James Frazier is a financial advisor who’s keen on investing in local businesses, and now he’s turned his passion into www.local-investing.com, a website otherwise known as the Local Investing Resource Center. The site offers advice and education about investing in local small businesses and nonprofits to help advisors whose clients want to invest in their communities.
“I’ve been involved with local investing groups and have been consulting with them for many years,” says Frazier, 40, an advisor with Natural Investments LLC who works from his offices in Hawaii and Washington state. “There’s no online resource out there with high-quality information about local investing. I’m doing this to fill a gap and provide authoritative information on the best practices of what people are doing across the country.”
Frazier’s career arc in financial services went from getting his finance degree from the Wharton School and working as an options trader on the floor of the American Stock Exchange to moving to Seattle in 1999 to help start an investment advisory business for hedge funds and high-net-worth individuals. In 2008, he joined Natural Investments, a collaborative network of nine independent offices across the U.S. with a focus on socially and environmentally responsible investing.
That same year, he helped form the Local Investing Opportunities Network in Port Townsend, Wash., to connect investors with local small businesses and nonprofits. Many of his clients have channeled money into local investments, often through loans to local entrepreneurs.
“It’s more than just investing,” Frazier says. “It’s community building and engaging with entrepreneurs in your local area, and finding out what they need and working together to build a more prosperous local community. To me, it’s ultimately about quality of life and [investment] returns.”
He notes that returns on local investments typically run in the low- to high-single-digit range, with most returning about 5% to 6%.
But local investments can be a quirky area for advisors.
“It gets into a lot of regulatory and compliance stuff in terms of how do you recommend something you might not be able to do due diligence on,” Frazier explains. “At Natural Investments, we can’t directly recommend these investments, but we support clients who do their own homework by telling them the sorts of questions they should ask.”
He says community-type investments tend to be a small part of a portfolio, mostly because they’re more illiquid. “It’s important to limit how much people put into any loan like that [for a local small business],” Frazier notes. “And they have to know the business loan could be a five- to seven-year loan, and that the business can go under.
“The money they invest with local investments goes away from us and we can’t bill on that, so it’s tricky,” he continues. “Hardly any advisors out there encourage local investments, but being an advisor who’s willing to support it gives you a lot of loyalty and respect from clients, which ultimately is a business builder. And that’s what I’ve seen personally.”
Among other things, Frazier’s website has a section on how to do due diligence on local investments. “That’s the kind of research I point my clients to if they want to evaluate a potential local investment. I hope advisors who have clients who want to do this but feel they can’t advise them directly—as most of us are in that situation—can send them to a resource like this and feel secure that they’re getting the best advice that’s out there. Not that there’s much advice out there,” he says with a laugh.
The Local Investing Research Center site launched in beta mode in December and officially went live last month. Along with the educational component, the site includes directories of both groups and individuals involved in local investing around the country, along with forums and news on the topic.
Frazier says he’s pleased with the site’s initial response. “We’ve built a network around local investing during the past several years, and I’ve got about 600 people on the e-mail list for the newsletter,” he explains. “I put the word out a while back about who wants to test the beta site and collected people that way.”
He notes his audience is a mix of investors, small-business entrepreneurs, economic development professionals, the media, sustainability groups and people who simply have an interest in seeing local investing happen in their communities. Frazier adds he’s working with a public relations and social media specialist to help promote the site.
“I hope to help support local investing groups and networks to form around the country, to get the support of community leaders around local investing, to help small business entrepreneurs and nonprofits to learn how to raise money locally and to help build relationships around local economies in the country to fill a gap we’ve kind of lost as we’ve become an institutionalized finance system,” Frazier says.
He also wants to engage advisors in the conversation rather than avoiding it entirely. “I’d like to add a guide for financial advisors that would discuss what the different approaches are out there, how we do it and how other firms do it in terms of participating in that conversation around local investing without excluding ourselves from it.”