Should Financial Providers Focus On Socially Responsible Investments?



Should financial providers focus on socially responsible investments?  Despite personal reluctance regarding this type of investment class, the overwhelming answer is “yes”.  Socially responsible investments are becoming increasingly attractive to investors, especially younger investors who will quickly become important to providers as they increase their wealth and influence.

 Currently, only 31 percent of Millionaires consider the social responsibility of a an investment when making an investment choice.  This is based upon Spectrem’s ongoing research with wealthy households in which more than 1,000 Millionaires are surveyed each quarter.  Social responsibility is much less important to making an investment choice than Risk at 92 percent, diversity at 88 percent, and tax implications at 76 percent. 

Most Millionaires (78 percent) indicate that their objectives when making an investment are purely financial.  In fact, almost half feel that “social responsibility” is more of a spin created for public relations rather than a real investment opportunity.

But that attitude varies deeply based upon age.  Forty one percent of those under the age of 44 think about Social Responsibility when making an investment compared to only 29 percent of those over the age of 65.

 It is easy to argue, however, that the current crop of investors is more likely to be over the age of 65 rather than under the age of 44.  While this is true, based upon the fact that many socially responsible investments and related funds are still relatively new, investment companies have time to create a longer term track record and perhaps to increase the performance of many of these investments.  Focus group research indicates that socially responsible investments have the reputation of being “poor performers” or “anemic”.

Millionaires are more interested, however, in being socially responsible than in the past.  When asked to compare their interest in social responsibility when investing today compared to five years ago, almost half of investors, regardless of age, indicated that they were more thoughtful regarding this issue.

Younger households are generally more open to new trends than older households.  Just as “organic” foods and sushi are becoming more popular with older households, perhaps socially responsible investing will join that trend.  Regardless, the current 30-years olds will soon be 50-year olds.  It happens to everyone.


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