members live in the San Diego area, one of many where military families are going hungry.

One nonprofit estimates that as many as 125,000 active-duty military families face food insecurity. The problem is especially acute for young parents. Junior-enlisted ranks earn a modest salary, and frequent moves make it hard for their spouses to find work.

Have you talked with your clients about issues like food insecurity? Headlines that spark personal conversations at the dinner table or in the break room also can create trust between advisors and their clients. With careful listening, you can build personal relationships that clients can’t get from a self-service platform.

At its core, investability depends on each person's risk comfort, goals, and values. Here’s how to guide client sustainability conversations on community issues and use that insight in personalized portfolios.

Table of Contents

When to Bring Up Social Issues With Clients

As the past decade has made clear, it’s hard to discuss environmental, social, and governance issues with loved ones—much less your financial advisor.

Today advisors have to swim upstream against general distrust in financial institutions. According to the Financial Trust Index, only a third of Americans say that they trust financial institutions.

Consistent communication and personalization can help you keep clients for the long term. In one survey, respondents agreed that personal advice helped build trust with their advisors [PDF].

During the onboarding process, you can set the tone for your relationship by talking about goals and motivations. Treat impact as another potential way to measure the success of an investment proposal, like risk-adjusted returns. How easily do they adapt to risk? How would they rank their financial goals, like a down payment or emergency fund?

With current clients, major life shifts can be an opportunity to revisit the motivations that drive their investing choices. After events like marriage or retirement, you can refocus on what clients hope to achieve with their dollars.

As an advisor, it can be hard to talk about social issues with clients without putting your thumb on the scale. Clients might feel judged for being honest about preferences. Others might struggle to quantify their commitment to sustainability issues.

Goal-based financial planning tools can guide clients through structured conversations about their financial futures. Based on client responses, you can easily connect risk profiles to personalized investment strategies.

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Are Your Clients Invested in Fighting Food Insecurity?

Confusing and conflicting terms can discourage potential clients from sustainable investing. In one survey of retail investors, only 24% of respondents could define ESG investing.

News stories can crack open some of the impenetrable industry jargon. Your clients might have mixed reactions to terms like “impact investing,” but they have clear feelings about food insecurity. And specific examples can help investors unpack some of the complexities of sustainable investing in a concrete framework.

Maybe one of your clients served in the military and feels strongly about supporting those serving today. Maybe another serves on the board of a local food bank. Or your clients could have faced food insecurity themselves and hope to pay it forward.

Listen carefully in these conversations to determine their level of interest. When you understand what matters to your clients and why, you can build investment proposals that match their personal goals.

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Strike a Balance Between Impact, Risk, and Performance

Not every client will be comfortable with the risk or performance trade-offs that would lead to the impact they desire.

One of your clients could prefer to focus their portfolio on maximizing returns. They might choose to volunteer at a soup kitchen as their way of giving to an issue they care about. Another client might have two children in college and worry about short-term risk. In the future, sustainable investing might feel more realistic, even if it means sacrificing some returns.

During onboarding, you can work together to write down clear goals for the portfolio. Transparency helps you stand out as an advisor and set clear expectations.

Consider questions like:

  • Do clients want to consider other non-financial investment issues, like sustainable resources or improving people’s lives?
  • How much would your client pay in fees for a portfolio that aligned with their values?
  • Would your client extend the timeline for their financial goals to invest in their values?
  • Would your client be comfortable with taking on more risk if it meant they could invest in their values?

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Crafting a Plan for ESG Portfolio Management

Guided by client goals, advisors can test potential scenarios to develop a plan that best fits each investor.

Take the client interested in hunger relief and food security, for example. Maybe they would want to exclude companies based on corporate controversies like food wastecorporate controversies like food waste. Or maybe they would want to invest in specific companies, like Coles Group. The Australian retailer donates meals to food rescue programs and now uses “imperfect” products in other value-add products.

Hypotheticals can show clients how their investments might fare in volatile markets. With something to visualize, clients might refine their preferences, and you can find a better fit for their motivations and goals.

With the ESG questionnaire coming soon to Morningstar Advisor Workstation, you can capture client preferences on the sliding scale of impact, investment, and risk. This impartial assessment helps clients understand trade-offs between sustainable products and potential fees.

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Explore the Investable World

Financial security. Freedom from economic anxiety. A healthier planet for all. Today, our definitions of successful investing are as diverse as we are.

Clear, unbiased research can help investors reach their goals, whatever they may be. Investable World shines a light on risks and opportunities with transparent ESG research.

Discover the Investable World.