Want to attract younger clients? Invest in ethical stocks

| June 18, 2018

By Johanna Roberts
June 18, 2018

Trevor Thomas thinks many advisers are missing out on the chance to engage a younger generation of clients by ignoring their preference for ethical investments.

“The younger generation doesn’t just want to put their money in, get a return and that’s that,” Thomas says. “They want to feel that what they’re investing in is actively doing some good in the world.”

Thomas has carved a career out of constructing ethical share portfolios for his clients, but he’s aware that he’s a bit of an outlier in the financial planning sector.

“Millennials grew up with the pall of climate change hanging over them and they are used to the likes of Apple talking about becoming carbon neutral,” Thomas says. “But they have found that some advisers have been dismissive when they have tried to talk about ethical investments.

“And we as financial advisers are gatekeepers, so this has slowed our progress as a collective,” he says.

While advisers are starting to open up to ethical investments, Thomas says many –to their own detriment – still have a long way to go.

“It’s better than it was even five years ago, but there is still this idea that ethical investments or stocks don’t perform as well, and that is untrue,” he says. “We make it clear to our clients that ethical investments are no more likely to perform better, but they certainly won’t underperform as a rule either.

“Some offer very competitive returns, yet many advisers do not have ethical options on their approved product list.”

Thomas has been working as an adviser at Ethinvest for 21 years, and is now the managing director. As the company’s name suggests, the firm promotes investments that line up with clients’ beliefs and values.

“Ethical investment means different things to different people,” Thomas explains. “For many, it’s companies that are actively trying to limit their footprint and the resources they use, and for others it’s pioneering medical companies that are improving people’s lives.”

Ethinvest compiles reports on ASX companies’ commitment to corporate responsibility and the social good, for clients to peruse. There are five financial advisers on staff, with 25 staff members in total.

“We have a lot of staff helping the advisers,” Thomas says. “No two share portfolios are the same, so individual share portfolio management takes a lot of time.”

The company manages 650 portfolios all up, with the median size sitting at about $1.2 million.

“We have everyone from younger clients to couples nearing retirement,” he says.

“They share a commitment to investing their money in a way that is environmentally and socially positive.”

Thomas’s personal commitment to ethical investments was born out of the seven years he and his wife spent in Paraguay in his late 20s and early 30s.

An economist by trade, he decided to head to South America to engage in economic development when he realised “how unequal the world is”.

“We were working in poor communities where people didn’t have jobs and it was very hand to mouth,” he says. “We ended up focusing on adult literacy, vocational training and keeping kids in schools.

“It was a wonderful experience and we’re still in touch with many of the people we met in Paraguay.”

It also taught Thomas important lessons on the realities of economic development.

“You realise that the utopian society you were trying to help bring about is not so easy,” he says. “Change is hard, and slow and incremental. But it’s also worthwhile.”

Name of firm: Ethinvest

Name of licensee (if not self-licensed): Ethinvest holds AFSL

Time in the industry (previous jobs?): 21 years (economist at CBA and AP-Dow Jones Telerate, 7 years in South America in economic development

Academic qualifications: MBA; bachelor’s degree in economics (honours)

Accreditations: Certified Financial Planner

Professional association memberships: Responsible Investment Association of Australia; Ethical Advisers’ Co-op

TOPICS: Ethical Investing, Trevor Thomas