Mark Stempel had a successful fee-only financial advisor practice in Tucson, Ariz., with about 65 clients and roughly $50 million in assets under management. In 2012, he sold his firm and planned to go into consulting. But earlier this year, he decided to restart his practice with the same name (Encore Wealth Advisors), relocate to the San Francisco Bay area, and embrace a new model based on impact investments.
During his brief hiatus from the advisor business, Stempel, 54, says he had an awakening of sorts about the myriad problems facing the planet. “I became more aware of the environmental and social predicament we find ourselves in,” he says. “I became more aware of impact investments, and it seemed like a perfect way for me to be of service. It’s great that you can help someone grow their portfolio from $1 million to $3 million, but if we don’t have an Earth left to enjoy, then what difference does it make?”
Impact investing strives to achieve both a competitive financial return and a measurable social, economic or environmental impact by promoting economic growth, delivering products and services to underserved people or tackling environmental issues.
These investments can include equity and loans. Participants in this space can also provide guarantees to third parties to put down their own money. Most impact investments are structured as debt funds, and the space has traditionally been the domain of foundations, family offices and very high-net-worth individuals. Recently, it has attracted greater interest from large financial services companies and the general public.
But one of the big hang-ups for broader acceptance is the dearth of products available to retail investors. And that’s a problem Stempel is encountering as he gets his new venture off the ground and seeks to build diversified portfolios dedicated to these types of investments. “If you’re going to take a real impact investing approach, it may mean sacrificing some diversification, at least initially,” he explains. “But I think it’ll be built out over time.”
As for Encore 2.0, Stempel says he’s learned from his experiences with Encore 1.0, which he started in 2001. That firm provided comprehensive financial planning that included investment management, tax planning and preparation, estate planning and insurance review. It was a small shop where Stempel was the main cog, and after 11 years he says he was burnt out and needed a change.
In a former life, he had built and sold a tax practice in Marin County, Calif. After he sold Encore last year to Ronald Blue & Co., a large, multi-office firm based in the Atlanta area, he planned to parlay his business-building skills into coaching other advisors. But then he got the calling to recreate Encore and embrace impact investing.
Stempel is building the new Encore from scratch and had zero clients as of early August. He hopes to attract clients through his Web site and via social media, and he says he has no plans to build a large practice. “I’d be happy with 10 clients with at least $1 million each and who have aligned values,” he says.
His goal is to create a low-cost, virtual business that’s online and paperless and uses executive office space when needed. He plans to tap into impact investment products available on Envestnet’s platform, and to work with outside professionals to provide some of the services he provided with Encore 1.0.
“I’m approaching Encore 2.0 from a totally different perspective,” Stempel says. “I’m re-energized.”