Freewheeling, Yet Disciplined
All NI advisors serve on the investment committee, and they rotate quarterly so that everyone plays a role in analyzing the holdings and recommending changes in the model portfolios. “We like to make changes by consensus as much as possible, and that’s possible at a small firm when everyone can get on a conference call and have real conversations,” Kramer says, noting that NI advisors can customize and deviate from the models if they think it’s suitable.
Despite the seeming freewheeling, democratic process, the investment committee is anchored by Scott Secrest, the firm’s director of investment research who’s located in San Luis Obispo, Calif. He affiliated with NI in 2005. “At Natural Investments, we’ve been fortunate—either by design or happenstance—to attract a group of advisors with expertise in a variety of different areas including regenerative or other types of alternative investments,” Secrest says.
But while NI considers its forte in less mainstream, perhaps more exotic sustainable-oriented investments to be one of its strengths, these vehicles aren’t right for all investors because of their liquidity and risk-reward considerations. So Secrest does the legwork to find more traditional investment vehicles.
“My role is to apply all of the best practices in mutual fund portfolio management to what’s available in the SRI sphere, which is a big and growing list,” he says.
NI offers its clients a variety of model portfolios that include SRI, green-economy and fossil-fuel-free portfolios. Each has different allocations ranging from aggressive to conservative.
It also uses separate accounts, along with various alternatives—including private debt and equity—for its higher-net-worth clients. But most of its investment vehicles are SRI-focused, retail-oriented funds such as the Shelton Green Alpha Fund and the Pax World Global Environmental Markets Fund.
Resilient Investing
NI is down to two-and-a-half active partners as Hal Brill downshifts into semi-retirement. Going forward, Peck expects the firm to expand its ownership base. “We’re having that conversation now about adding new partners, and that’ll probably happen in the next year or two,” he says.
And looking 10 years out, Peck also expects NI to grow its membership. “I definitely see us with roughly 50% more advisors, finally covering the Central time zone and serving progressive clients across the entirety of the country,” he says.
NI says the wonders of modern technology make it possible to efficiently run a small advisory firm across multiple time zones. “While we don’t have water-cooler conversations, as a cloud-based company we are able to use online technology to operate quite smoothly,” Kramer says. “This enables any of our advisors to effectively manage client accounts from anywhere while giving us the capacity to provide compliance monitoring and cover for each other.”
He adds that some key programs they use are Black Diamond Performance Reporting, RedBlack, Redtail and Morningstar. Nonetheless, some challenges remain. “We are a bit frustrated finding an affordable video conferencing tech that will work for the size of our team,” Peck says. “That’s a nut still to crack.”
NI members meet en masse once a year, usually at the annual SRI Conference produced by First Affirmative Financial Network. By all accounts, the group meshes well together. “There’s wonderful collegiality,” Taylor says. “Our meetings are interesting because we come from all over and there are lots of cultural variation with different backgrounds.”
And NI keeps moving forward in its mission to help foster the gentler side of capitalism and to view investing in a different way. Hal Brill, Kramer and Peck earlier this year published The Resilient Investor: A Plan for Your Life, Not Just Your Money, which looks at people’s financial investments; personal and social assets such as skills, relationships and community; and tangible assets including homes, shared infrastructure and ecological systems in the context of various future scenarios.
“With our latest book, we’re already assuming people have got the sustainable investing story and we’re moving on to the next step in the evolution and pushing the boundaries,” Peck says. “What we’re pointing out is your portfolio includes a much broader array of investments than you think.”
Peck and others at NI believe the book continues the firm’s efforts to be thought leaders in the SRI space and, by extension, the financial services industry in general. To them, these endeavors, along with their active role in shareholder advocacy work with major corporations and public advocacy in Washington, D.C., are part and parcel of their jobs as financial advisors.
But while NI may not be your standard-issue advisory firm, not all of its members think of themselves as being unusual within the broader advisor universe. “I don’t feel like I’m quirky or on the outside looking in,” Taylor says. “I just feel this is our sector; this is our piece of the work.”