Hot Topics: Learnings from the Morningstar Investment Conference

Chris McGuire
Director of Client Growth and Engagement

What could bank marketers learn from the annual Morningstar Investment Conference? Since I had the good fortune to be invited to the event in Chicago, I figured I’d seize the chance to find out.

Morningstar says its conference “delivers our signature research, insights, and analysis to professionals who want to empower investor success.” If you’re a bank marketer looking to boost the appeal of your investment program, here are some things to put on your radar.

More investors want their money to make a positive impact.

Values-based investing, once a niche concept, is gaining acceptance among a wide swath of investors. More clients are looking to align their investment strategies with their values and getting the feeling that their money isn’t just doing well, it’s doing good.

Some takeaways:

1. Values-based investing isn’t one bucket: It can focus on the environment, healthcare or social outcomes. But it’s not one-size-fits-all:

  • Impact investing seeks to achieve social or environmental goals, as well as generate profit. Unlike philanthropic endeavors, impact investors typically expect a return on their investment, although this may be a secondary consideration.
  • ESG investing (environmental, social, and governance practices) refers to business decisions that could affect the returns of that company. For example, a company that knowingly employs child labor or engages in discrimination could be at a competitive disadvantage, particularly when marketing to socially conscious consumers.
  • Socially responsible investing goes a step further than ESG by actively eliminating or selecting investments according to specific ethical guidelines. The underlying motive could be the environment, personal values or political beliefs. Unlike ESG analysis, which shapes valuations, SRI uses ESG factors to apply negative or positive screens on the investment universe.

2. How to temper customer expectations: While socially responsible investments might make investors feel good, they may or may not perform as well as a more agnostic portfolio.

3. Finding the upside to a downside: In a down market, a values-based portfolio can shift investor focus from performance to making a difference.

4. Goalsetting: Understanding the client’s goals is essential to success.

  • What impact are they looking to make?
  • What’s their appetite for weighting between performance and impact?
  • What’s their level of commitment to a cause? It’s not all or nothing.
  • Good diversification is still important to protect investments.

More investors are trusting their money to robotics.

Get ready for rise of the robo-advisor —which is essentially a digital financial advisor that provides financial advice or manages investments without a lot of human intervention. Based on inputs from the investor, robo-advisors are designed to deliver advice and guidance digitally.

Maybe your bank has a robo-advisor program, but more likely you and your advisors compete against them. Robo-advisors generally charge a fee based on assets under management (AUM), which can be less than a traditional advisor. But do investors get what they pay for?

Some providers have more robust offerings, focusing not just on risk tolerance but on other factors such as time horizons and goals. Morningstar’s research suggests companies with a less tailored approach don’t deliver the results investors might hope for, despite the lower fee rate. Vanguard got high marks for both affordability and performance.

What does this all mean?

Clients’ thoughts about — and access to — how they invest their money is changing. Whether your investment program is a little more traditional or a little more progressive, now is an opportune time to communicate the fundamental value you provide and the ways you can best align investors both with convenience and their conscience. You don’t have to be the industry pathfinder. Just offer clients a path they can count on.

You can learn more about the Morningstar Investment Conference and its speakers here. Thanks to Morningstar for the opportunity to attend.

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Chris McGuire
Director of Client Growth and Engagement