By Danielle Verbrigghe
Morgan Stanley Wealth Management has unveiled a new mass of resources around Catholic-values investing, aiming to provide advisors with more nuanced approach to aligning clients’ investments with their values.
The new offering includes educational material for advisors about options for aligning client investment portfolios with guidelines from the Catholic Church. That includes guidance on how advisors can utilize the lineup of about a dozen Catholic-values based strategies, available on the platform. In addition, the wirehouse is providing a flexible framework to let advisors customize portfolios to meet clients’ specific faith-based objectives.
The move is part of a broader program designed to target high-net-worth and institutional investor interest in nuanced, and targeted approaches toward values-based investing. In the future, the wirehouse plans to add additional material targeting other specific niches within the sustainable or values-based investing universe.
If successful, the program could be a boon to values-based investment managers on the platform. Morgan Stanley has previously made a public commitment to raise $10 billion across its “investing with impact” program by 2018. The firm is already more than halfway to that goal, says Lily Scott, director of that program.
Pope Francis’ advocacy around social and environmental issues during his recent visit to the United States, and in this summer’s Encyclical, a papal letter sent to bishops, has heightened interest amongst Catholic high-net-worth and institutional investors in aligning investments with guidelines promoted by the Church, Scott says.
"Since the Pope’s launch of the Encyclical [papal letter] in June there has been an increase in consciousness as it relates to Catholic-values investing," Scott says. In response, the firm timed the launch of the program to coincide with the Pope’s recent visit to the U.S.
Pope Francis, who has referred to unfettered capitalism of money as "the dung of the devil,", has done much to heighten awareness of social and environmental issues such as poverty and the environment, consultants say. While Catholic-values investing has also been buoyed by growing interest in socially responsible investing broadly, the Pope’s high-profile advocacy has also piqued interest, says William Burckart, founder and CEO of Burckart Consulting.
"You have an incredibly popular Catholic Pope who has jumped out there and has talked about the need for capitalism to be more humane," Burckart says.
At the same time, distributors are realizing that talking to clients about religious, or other more specific flavors of responsible investing, can help them build stickier relationships with clients, Burckart says.
Talking to clients about religious-values based investments can allow financial advisors to create a deeper connection with clients than talking about socially responsible investments in a broader way, Burckart says.
Targeting specific religious or values-based approaches can add "nuance and intimacy to this broader world of responsible investments," Burckart says. "It can resonate in a way that general-investing responsibly doesn’t."
Within Morgan Stanley’s philanthropic arm, "the vast majority" of clients are giving assets to a religious organization, says Scott. But many of those same clients may not be yet incorporating those religious values into their investment portfolios. That untapped market signifies a big, untapped opportunity for values-based investment managers.
"We see institutional clients that are demanding an alignment of their investment objectives with their values, which are typically unique values," Scott says. "We also see individual high-net-worth investors and families seeking to align their values with their [investments]."
And there is still room on the shelf for managers with innovative, values-based strategies.
Morgan Stanley is actively seeking out additional investment strategies, including SMAs, that fit the Catholic-values investing niche, as well as for other categories of socially responsible investments.
"We’re absolutely looking for high quality, innovative solutions," Scott says.
In August, Morgan Stanley added Great Lakes Advisors’ Large-Cap Catholic Sustainable Responsible SMA strategy to its Fiduciary Services SMA program and Select UMA program. The strategy was previously available on the wirehouse’s dual-contract platform.
Since then, Great Lakes has seen an increase in activity in the strategy, said Thomas Erdmier, director of intermediary distribution for Great Lakes Advisors in an emailed response to questions.
"Client demand is increasing as they become more aware that it’s possible to invest in accordance with their values," Erdmier says. "Secondly, the misconception that investing along these values produces inferior returns is no longer the case. Long-term performance and academic research has shown it’s possible to achieve market rate returns while investing with one’s values."
There is still plenty of room for product development around values-based investments, says Burckart, the strategic consultant.
"It’s a market that is still in early days," Burckart says. The shelf of products hasn’t yet caught up with the potential for innovation, he says.
And distributors are under pressure from their clients to provide quality investment options aligned to specific values or flavors of responsible investing, he says.
In fact, Morgan Stanley announced the new offering the same week as protestors reportedly targeted its offices in several cities, expressing umbrage over coal investments, as reported by the International Business Times.
That sort of pressure is encouraging financial services firms to align their own practices to socially responsible investing standards, Burckart says. He points to the move by many firms to sign the United Nations Principles of Responsible Investment. However, most of those firms are still a ways off from actually implementing the principles at a firm level, he says.
"A lot of them have signed up, but they haven’t actually implemented these guidelines and principles," Burckart says. "It’s very much still a work in progress."
Article published on October 13, 2015
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