Paul: Young professionals in our industry are creating online platforms to work with millennial investors. What can a firm like Veris learn from these platforms?
Lori: The online platforms are providing a lot of information to millennial investors who want to do the research themselves and understand the mechanics behind financial products, as well as the fee structures. The traditional financial advisory world can learn from this by doing more education up front with clients.
Today, there are algorithms that suggest strategies, but this is not a professional advisor, so perhaps this can work for people who have very basic needs as investors. These platforms don’t have comprehensive impact investing solutions yet, and you can’t have a conversation with someone who can customize that solution for a particular person’s interests and passions. We do a lot of listening in order to understand clients and make sure their portfolio is reflecting who they are.
Paul: How does Veris approach shareholder engagement?
Lori: Veris is a manager of managers and we often choose those managers because they have expertise in shareholder engagement, so we know we are getting the right type of proxy voting and resolution filing. The managers report on this quarterly and we report back to the client. The managers contact us when they are filing a resolution and want our clients’ shares to be part of the process.
Paul: Do you have clients who want to be active in shareholder engagements with corporations?
Lori: The majority of clients prefer to outsource that work to experts, but some clients want to be involved. I have a client who was holding shares of a company that she inherited for the precise reason of shareholder engagement. The process becomes more personal when someone has held the stock across generations, what we call legacy positions.
Paul: Do you think we are going to see the development of ESG materiality standards in the next five years that investors can use as guidelines?
Lori: I think that the development of ESG materiality and impact standards will be really important for our industry. SASB’s (Sustainable Accounting Standards Board) work to establish reporting guidelines of material ESG risks will help standardize the acceptance of these issues over time. For public equities, I think we will start to see more ratings of portfolios, comparing the carbon footprint of your portfolio to a benchmark, for example. From an overall portfolio perspective, including fixed-income and alternatives, impact-reporting standards will take some time because the infrastructure isn’t built yet.
Paul: As a partner in a firm like Veris, you’re putting your expertise to use in multiple ways. How can other young people interested in a career in our industry develop the kind of focus you have?
Lori: Talking to people already in this field has been one of the best ways for me to learn and connect. Also, join networks like WISE (Women Investing for a Sustainable Economy) that can introduce you to those people. If you want to work on the asset management side, you still need to get a CFA or an MBA, but you will be that much stronger as an analyst if you have a passion for sustainability as well as the financial background. I feel like there is so much more to come in this industry, this is just the beginning!
Paul Ellis founded Paul Ellis Consulting to work with financial advisors who want to integrate sustainable and impact investment strategies for their clients. Lori Choi is wealth manager and partner at Veris Wealth Partners.