Hosted and produced by Bruce Sellery
Mixed and edited by Jason Perrier of Phizzy Studios
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Bruce Sellery: Hello, I’m Bruce Sellery. This is Prosper. The financial advisors podcast from Advisor’s Edge. You might be hearing some more questions from clients about responsible investing, people talking about it so much these days. Are you prepared to answer their questions? We’re going to spend most of this episode on one topic, the different approaches, like ESG integration and Norm-Based Screening, all that kind of stuff. And what the big trends are that are likely to be most relevant in the decade ahead. Our guest is Tim Nash. He’s the founder of Good Investing.
Tim Nash: I think it’s hard to get people to care about their money. I think that as advisors, one of the biggest challenges is just getting that spark of interest. As soon as I start talking about how it relates to their ethics and beliefs and values, Oh my goodness. They perk right up, their eyes light up. They care about this stuff.
Bruce Sellery: Tim works with clients on how to make their portfolios profitable for themselves and also profitable for the planet. Plus, we’ll bring you another tip from a prosperous practice.
Wade Carrefour: Hello, my name is Wade Carrefour. I’m a certified financial planner as well as the chartered life underwriter in the Greater Toronto Area. Today I’d like to share with you my perspective on gifting to clients who refer business to us.
Bruce Sellery: That’s coming up on Prosper.
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Bruce Sellery: There has been a lot of talk about climate change lately. Whatever your personal views are of the science, you can bet that some of your clients have strong feelings about it. As a financial advisor, you’re smart to at least have an idea of how you would play the climate change theme. Tim Nash is the founder of Good Investing. He works on a fee for service basis to help investors build sustainable portfolios. Hello there.
Tim Nash: Hi thanks so much for that [crosstalk 00:02:19]…
Bruce Sellery: Did I accurately characterize what you do?
Tim Nash: That’s absolutely correct, you nailed…
Bruce Sellery: It’s what you do. We’re going to spend the whole show on this topic. First, we’re going to focus on the present. Second, we’re going to, we’re going to talk a bit about the future. I want, first off, for you to give me the term that people use today to refer to what in past we have called sustainable investing, socially responsible investing, ESG. What’s the correct term for today? Are they all still in use?
Tim Nash: They’re all still in use. I know you’d think we would have consensus around the language, but we really don’t.
Bruce Sellery: All those things sort of mean the same thing.
Tim Nash: Yeah, and I mean the way I kind of break it up is I talk about sort of impact first versus financial first. So if there’s someone who really cares about the impact, I’ll often use the term like ethical or sustainable investing that’ll resonate with them. Whereas there are people that are doing this for purely financial reasons, and they’re going to use this acronym, ESG, environmental, social, governance, which is kind of like insider baseball, like sort of if someone’s really doing it just for the financial side, they’re going to want to talk about ESG.
Bruce Sellery: Regale me with some data. How much is this growing? I’ve seen some stats in terms of AUM. The percentage gains seem dramatic, from a share standpoint it’s still not massive.
Tim Nash: Yeah, and it depends on the context that we’re looking at. If we include foundations and pension plans that are doing some type of ESG analysis, we’re talking massive amounts. I’ve seen about 20% of global assets in this direction. So really that’s going to be… But those, I mean, when it comes to Canadian Pension Plan or Ontario Teacher’s Pension Plan, they’re doing it, but I, they’re not doing it very heavily. It’s really sort of a minimal kind of skew. When we look at it from a sort of the ETF perspective, which is my market right here in Canada, the most popular ETF is the Jantzi Social Index. And that’s got about $150 million under management, which is not bad. It’s grown quite substantially over the last few years, especially as the robo advisors, this is the one, the ETF that’s inside Wealthsimple and the different responsible robos.
Tim Nash: Whereas in the U.S., you know, the most popular socially responsible ETF is at about $1.5 billion. So I mean it’s definitely so much higher than it’s been in the past. But if we are looking at market share specifically on the retail side I don’t think we’ve quite cracked 5%.
Bruce Sellery: So, as you know, this show focuses exclusively on financial advisors. Some believe in responsible investing because it aligns with their values, like they believe in it. Some believe it because they believe the companies with those values will do better, as you say, the ESG language, and some don’t believe at all, but they want to have an answer when a client calls, which I think is smart. Why do you personally think responsible investing matters and why should financial advisors pay attention?
Tim Nash: Sure. I think it’s hard to get people to care about their money, right? I think that as advisors, one of the biggest challenges is just getting that spark of interest. So often when I just present sort of the raw data, people’s eyes glaze over and they want to take a nap. You got it. And especially with younger generations, right? A lot of these sort of intergenerational transfer of wealth.
Tim Nash: You’ve got these younger millennials who aren’t as keen on hearing about this sort of thing. As soon as I start talking about how it relates to their ethics and beliefs and values, oh my goodness. They perk a write up, their eyes light up. They care about this stuff, and they are now actively engaged in this process.
Bruce Sellery: It’s not that they don’t about their money. They care deeply about their money, but they care about it in a values way as you say. Or they care about it in their ability to buy the stuff that they want or have the experiences that they want to have. They just don’t really care about the things they need to do to get a handle on it. Like the savings and budgeting and all that kind of stuff.
Tim Nash: Exactly. So to me this is really, you know, I describe it as a bit of a hook for people, right? To get them to care, to get them to pay attention. It’s sort of by aligning it with those values. I think what it does is it makes it so much more meaningful for people and that really this to me is about client retention for a lot of advisors that if someone comes to, if a client comes to you and you know you don’t have a good answer for these things, they’re going to start looking at other options. So to have good answers here for existing clients, but also like I said for that younger generation coming up.
Bruce Sellery: If a client brings it up, where should the advisor take the conversation? And as you mull that question, I’ll put an asterisk beside it because of course advisors are licensed in so many different ways. You might be restricted to selling mutual funds or you could have an ability to get into specific stocks or ETFs or whatever.
Bruce Sellery: But broadly speaking, where should the advisor, they hear the question, where should they go, right?
Tim Nash: So just to be clear, all of those options are available. So there are mutual funds, ETFs, companies, all that’s on the table when it comes to this world. And really this is an opportunity for advisors to stop talking and to start listening. And really what advisors…
Bruce Sellery: You look at me like you’re giving me that advice. Because, I’m supposed to stop talking and start listening. Okay.
Tim Nash: I think all of us. I mean in the financial industry, a lot of us are trained as sales people.
Bruce Sellery: Listen, listen, listen.
Tim Nash: And so to me it’s about understanding where is the client on this spectrum. That there is a wide spectrum from this idea of sort of socially responsible investing and kind of the negative screens of just getting rid of the, we call them sin stocks because it was the Mennonites who started this in Canada. So getting rid of alcohol, tobacco, military companies, things like that.
Tim Nash: And then you know, all the way down to deep down the rabbit hole where people are talking about fossil fuel divestment, where people are talking about only investing in sustainability leaders. You know, really for me it’s about listening to the client and asking some questions to figure out where are they on this spectrum and what are the issues that they care about.
Bruce Sellery: There is something called the Canadian Responsible Investing Trends Report and there were some really interesting stats and some interesting strategies outlined. And what surprised me was the order of importance, and I’m going to go through them. The ones that I’m aware of are tiny compared to ones that do the big volume. So ESG integration is the first one. How would you describe that in layperson’s terms?
Tim Nash: Okay, so ESG, environmental, social, governance is kind of a code word for broad sustainability, right? So what’s happened is that investment analysis firms, there are two big ones, MSEI and Sustainalytics. What they do is they assess companies that go through their reports, both on the financial side and the sort of corporate social responsibility, CSR reports. And what they do is they give companies an ESG score.
Bruce Sellery: Is this why we would see companies like Microsoft, Facebook and Apple in the top of these socially responsible funds when a party is “Like, wait, they have nothing to do with saving the planet. They just make phones.”
Tim Nash: That’s right. And this is very much about the risk analysis side. So Microsoft has a pretty good ESG score across the board. Facebook is fascinating because they have a good environmental score, they have a good social score, they have a horrible governance score.
Bruce Sellery: Interesting.
Tim Nash: So again, we tend to get this data on the silos, the E, the S and the G, and then obviously it does get put together for an overall score. And this is where, again, there’s a wide spectrum when it comes to these issues that some funds will exclude Facebook for that poor governance score where some of them will just look at the aggregate, in which case Facebook will slide through.
Bruce Sellery: And ESG integration the top of the list in terms of share of AUM, I get it because it’s quite general and broad based and in its, in the way of thinking about it. Shareholder engagement is number two. How do you describe that?
Tim Nash: Right. So shareholder engagement is about using your voice as a shareholder to push companies in a more sustainable direction. So as a shareholder, right, I’ve got rights, I’ve got voting rights, I’m an owner of the company.
Bruce Sellery: Especially if you’re a massive foundation or a sovereign wealth fund or a pension.
Tim Nash: Oh my goodness. Yes. And also increasingly these ETF companies. So BlackRock and Vanguard now have so much power when it comes to this. And so these… Now I don’t expect people to like show up to the annual general meetings…
Bruce Sellery: With a placard.
Tim Nash: And vote their shares. Like no, no, no. Typically people are going to invest in funds and those funds are going to have something called proxy voting guidelines where they’re going to vote your shares, those shares on your behalf based on those guidelines. And so what we’re looking for are funds with very strong guidelines saying that we will vote for any motion, something like climate change disclosure or something like a minimum wage increase to a living wage, right. These are all motions that shareholders will put forward and that obviously we want to vote for those motions.
Bruce Sellery: Number three in importance is Norm-Based Screening. So, this is companies aligning with international standards like the United Nations Global Compact, for example.
Tim Nash: So this is going to get rid of the worst of the worst companies.
Bruce Sellery: I love how low a bar we’re setting.
Tim Nash: So really with something like the global compact, this is going to be things like child labor. This is going to be things like really unsafe working conditions.
Bruce Sellery: I talked to someone yesterday who was talking about eliminating companies that transport hunter’s trophies. Like the lions they shot on the Savannah, right? We were not going to invest in companies that bring those trophies home. It’s a whole other thing. Negative screening or exclusion based criteria.
Tim Nash: Yeah, and although this is kind of far down the list when it comes to these institutional investors, this is probably top of the list when it comes to retail investors that I deal with.
Bruce Sellery: Because it’s the one we know.
Tim Nash: That’s it and they want to get rid… These are the people that are saying not one penny into sectors like tobacco, like military and then people are going to have specific companies like you know it’s a little tricky one that always pops up for my clients is Nestle, right? They have a really high ESG score. They do a lot of good work…
Bruce Sellery: Baby formula.
Tim Nash: But there are some people, the baby formula combined with the bottled water, where there are so many people I know that are just like “Not one penny.” And so these are going to be really tricky for advisors because these are really going to vary client to client and they can be very difficult to manage.
Bruce Sellery: These last two are the ones that I think consume most of the air in the room. Thematic ESG investing, this is like a clean tech fund, and impact investing, which is things like solar bonds. Tell us a bit more about those two.
Tim Nash: Sure. So the, these are what I would call ‘doing more good’ with your portfolio. So where’s the other stuff is kind of doing less evil, right? This is doing more good and so this is allocating money to things that you really believe in. And again this is where the spark happens. So this is what I would suggest advisors sort of focus on is let’s carve out part of your portfolio for funds that invest in clean technologies, renewable energy and then this burgeoning field of impact investing, which to me is so exciting. Things like community bonds, green bonds, micro finance, where I’m making direct investments that are still earning me a market rate return. But I’m doing things like actually building solar projects.
Bruce Sellery: And I could drive by the wind farm if I wanted to.
Tim Nash: Absolutely. These are often things that are going to be local. Although micro finance is more global, loans to entrepreneurs in emerging economies.
Bruce Sellery: The trends report also has data on why investors consider ESG issues, and this really surprised me because there’s a whole bunch of reasons. Minimize risk, improve returns, fulfill fiduciary duty, fulfill missions about… Number six. Number six is pursue social and environmental impact. Really?
Tim Nash: Well, and again, I think this is more looking at the institutional market where of course they’re more focused on the fiduciary responsibility, right? So they’re doing it because it does outperform. You can get better risk adjusted returns, which is really the driving force for them. I think on the retail market it’s going to be a little bit different. Certainly most people that are coming to me, it’s because A, they kind of feel guilty about the stuff that’s in their portfolio. They want to get rid of some of those things and B, again, they’re looking for that spark. They’re looking to actually get excited about these things.
Bruce Sellery: I want to ask about the new wants of making investment decisions. Given how complicated all of these issues can be. There is no, not no black and white. Yeah, guns or no guns is black and white, but a lot of them, they’re nuanced. I was talking to the founder of the vegan ETF just now in the marketplace and they’ve got big financial institutions at the top of their holdings list. How do you and how do you work with that financial advisors and clients to reconcile what fits and what doesn’t fit.
Tim Nash: Yeah, and this is the hardest part. So again, this is where we have to start listening. Really all I can do with clients is to show them the different methodologies, go through the companies inside and help them determine where they draw the line. And there’s a wide, wide, wide spectrum, right? So you know, if you don’t want the vegan portfolio, you don’t want animal testing, you don’t want meat companies, but what about the banks who are going to be investing in those things? What we call indirect investments. I can’t tell you what to do. All I can do is provide you the information and empower you to decide where you want to draw the line. And if it’s a thumbs down, it’s a thumbs down and I need to accept that, but everyone’s going to have a completely different perspective when it comes.
Bruce Sellery: Interesting. Aside from Beyond Meat, the biggest developers of the meat alternative products are meat producers. Like Tyson.
Tim Nash: They recognize it, right? They’re the ones that are seeing this trend and they don’t want to get left behind.
Bruce Sellery: Tim Nash is our guest. He’s the founder of Good Investing. The focus of our episode today, responsible investing. We’re going to take a brief break and when we return we’ll look at the future of responsible investing and talk about some of the trends you can expect in the decade ahead.
Tim Nash: Cleantech is definitely, I would say probably sort of the sexiest industry now.
Bruce Sellery: We should probably define it.
Tim Nash: So clean technologies are going to be a wide range of technologies encompassing renewable energy, energy efficiency, green buildings and construction, right? There’s going to be a wide range, probably what gets the most airtime right now is electric cars.
Bruce Sellery: And later prosperous practice. A quick tip on building your business.
Wade Carrefour: That we take a very personal approach when thanking a client for an introduction or referral. We believe this goes a very long way and not only thanking them but letting them know that we are paying attention and we do not take them for granted.
Bruce Sellery: There is a ton of really, really great information and insight on our website. The address is advisor.ca. There are articles on industry news, tax issues, investments, insurance, practice management, all sorts of stuff. You can also sign up for our daily e-newsletter and subscribe to our print magazine. Stay with us. We’ll be right back.
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Bruce Sellery: Did you know that 45% of Canadians say that they’re interested in responsible investing, but only 5% say they’re knowledgeable about it. And those numbers are on the move, in part given the increasing attention that topics like climate change had been receiving in the media over the last couple of years. Tim Nash, the founder of Good Investing, he is back for part two of our conversation and we are going to shift our sights to the future. Okay, so we’re looking to the future. I saw this report from UBS Wealth Management and it said that adoption of responsible investing was just 12%, this is a U.S. number, so 12% of U.S. investors, but that that will increase by something like 60% in the next five years. Are you that optimistic? Do you think that’s going to unfold that way?Tim Nash: I mean, I hope so. Mind you, I’ve been waiting for this for a long time, so I’ve been in this industry for 10 years. Ten years ago I saw the tidal wave coming that really you can do just as well financially if not a little bit better with returns. You know, and I think that’s really the, the change that’s taking place. For so long, people assumed you had to sacrifice financial returns to do the right thing.Tim Nash: And now study after study from these major… Big tree huggers like UBS and the Bank of Canada.
Bruce Sellery: It’s like eating healthily, like the cookies that use whole wheat flour are just not as good.
Tim Nash: Right? People assume that, but when it comes to this, especially ESG integration and broadly looking at these sustainable investment strategies, they actually perform better. So, as more people clue into this, I absolutely think that a tidal wave is coming.
Bruce Sellery: So, awareness is a big deal.
Tim Nash: Absolutely.
Bruce Sellery: What hinders the growth of responsible investing. So for example, how are people in a stock market correction? Does it make them more traditional, at least for a time? I know we don’t have the data on that because we haven’t had a massive correction in the last decade.
Tim Nash: Yeah, so I mean what I tend to look at our fund inflows and outflows. It was really interesting looking at the 2008 crash, because what I saw was that there were fewer outflows when it came to these socially responsible and sustainable funds. My theory is that people are more loyal when they believe in what they’re investing in. That if you’re investing in a fund or in a company simply for financials, the moment the sort of tide turns and things get a little dicey, you’re going to cut and run, you’re out of there. But if you actually believe in the company with sort of this long-term story, I think you’re much more likely to ride out the storm.
Bruce Sellery: Which countries around the world are leading the way in responsible investing?
Tim Nash: It’s definitely Europe. So Europe is all over this, right? When I look at these, the options that are available there, both on the supply side and the demand side.
Tim Nash: I always look at the Norwegian pension fund…
Bruce Sellery: God I love the Norwegians.
Tim Nash: Yeah. And they’re doing such amazing things where this is now become, I would say the default way for people to invest. Recognizing that you know, this is the smart thing to do both financially and ethically.
Bruce Sellery: So, Europe is leading. What would you say are the asset classes in which most of the innovation is occurring? So maybe not share-wise, but is it clean tech? Is it solar? What is the, what’s the nuance of how those businesses work?
Tim Nash: So Cleantech is definitely, I would say probably sort of the sexiest industry.
Bruce Sellery: We should probably define it.
Tim Nash: So clean technologies are going to be a wide range of technologies encompassing renewable energy, energy efficiency, green buildings and construction. There’s going to be a wide range. Probably what gets the most air time right now is electric cars.
Tim Nash: You know, Tesla is just in the news all the time. Huge amount of interest when it comes to these electric vehicles. But it goes much further beyond that. And I would actually say that when it comes, on the financial perspective, it’s really about energy efficiency, which is not necessarily that sexy, right? But that’s going to be the most cost effective way for people to be able to reduce their CO2 footprint. You’re lowering energy costs and you’re lowering your CO2 emissions, so it’s kind of easy to get that sort of win-win.
Bruce Sellery: The cliché word is the environmental ecosystem. People love to use the word ecosystem, but I think it’s fair to say there’s a lot of players here. There are founders of businesses, there are venture capitalists, there are regulators, there are politicians, there’s pension funds, there’s private equity firms. The private investment firms, there are sovereign funds. What are some of the dynamics that play out between all these different players?
Tim Nash: Yeah, I mean, I think that it’s really understanding that green sectors right now are still sort of in their infancy. They’re on the smaller side of things. So if you’re investing in renewable energy, in clean tech, these are going to be either from sort of the seed stage, venture capital, all the way up to sort of like small cap sectors. There are very few, a sort of a large cap green companies that are in this space. So I think it is what we would call sort of a nascent industry. And I think what we’re seeing is a lot of support across the board from governments, from investors realizing that these companies need to grow, we need them to succeed, right? And that if we’re going to be transitioning to this low carbon economy, there’s a lot of work to be done here and there’s a lot of money to be made for companies that have those solutions.
Bruce Sellery: That’s something else that Europe does differently. So do they incent, that activity, do they funded, are there subsidies, are there requirements in procurement, that kind of thing.
Tim Nash: Yeah. So definitely stricter regulations, things like car missions, things like that. And then the thing that I’m a big fan of is carbon pricing, right? So this is to me the best market based solution. This is what the biggest oil companies in Canada are advocating for. Suncor, Husky Energy, their senior officials are saying we would much rather have a price on carbon rather than strict regulations. Because the price on carbon they can deal with, they can do the math, they can figure that out. It’s a very consistent not market based policy…
Bruce Sellery: It almost incents innovation versus regulation disincents it.
Tim Nash: Absolutely. That’s entirely it. So you know, and it’s just been really frustrating to see all this opposition to it because this really is the most conservative climate change plan is put a price on pollution.
Tim Nash: We know there’s a negative externality, there’s a social cost to CO2 emissions. Let’s put a price on that and let’s let the market innovate.
Bruce Sellery: What more needs to be done on, I’m using air quotes here, labeling because there was an article in Barron’s recently that flash and responsible funds that had stocks like Shell, like British American Tobacco, like Diageo, the liquor company and it just, there’s mud, it’s muddy, it’s muddy. So what more needs to happen on labeling.
Tim Nash: Yeah. I mean, it would be nice to get consensus around sort of the taxonomy here that I would really love to have these more stringent labels. We’re seeing a lot of work around green bonds. This is sort of an exciting area right now and that they are getting certified so they’re actually audits taking place to ensure that they are living up to that label. But at the end of the day there’s always going to be greenwashing. This is as all this as corporations itself where it’s…
Bruce Sellery: Let’s define that term.
Tim Nash: So greenwashing would be companies that are really sort of talking green and not backing it up with action. So a great example of this would have been a BP, British Petroleum, rebranded as Beyond Petroleum. Then their CEO got canned and they went back to BP.
Bruce Sellery: The petroleum got all spilled into the ocean.
Tim Nash: Exactly right, so you know, that was a great example of greenwashing. You know, more recently we had Volkswagen right, where they had these diesel cars and then it turned out they were cheating. So they were trying to get this green halo of these sort of diesel engines, very clean diesel. And then it turned out it was BS.
Bruce Sellery: And at the same time there are massive companies who have a heritage in traditional energy production who really are investing in renewable resources. They are making that genuine effort I think more than just a PR move. And we don’t want to… Your take your body language is skeptical here.
Tim Nash: I am. Because when it comes to the energy sector, again I see way more PR releases than I see actual projects. So to me the company, if there is a leader it’s going to be Totale, which is the European where they’re doing a lot of really cool stuff actually putting huge amounts of money. When it comes to a firm like Exxon, they put something like $100 million into biofuel from algae a decade ago. And I haven’t heard a peep from them since. So how much did they spend on advertising that $100 million investment. Right. And then it’s not really going anywhere.
Bruce Sellery: How are financial advisors supposed to keep on top of all of this stuff? I mean, how do you keep on top of the right things versus on top of all things? Because I just saw an article about palm oil production and the link to deforestation. I didn’t know that. Should I have known that? I didn’t know that. So for a financial advisor for whom this isn’t their full time gig, how do they engage because their clients are going to ask them for it. If not today, then in the next five years without becoming overwhelmed by it.
Tim Nash: Yeah, and I would really let your clients guide you, right? That you’re never going to know everything about this. One of the huge issues I get from clients who come to me because their advisor wasn’t able to give them what they need is they often find that the advisor kind of tries to talk them out of it or sort of tries to mansplain a little bit.
Tim Nash: Whereas really what I would say to advisors is there’s no harm saying, “You know what? I’m not aware of this issue, but this is really interesting and I can tell you means a lot to you.” Let me do a little bit of homework and then to go and use your Bloomberg terminal, use Thomson Reuters. These things have ESG data on there. Use Yahoo Finance, which can list all these different controversy areas. Do a little bit of homework on the issues that matter most of your clients and then come back to them with sort of a reasonable expectation of, “Well, it’s never going to be perfect, but here’s what we can do to move you in the right direction.”
Bruce Sellery: We’ve talked about so many of the themes looking ahead to the future of responsible investing, what ones have we missed that we just cannot finish before we talk about these other things that are going to affect this world in the next 10 to 20 years? What else is on your radar?
Tim Nash: Yeah, I mean, so the big, so in terms of taxonomy and the definitions, the big thing right now are the sustainable development goals. So we now have with the UN these 17 goals where we actually agree on these sort of no brainer things that we all should be working on. These are going to be environmental as well as social issues. And so to me it’s really the two major issues I see going forward are income inequality and climate change.
Tim Nash: And so to me it’s… And income inequality is always going to be tricky when we’re talking about investments, right? Because we’re trying to…
Bruce Sellery: I can see how to profit from climate change because you can invest in electric cars. I don’t know how I invest to profit air quotes again to profit from income inequality.
Tim Nash: And so really what it comes down to are companies that are servicing what we call the base of the pyramid. The billion poorest people on the planet that are now coming out of poverty. Like capitalism is doing some amazing things and we’re seeing this emerging middle class in all these what used to be sort of developing countries that are now emerging…
Bruce Sellery: The names that I think of right away are packaged goods companies like Proctor and Gamble my alma mater or Nestle or Kraft or whatever.
Tim Nash: Unilever would be a good one.
Bruce Sellery: Unilever.
Tim Nash: Or Danon.
Bruce Sellery: They aren’t necessarily producing products that are consistent with environmental concern.
Tim Nash: And so this is going to be that sort of ESG balance, right? What are the companies that kind of understand this holistic approach? But I would say that the biggest economic opportunity when it comes to this global economy is going to be about finding solutions for those poorest people in a way that it also is environmentally sustainable.
Tim Nash: And if companies can crack that nut, they’re in a position where they’re going to be making billions of dollars for decades.
Bruce Sellery: What are the risk factors that financial advisors should keep in mind as they walk this path with their clients? What are the risk factors facing investment in the business? Not necessarily in the business itself. I mean, who knows if a clean tech company is going to deliver? And I don’t mean in that way. I mean for a financial advisor, what should they have on the radar?
Tim Nash: Oh, so I mean, I really think it’s talking to clients and getting them to understand that it’s never going to be perfect, right? And really about managing those client expectations that you’re never going to have all the information. It’s never going to be 100% sustainable. That really communicate that we’re going to do the best that we can given the products that are available right now.
Tim Nash: If you’re talking about a financial risk perspective, it’s really all about carbon risk right now. The bank of Canada has now come out and said this is one of the largest systemic risks facing the Canadian economy and Canadian investors are overweighed when it comes to the Canadian stock market.
Tim Nash: So if you’ve got 30% of your portfolio in Canadian equities and that Toronto stock exchange is now what, like 20% energy mining and you know, another huge amount that’s banks that have that carbon risk, that really, that would be the, I would say the biggest financial risk is understanding that carbon footprint and you got to be careful there.
Bruce Sellery: You almost seems like something that advisors could work with their clients to do in a very small way. So it’s 2% of the portfolio. It’s 5% of the portfolio and it’s a ETF or a mutual fund or three companies that we’re going to walk with play watch with, play money.
Tim Nash: That’s it. And you know, it doesn’t have to be zero to a hundred right away. You don’t have to completely divest from fossil fuels, but you could for example, go underweight those sectors and then hedge them by investing part of the portfolio and clean technologies.
Bruce Sellery: Really interesting stuff, Tim. Thank you very much.
Tim Nash: Thanks so much for having me.
Bruce Sellery: Tim Nash, founder of Good Investing, our two part conversation on responsible investing and what’s next for the future. Get a group of seasoned financial advisors together and you can learn a lot as a part of this show. We’re bringing you a quick tip on each episode from a seasoned financial advisor. We call it prosperous practice.
Wade Carrefour: Hello, my name is Wade Carrefour. I’m a certified financial planner as well as a chartered life underwriter in the greater Toronto area. My business focuses on providing holistic financial plans for mass affluent families and business owners. Today I’d like to share with you my perspective on gifting to clients who refer business to us.
Wade Carrefour: First, I’d like to say that by far referrals are our number one source for new business. It’s important to note here that a review of your business to ensure you are referable would be a good starting point. It is extremely important to us that we take a very personal approach when thanking a client for an introduction or referral. We believe this goes a very long way and not only thanking them but letting them know that we are paying attention and we do not take them for granted. Over the years of servicing our clients in their home at the office or wherever we may meet, notes are made outside of our normal financial discussions.
Wade Carrefour: These notes may include stuff like kids involvement in sports, personal hobbies, things in common, preferences to food or drinks. The list goes on. The idea behind making these notes play a much bigger role than the compliance aspect of getting to know your client. These discussions go much deeper in building and maintaining a healthy client advisor relationship while fondly enough it also helps us in determining an appropriate gift for the client. That refers us to a family member, friend or colleague.
Wade Carrefour: Here’s an example. Everyone knows the feeling of getting socks or underwear for Christmas or on their birthday and I’m willing to bet most of us know that that’s not a very memorable feeling. Now, what about that gift you’ve been wanting or thinking about for months, the one you’ve been telling your partner or friends about all year, what feeling resonates with you when you open that gift and it’s actually something you value or care about?
Wade Carrefour: I’m guessing it’s going to be a little bit different than those socks. My point here is make your gift thoughtful, a gift card to that restaurant they were ranting and raving about. Tickets to go see their favorite sporting team, a day outing to their favorite gallery or amusement park. Something that is relevant to them on a personal level. Generic gift cards, thank you letters and emails are very impersonal and in my opinion, don’t give that warm and fuzzy feeling we were looking for.
Bruce Sellery: That’s it for this episode of Prosper, the financial advisors podcast from Advisors Edge. We would love to hear your comments or questions and your topic ideas. You can send us an email if you want to kick it old school, our address, firstname.lastname@example.org or connect on any of our very, very social media platforms. Twitter is advisorsCA, Facebook advisorsedgemagazine, LinkedIn advisor.ca, and you earn a thousand good karma points if you click that little subscribe button on your podcast platform. That will enable the next episode of the Prosper podcast to just magically appear on your device while you’re there maybe rate and review us too. That’d be nice. Thanks for listening. Now go out and prosper.