Editor’s note: This article is part of a continuing series in which Paul Ellis, a well-known advisor and consultant on sustainable investing strategies, interviews industry professionals on the topics of millennials and sustainable investing. What follows is an interview with two industry experts: Sonya Dreizler Schinske is president and CEO of Protected Investors of America Inc., a full-service broker-dealer and an SEC registered investment advisor headquartered in San Francisco, and Bob Dreizler is a chartered financial consultant and a former chairman of PIA.

To read the first article in the series, click here: /news/the-wise-woman-and-the-millennial-23738.html

To read the second article in the series, click here: /news/millennials-leading-the-way-in-sustainable-investing-24019.html

To read the third article in the series, click here: /news/millennials-mainstreaming-impact-investing-24487.html

To read the fourth article in the series, click here: /news/an-sri-collaboration-across-generations-and-genders-24873.html

To read the fifth article in the series, click here: /news/like-minded-people-with-purpose-and-passion-25457.html

 

Paul: Sonya, I want to congratulate you for being chosen by InvestmentNews as a member of the 40 Under 40 Class of 2015, a distinction that honors millennial generation leaders in the financial services industry. The article mentions that you started an ESG (Environmental, Social and Governance) speaker series for advisors in your firm, Protected Investors of America (PIA) and other ESG advisors in the San Francisco Bay Area. Tell us more.

Sonya: It’s a wonderful opportunity to have lunch, network with peers and share ideas. And we always hear from someone who has an ESG specialty they can share with the group.

Paul: Are all of the advisors at PIA comfortable with the fact that you, as the CEO, have an ESG focus?

Sonya: I think for the most part they are. The advisors know that I support everyone’s practices, even those not focused on ESG. They know this is one area of focus where my network can help to grow the firm, so they’re supportive of that.

Paul: Bob, you are Sonya’s father and a former chairman of PIA, right?

Bob: Yes. I was on the board for six years and chairman the year that the board chose Sonya’s predecessor. At that time, Sonya was chief operating officer. I was no longer on the board when she was selected president and CEO, but I was a very proud dad when that happened! She’s done a tremendous job in a really tough environment for independent firms.

Paul: Sonya, give us your perspective on the new DOL fiduciary rules that firms are being required to follow. There’s a lot of discussion in the industry about their potential impact, and from an ESG or impact investing perspective, a lot of people believe we need more comprehensive fiduciary oversight.

Sonya: The challenge is to scale a response to the new regulations because the old ones don’t go away—so there’s just more. We’ve contracted with a great compliance firm that has been very helpful in the past year, but it’s an ongoing process.

Paul: From the sustainable and impact investing perspective, do you see these new fiduciary rules as something that the industry will adjust to and learn how to work with in a way that is helpful for investors? Or will they just create more regulatory infrastructure?

Sonya: That’s hard to say. I think the new regulations are well intended, and better protecting the end client is always a good idea, but increased regulation is very challenging for smaller firms. That is one of the reasons we see more and more consolidation in the industry.

Paul: Bob, you now work solely as an advisor, right? 

Bob: I’m both an advisor and a PIA shareholder. The firm is owned by our employees and advisors.

Paul: Are all of the employees and advisors shareholders?

Sonya: No. But many of them are. It’s not mandatory.

Paul: Bob, one of the major differences in the sustainable and impact investing industry today is that it’s not only focused on negative screening and exclusionary strategies. Thematic strategies are used by investors to generate portfolio alpha as well.

Bob: That’s right. I believe one of the themes that offers good growth potential is in alternative energy. Another proactive approach is community investment notes, which provide loans to lower income communities that are underserved by the traditional banking industry.

Paul: Sonya, does PIA as a firm do direct shareholder engagement with companies?

Sonya: No, we don’t. Each of our advisors owns their own independent practice, so PIA is not doing any engagement on behalf of clients. But our advisors may offer clients mutual funds or separately managed accounts that do participate in shareholder engagement at some level.

Paul: And how do you see this part of the industry developing from your perspective as a millennial?

Sonya: I think long-term investors can benefit from screening for factors like environmental impact or gender and racial diversity on boards of directors and in management. When you find companies that are forward thinking around solutions to environmental issues, for example, those are companies that can end up adding to the bottom line. Think of ESG screening as another component to consider when looking at a company’s financial data.

Paul: Sonya and Bob, numerous names are being used to describe how ESG screening works. What do you think?

Sonya: It’s tricky. We always come back to the question: Is it impact? sustainable? green, SRI or ESG? It would be helpful if we could all agree on one name that means something to clients. But it’s the client’s values that matter most. We need to ask what is important to them and then have different investment options available. 

Bob: I agree with Sonya that what’s most crucial is talking to people about their values. The one phrase I use over and over is, “How do you align your investments with your values?” I think that’s what advisors in this industry are here for, and millennial professionals have a tremendous opportunity to expand their business in this way. And you end up with clients who are a lot like you.

Sonya: I agree. While someone is waiting in our reception area, I can guess who their advisor is with almost 100 percent accuracy! I think advisors and clients tend to share a lot of the same attributes. It’s wonderful to see actually.

Bob: I recently looked through my client base to see what the age range is. I’m 67, and 56 percent of my clients are in their 60s. Only 9 percent are under 50, and that surprised me.

Paul: Sonya and Bob, what do you think the opportunities are for young people in this industry today?

Sonya: The older generation of ESG professionals is very welcoming and willing to share time and advice. Being a young advisor is difficult. I’ve said that your clients tend to be like you, so if you’re in your twenties, even if you’re building a successful career, your clients likely don’t have big investment accounts yet. So I suggest young people work with someone from the next generation up, as a paraplanner or junior advisor. While you learn the business end, you can help them to grow their practice and perhaps eventually take over the practice. I’ve seen that happen a number of times.

Bob: I’m in good health and don’t have any plans to retire, but many older advisors are planning their retirement and looking for the right young advisor to transition their clients to.

And millennials in the industry have a great opportunity given the ratio of advisors who specialize in sustainable and impact strategies compared to the percentage of clients who would like to be investing this way. There are so many investors out there who have social or environmental concerns and want to make a difference.

Paul: So how can advisors start developing an ESG specialty in their practice?

Bob: There are some good books, and they can talk to the senior advisors at their firm. Of course, it helps if the firm offers a hospitable environment for sustainable and impact investment strategies. Also, they should go to the SRI conference.

Sonya: I agree. Go to the SRI conference or one of the one-day sessions offered in different cities in the spring. Or consult with an advisor that specializes in this field. There are plenty of clients to go around who want this kind of investing opportunity.

Bob: It’s like having another arrow in your quiver. I think advisors will be surprised at the positive responses they’ll get if they simply ask clients if they’re interested in ESG.

Paul Ellis founded Paul Ellis Consulting to work with financial advisors who want to integrate sustainable and impact investment strategies for their clients. Sonya Dreizler Schinske is president and CEO of Protected Investors of America Inc., and Bob Dreizler is a chartered financial consultant and a former chairman of PIA.