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Pain vs. Gain: Why It’s Worth It to Move to an Impact Investment Portfolio

Two portfolio managers talking about impact investments

Pain vs. Gain: Why It’s Worth It to Move to an Impact Investment Portfolio

The climate crisis, a deadly pandemic, war, gun violence . . . our world’s challenges are more urgent than ever. And there’s an increasing demand from investors to become a proactive part of the solution. 

There’s also good reason to do so: your investments can have far-reaching, large-scale impacts that far exceed the individual benefits of composting or driving an EV. Making a bigger impact starts with aligning our investments with our values via an impact investment portfolio.

But if you’ve been investing in more traditional channels, or have had your wealth parked with more traditional wealth managers (like banks) for some time, the perceived pain of moving your investments – whether from one wealth manager or portfolio strategy to another – can seem great.  This can lead to apathy and could delay your ability to do more with your money.  

The truth is, while there may be a bit of discomfort in shifting your investments to a more sustainable approach, the gains far outweigh the pains. Here’s how.  

Divest to Do Good with an Impact Investment Portfolio

The social movement to divest from investments that support fossil fuels or military weapons and into ESG funds has gained traction, says Thomas Irwin, Partner and Client Relationship Manager at Genus.

Although the energy sector has recently had a strong run, Irwin notes that clients who are focused on climate change and other ESG-related factors look beyond the market’s fluctuations. “It’s more about a long-term vision and how that aligns with their values,” he says. “More and more people are realizing that impact investing is beneficial, and that more and more institutions are coming to the market with options.” A recent Bloomberg Intelligence report notes that “global ESG assets may surpass $41 trillion by 2022 and $50 trillion by 2025, one-third of the projected total assets under management globally.”

Genus offers impact investment portfolio options ranging from fossil-free and ESG-oriented portfolios, to impact investments that enable you to not only screen out companies and industries, but also to actively support sectors that are advancing the United Nations’ Sustainable Development Goals ranging from access to education and sustainable cities to promoting gender equality and making production and consumption processes greener and cleaner.

Woman looking at her impact investment portfolio

Tax Triggers and Fees When Moving to an Impact Investment Portfolio

Transferring your investments to an impact investment portfolio takes some due diligence to avoid unintentionally triggering penalties, but this is where your portfolio manager can help, as it depends on whether your funds are registered or unregistered.

There are no tax implications when transferring registered funds like a tax free savings account, RRSP or RRIF, since money isn’t coming out; it’s simply moving from one account to another within that registered plan.

For non-registered investments, “if we’re moving into our pooled funds,” says Irwin, “we would need to sell the existing investment, transfer the cash and invest in a Genus portfolio, which would trigger a potentially taxable event,” such as a gain or loss.

Taxes are important but they’re only part of the investment equation. Before money is moved, Genus’ advisors will review your current financial statements to assess the positions currently held (including from a tax standpoint) and discuss your risk profile, time horizon and financial goals, as well as the pros and cons of any investment choice. All this is supported by formal documents, such as an investment policy statement, new account application and a management agreement.

While the relinquishing institution typically charges for redeeming and transferring out assets to another institution, Irwin says that the administrative costs are usually small relative to the benefits, and the mechanics of the transfer are simple. Bottom line? We handle the paperwork to ensure the transition goes smoothly.

Navigating the Emotional Side of Investments

For many investors, transferring investments is more emotional than tactical: the dread of having the awkward conversation that comes when explaining that you’re moving your money. 

“When we put together an account package, it includes an authorization that, once the client signs, gives us the authority to contact the relinquishing institution, so the client doesn’t have to do it themselves.” 

– Thomas Irwin, Partner and Client Relationship Manager at Genus

Genus overcomes this barrier by taking care of the logistics, eliminating the discomfort of breaking the news. “When we put together an account package, it includes an authorization that, once the client signs, gives us the authority to contact the relinquishing institution, so the client doesn’t have to  do it themselves. We’ll send a formal notification saying that the client wishes to sell their investments and transfer those assets to us.” 

Transfers can often happen quite quickly, and there’s very little turnaround time with a taxable portfolio, says Irwin. Registered accounts can take a little longer, so plan for the process to take two to four weeks. 

When to Move Your Money

It can be tempting to attempt to time the market, but you shouldn’t let economic headwinds or downturns dictate your decision to move your money. “While we may not be able to control what the market is doing, we can control how we act when it comes to our investments.” says Irwin. “For an investor who has values as a very strong motivator, that’s something they can control. Divesting and investing in companies that are doing good things, making an impact—that is a way you can take control and  feel better about lining up your values and your money.”

Interested in exploring how to move to an impact investment portfolio? Talk to a Genus Advisor today. 

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Client impact

“Graduating from a big bank to Genus was one of the best financial steps we've ever taken. Genus has delivered reliable asset growth despite our moderate risk tolerance. As our financial security has grown, we've also been the beneficiaries of a great client experience. The company's communications have been consistently transparent and informative, including educational webinars and a well-designed web portal where we can track investments daily. Most importantly to us, our portfolio manager has always responded swiftly and thoroughly to our questions and requests. ”
Martin T.
"Having relatively diverse financial goals and needs, along with a slight reticence regarding the stock market, Genus skillfully addressed all of our concerns, and put together a truly exceptional plan: Fossil free funds and a diversified investment portfolio, check; An effective Impact investment portfolio that coincides with our hopes and dreams for a better world, check; Professional advice and assistance to create a donor advised charitable fund with immediate charitable receipts for tax purposes, check. Returns? Way beyond our expectations! We even had some fun along the way and certainly enjoyed an incredible two-year start to what will be a satisfying long-term relationship with Genus."
Marc B.
“I love the service I get at Genus.”
Chris H.
“Leslie and I were fellow board members when we met twenty years ago. For the last ten she has been thoughtful in the construction of an investment strategy for my family and is executing the strategy as planned. The team at Genus has met my expectations and are a pleasure to deal with.”
Bob Q.
“For over 15 years, I have provided selection and performance evaluation of multiple investment managers for a significant family office. Leslie and Genus have been foundational for me in my role. I have always found Leslie and her colleagues to be insightful and proactive, and found the performance of their portion of the portfolio to be well above benchmarks. And they have been a great pleasure to work with.”
Douglas H.
“Genus is a very innovative firm. I am pleased to invest in their Fossil Free and Impact strategies that help me invest in line with my values.”
Marnie C.
“Great team of professionals. Excellent website and reporting. Responds to inquiries promptly. Very pleased with the process of changing from another company to Genus as well. Kudos.”
David L.
“Genus consistently provides a good, clearly explained, comprehensive picture of the general economic and financial situation, along with an excellent account of the investment decisions made in relation to this. Genus’ equally strong concern with clients’ questions and requests for further information is also a very important part of the service it provides.”
Allan S.
“Back in 1992 when I found myself at fifty with a substantial amount of money to invest, I knew just one thing — that I didn’t want to contribute to tobacco companies, arms manufacturers, or oil. But over the ensuing years the options for socially responsible investing have become far more sophisticated and I’m very happy that this is a big part of the Genus approach. I also very much appreciate the long-term relationship with my portfolio manager, Mary Lou.”
Ann P.

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