Choosing a socially responsible financial planner
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Choosing a Socially Responsible Financial Planner

Whether you’re a business owner or an individual, you may find yourself in need of a financial planner. But, maybe you’re keen to ensure that your money is invested in a socially responsible way. Many of us now choose to buy from ethical businesses. We do the research, and we ask questions to make an informed decision. So perhaps you want to apply the same logic here to ensure you choose a socially responsible financial planner.

A financial planner covers a multitude of services, such as:

  • tax planning
  • negotiating loans
  • finding gaps in your insurance coverage

They provide a service through many significant life events such as inheritance, having a family, or getting divorced. They help businesses to understand and reach their short and long-term financial objectives.

So, you’ve established that you need a financial planner. You’ve also decided to make sure that your chosen financial planner is socially responsible. Now you need to find one. Here are some tips on how to go about doing that: (it probably goes without saying that none of the below should be considered as investment advice!):

Explore financial planner websites

Let’s start with an obvious one. Use keywords to search on Google (“socially responsible” with “financial planner/ advisor: should get you some hits). Other key phrases to search for are green, ethical, SRI, ESG, and sustainable investing.

Generally, if a financial planner is interested in responsible investing, they will make this known on their website. This information shouldn't be hard to find. If it is, or it’s stated in small print at the bottom of a page, then perhaps question whether they are the right fit for you.

To get an idea of where their priorities lie, look for any charitable work they might be doing. I found a financial planner online that stated that a portion of their income is donated to non-profit organizations. This gives me a good insight into their ethics, and I’d want to know more, so I’d request a meeting.

Arm yourself with responsible investing knowledge

So you’ve found a few financial planners you like the look of. Before you request a meeting, it’s worthwhile doing some research on responsible investing so you can ask the right questions. Here’s a bit of a guide:

Terminology: SRI / ESG

Firstly, it’s useful to know what SRI and ESG stand for. These will be important terms to know and understand.

SRI stands for socially responsible investing. This might mean investing in businesses that are involved in clean energy, human rights, or those that follow sustainable practices. It may also mean deliberately avoiding investments in companies that damage the environment. Selecting ethical businesses to invest in is known as inclusionary or positive screening.

This is a simple explanation of SRI, and you should know that there are different approaches to ethical investments. This can be through engagement for positive change or delivering positive impacts (where benefits can be measured).

SRI observes the Environmental, Social, and Governance (ESG) factors whilst still looking to achieve positive financial returns. ESG factors are measured before an investment is undertaken within that company.

choosing a socially responsible financial planner
Image by Jack Moreh from Stockvault

SRI is growing at an unprecedented rate. The US SIF Trends Report (2018 Release)1 says that “(SRI) assets have expanded to $12.0 trillion in the United States, up 38 percent from $8.7 trillion in 2016.” 

The Fourth Annual Responsible Investing Survey from Global Investment Manager Nuveen shows that 81% of investors indicated that they wanted to advance environmental sustainability. This was compared with 73% in 2015.  Also, 80% of investors said that their investments should strive to make a positive impact on society. This was up from 75% in 20152.

Socially Responsible Index Funds

managing money and choosing a socially responsible financial planner
Image by Jack Moreh from Stockvault

Business Insider says that according to financial planners, index funds “are one of the best investments for building long-term wealth.” Index tracker funds look to match the securities within a particular index. Returns should, therefore, be similar to that of the index.  Linking back to SRI, there are a good number of indices that track companies with excellent ESG ratings, so worth a conversation with your financial planner about these.

Sustainable investing myths

Want to learn even more? Take a look at these five sustainable investing myths, which question the idea that sustainable investing is only about investor values, and not good returns.

It’s also fair to say that sustainable investing is not only about the environment: it covers far more. Remember, ESG stands for “social” and “governance” as well. It can be about safety in the workplace (social), or Board diversity (corporate governance). You may find this example of ESG factors useful.

The UN’s “A Blueprint for Responsible Investing”

Just a quick note about the bigger picture.  The UN’s Principles for Responsible Investment (PRI) has a ten-year blueprint plan to integrate ESG factors into investment management practices.  Investment managers will need to be much more transparent and will need to start sharing their ESG screening methods. PRI Chair Martin Skancke says:

“Investors’ responsibility to use beneficiaries’ money in line with their best interests extends beyond providing a return on their capital: it includes ensuring that that money is being invested in ways that support sustainable development towards a world in which beneficiaries can live fulfilling lives”. 

Questions for your potential financial planner

Questions to ask a socially responsible financial planner
Image by Mohamed Hassan from Stockvault

In 2017 41% of financial advisors said they would actively bring up SRI with a client. This compares to 51% in 20183 So, the number of professional advisors bringing up SRI is definitely increasing, but it’s still only around half. This means it still may be up to you, the potential client, to start the conversation.

So, you’ve taken a look at their website, and you’ve learned a little about SRI. Yo' selected financial advisor. It’s time to present them with your list of questions. Here are some suggestions to get you started:

  • Ask about their website. Presumably, you selected them because they’ve made some sort of reference to SRI.  If this is the case, quiz them on their policies and their ethics. If there’s no mention of ethical investing on their website, ask them why not.
  • Quiz them about any ongoing research they do on SRI and ESG factors. How do they educate themselves on these issues?
  • Ask about index funds. Are they a good option for your particular needs? Ask them about specific ESG indices and what their thoughts are on these.
  • Query which stocks they view as unethical, and why this is the case.

A good socially responsible financial planner will ensure that they answer all of the above questions, as well as any others you may have.

If socially responsible investing is something you feel particularly strongly about, then do take the time to learn the terminology. Also, read up on some background information. Don’t be afraid to ask questions to ensure you are comfortable with the financial planner you finally select. After all, it’s your money, and it should be invested exactly in the way you intend.

Disclosure: None of the above should be considered investment advice or encourage you to adopt a particular investment strategy. Investment decisions should be made in consultation with a professional advisor.

1Report on US Sustainable, Responsible and Impact Investing Trends (Press Release). US|SIF Foundation. The forum for Sustainable and Responsbile Investment. 2018.
2Fourth Annual Responsible Investing Survey. nuveen. A TIAA Company. 2018.
3Fourth Annual Responsible Investing Survey. nuveen. A TIAA Company. 2018.

Sam produces our regular #TRVSTLOVES where she seeks out inspiration, news, and ideas from across the globe that both highlight and celebrate how actions can make for social and environmental change.

Sam is passionate about seeking out small businesses that are implementing remarkable and exciting projects to tackle the climate crisis; she enjoys exploring how their innovation will help change the future of our world.
A degree in English Literature from the University of Southampton has given Sam the research expertise to share and contextualize stories around innovative projects, legislation, and changemakers.

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