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What You Need to Know

A Cerulli Associates survey shows that up to twice as many investors as advisors are interested in ESG investing.
Advisors tend to restrict ESG investing to wealthier clients, which is a mistake, according to Cerulli.
Advisors also tend to favor the largest fund companies for ESG investments when other firms have more experience.

Despite increasing interest in investments focused on environmental, social and governance issues among investors, advisors and asset managers, many advisors are still reluctant to offer ESG strategies in client portfolios, according to a recent report from Cerulli Associates.
More than half, 58%, of more than 1,000 advisors surveyed cited lack of investor demand for their lack of ESG strategies, while 44% of 1,200 retail investor households surveyed said they preferred to invest in an environmentally or socially responsible way and 80% of investors reported a preference for investing in companies that are leaders in environmentally responsible practices.
The Cerulli survey also noted that advisors tend to limit ESG investing to their high-net-worth clients, which Cerulli defines as investors with more than $5 million in investable assets, leaving out the 56% of households with investable assets between $100,000 and $250,000 who said they would rather invest in companies that have a positive social or economic impact.
“In order for responsible investing to fully develop and grow in retail channels, advisors and asset managers must fully understand the appetite for ESG investing among retail investors. … Both asset and wealth managers should seek to make ESG investing more accessible across wealth tiers,” the report notes.
Advisors Favor Biggest Fund Managers for ESG Investments
When they do invest client assets in ESG investments, advisors tend to favor large asset management firms like Vanguard and BlackRock’s iShares division. When asked to rank the firms that had the best reputation for providing quality ESG offerings, about half the advisors surveyed selected Vanguard and 44% chose BlackRock/iShares, even though Vanguard has only five ESG funds available to U.S. investors and BlackRock has 28.
Moreover, only about 16% of advisors rated Calvert (now part of Eaton Vance, which has been acquired by Morgan Stanley) and Parnassus as having the best reputations for quality ESG offerings when the two firms have invested exclusively in sustainable investments since their beginnings, which date back to 1976 for Calvert and 1984 for Parnassus.

What You Need to Know

Schwab is reducing the number of advisor firms in the two advisor referral programs to 175 from 298.
TD Ameritrade’s AdvisorDirect referral program is being integrated into the new Schwab Advisor Network.
Schwab is selecting RIAs based on matching the unique needs of affluent investors in each market, it says.

Charles Schwab has started the process of integrating the Schwab and TD Ameritrade advisor referral networks this week as part of an initiative that will result in a decrease in the number of participating RIA firms to 175 from 298, Schwab said on Wednesday.
TD Ameritrade’s AdvisorDirect (AD) referral program is being integrated into the new Schwab Advisor Network (SAN), a “single, industry-leading referral network for independent advisors,” Schwab spokesman Rob Farmer told ThinkAdvisor.
The combination of the two programs, first reported by RIA Intel on Wednesday, is “part of the continuing integration of Schwab and TD Ameritrade,” Farmer said.
The integration of the companies started after Schwab finalized its acquisition of TD Ameritrade Oct. 6.
“As with all aspects of integrating the two companies, bringing the referral networks together took careful consideration,” Schwab said at its website, introducing the new SAN.
“Each participating SAN and AD firm was reviewed with an eye toward investor need and the makeup of the combined branch network footprint,” Schwab said, explaining how it selected RIA firms for the new referral program. “Although the resulting program may look new, the focus remains the same: serving high- and ultra-high-net-worth investors in markets throughout the United States,” it said.
The referral programs for both firms have been “incredibly successful both for advisors and the investors they serve,” Schwab said. “We recognize the strong advisor interest in our respective referral networks and made their integration a priority among the important work we’re doing to combine the two companies.”