U.S. millionaires’ demand for sustainable investments is the lowest demand level of any service in the U.S. wealth management market, according to GlobalData’s 2018 Global Wealth Managers Survey.
Although 90 percent of U.S. providers interviewed have socially responsible investments in their high-net-worth (HNW) proposition, the demand they experience for such products is moderate at best. On a 0 percent (very weak) to 100 percent (very strong) scale, sustainable investments stand at 50.1 percent. This is the lowest level of any service in the U.S. wealth management market — and it is forecast to increase only slightly over the next year.
With the number of impact investing funds on the rise, a UBS report looked at HNW investors with at least 1 percent of liquid assets, allocated to investments linked to environmental, social, and governance factors. Out of the countries surveyed, the United States had the least appetite for sustainable investing, with only 12 percent of HNW individuals having them in their portfolios.
Sergel Woldemichael, wealth management analyst from GlobalData says, “Although sustainable investing may not currently be the biggest money-maker, that does not mean providers should omit it in their proposition. Parallels can be drawn with robo-advice; both offerings are ahead of their time and will be key for the next generation.”
Indeed, 53.4 percent of U.S. wealth managers surveyed by GlobalData believe socially responsible investments are more important to the next generation than the current generation of clients. Research shows that millennials are committed to their money having more of a social impact than their elders, and wealth managers’ views echo this.
Woldemichael concludes, “As the generational wealth transfer approaches, wealth managers will need to ensure the next generation’s needs are met sooner rather than later, as heirs are likely to start influencing their parents’ investment decision even before the actual wealth transfer. Wealth managers need to adopt or expand their sustainable investments, as demand for these products will only grow.”
