To play on a phrase made popular by Jeff Foxworthy, comedian and host of the hit TV show Are You Smarter than a Fifth Grader, if you'd like to serve a growing market of investors who are interested in making money while making a difference then, "You just might be a transformational advisor." So, how do you equip yourself to help these investors make appropriate choices?
Seek First To Understand
Habit No. 5 from Stephen Covey's landmark book The Seven Habits of Highly Effective People is "Seek first to understand, then to be understood." The first part of this habit is based on empathic listening and being concerned about the welfare of the person to whom you are speaking. Done well, it allows you to build a relationship based on openness and trust. Some of the best resources to help financial advisors develop empathic listening skills include:
Financial Planning - the Next Step: A Practical Approach to Merging Your Clients' Money with Their Lives, written by financial advisor Roy Diliberto.
Money Quotient (www.moneyquotient.org), a nonprofit training organization founded by Carol Anderson. Money Quotient can help you design an approach that will get to the heart of your clients' values and priorities and create a framework to align a financial plan with their life goals.
Kinder Institute of Life Planning (www.kinderinstitute.com), started by George Kinder. He is considered one of the founding fathers of the life planning movement and has written many books on the subject.
Galvanic Communications (www.galvaniccommunications.com), founded by Susan Galvan. She co-founded the Kinder Institute of Life Planning and is co-author with Kinder of the book Lighting the Torch.
Then To Be Understood
The second part of Covey's fifth habit tells us that to be effective in communicating, you need to exhibit personal credibility, make an empathic connection and employ logic. Done properly, you will be able to present your ideas clearly in the context of what matters to your client. Although improving your empathic listening skills will help you connect better with your clients, to exhibit personal credibility and employ logic in your presentation you need to deepen your understanding of what's important to your client. If you want to serve socially conscious investors, you need to have a solid understanding of their cultural paradigm and investments that will appeal to them.
The Cultural Paradigm: Lifestyles Of The Richly Conscious
In my earlier FA Green column "A Conscious Walk Down Wall Street," I introduced you to enlightened investors. To better understand them, I suggest the following resources:
For insights on how the culture has evolved to create the current demand for green investing, visit www.CulturalCreatives.org. Here, you'll experience the work of Paul H. Ray. Paul is the author of The Cultural Creatives, How 50 Million People Are Changing the World. Another great resource is www.patriciaaburdene.com. Patricia Aburdene is the author of Megatrends 2010: The Rise of Conscious Capitalism. She identifies seven trends that are transforming how we work, live and invest.
For access to businesses that are serving this market and each other, a great resource is the Green America Business Network www.coopamerica.org/cabn/. For institutional quality research on the impact of these trends on consumer behavior, my favorites are The Hartman Group www.TheHartmanGroup.com and The Natural Marketing Institute www.NMISolutions.com.
The Green Investment Landscape: The Purpose-Driven Portfolio
In another article on FA green, "A Look At Performance," FA green Senior Editor Jeff Schlegel takes an in-depth look at socially responsible investing performance. Since many advisors like to make their own decisions regarding fund selection, let me offer you some resources to begin your journey of discovery.
For an anthology of excellent academic research on the performance of SRI, a wonderful resource is www.sristudies.org. For facts about SRI products available to your clients, I suggest you visit The Social Investment Forum, a national membership association dedicated to advancing the concept, practice and growth of socially and environmentally responsible investing. Another good site is Social Funds, the largest personal finance site devoted to SRI. If you decide to incorporate SRI into your practice, Social Funds has a link that serves as a professional directory for SRI practitioners looking to serve this market.
Several services provide portfolio management tools for both institutional and retail markets. One company that is popular with financial advisors is IW Financial. IW Financial is a leading provider of environmental, social and governance (ESG) research, consulting and portfolio management solutions for asset management firms, managed accounts sponsors, institutional investors, plan sponsors and investment advisors.
A great book that serves as a primer for clients and advisors interested in SRI is Investing with your Values: Making Money and Making a Difference. One author is a registered investment advisor specializing exclusively in values-based investing and another is the editor of Green Money Journal, a newsletter and Web site that is a leading source of in-depth SRI information.
Perhaps the best and most cost-effective way to immerse yourself in this field is to access the people and resources available through First Affirmative Financial Network, a national network of financial advisors who specialize in SRI. First Affirmative and the Social Investment Forum serve as co-hosts of the SRI in the Rockies conference, the premier annual gathering of the SRI community.
Much more can be said about the facts and myths surrounding SRI mutual fund performance and portfolio construction.
Recent studies show that many SRI and non-SRI funds produce comparable financial returns. Perhaps, more importantly, behavioral finance has demonstrated that long-term financial performance is more a function of investor behavior than fund selection. You must satisfy yourself that your fund choices are appropriate to honor your clients' values as well as to meet their investment objectives in the context of a comprehensive financial plan. Your ability to influence your clients' behavior through personal credibility, empathic connection and logic will ultimately determine their success and yours.
Invest some time with these resources. Not only will you end up smarter than a fifth grader, you'll be well on your way to becoming a transformational advisor.
James Buro, CFA, CFP, ChFC, CPA, is president of Conscious Capital. He provides consulting, training and coaching services to support the marketing and communications activities of financial services companies and advisors who seek to better understand and serve conscious capitalists.