In his groundbreaking book The Cultural Creatives, sociologist Paul Ray introduces us to an important emerging subculture of Americans. Ray describes the convergence of the social and consciousness movements of the 1960s that has caused many of us to think differently about various aspects of our lives. Over 60 million strong, the "cultural creatives" are challenging many traditional thoughts and actions. They are concerned citizens of the world interested in healthy living, the environment, spirituality, personal freedom, integrity and ethical behavior.

Patricia Aburdene expanded on the work of Ray in her 2005 book Megatrends 2010: The Rise of Conscious Capitalism, introducing several trends that are influencing how the cultural creatives work, live and invest. Dubbing this enlightened group "conscious capitalists," she describes how the power of spirituality has spilled over from the personal to the institutional. She details how personal and organizational change, as well as economic necessity and changing values, are transforming capitalism from the inside out and outside in. The evidence of these megatrends is that there has been a move toward spirituality in business, consumers have become more driven by their values, and corporations have taken on more social responsibility.

While the conscious capitalists are aware of the traditional challenges associated with planning for, and achieving, financial security, they are also interested in understanding how they can better align their investments with their values. They want to know that the companies they entrust with their investment dollars are acting as effective stewards of that capital by serving all their stakeholders. In order to assess a company's value and values, as well as to establish a basis for making long-term investment decisions, they seek transparency in corporate reporting and full and fair disclosure from the financial services community.

Wall Street Responds
Slowly, but steadily, the financial services industry has responded by developing products and services to meet the needs of this emerging group. On August 10, 1971, Luther Tyson and Jack Corbett launched the Pax World Fund, the first broadly diversified, publicly available mutual fund to use social as well as financial criteria in the investment decision-making process. The number of socially screened funds has increased from 55 in 1995 to 260 in 2007, according to the Social Investment Forum's 2007 Report on Socially Responsible Investing Trends in the United States. Many other SRI investment products-including exchange-traded funds, alternative investments and other pooled products-have also been introduced. Although it's taken over three decades for these cultural changes to take root, socially responsible investing has grown into a broad-based approach to investing that now encompasses about 11% of assets in the U.S. that are professionally managed (an estimated $2.71 trillion out of $25.1 trillion in 2007), says SIF's 2007 report. Socially responsible investing has evolved to encompass environmental, social and business governance issues and is often referred to as mission investing, responsible investing, double- or triple-bottom-line investing, ethical investing, sustainable investing or green investing.  

While Wall Street has responded via product innovation, several visionaries in the financial planning profession have emerged to introduce the concept of financial life planning to the profession. One of the pioneers in this movement was George Kinder. In his book The Seven Stages of Money Maturity and subsequent works, Kinder introduces a philosophy and process whereby financial planners are empowered to provide a holistic approach to money and investing. Clients are encouraged to more fully develop understanding and knowledge about money as part of a life plan that is fulfilling both financially and spiritually. Although life planning does not require that an individual embrace SRI, it certainly offers a framework in which conscious capitalists can consider their financial goals and personal values.

Malkiel And Maslow
In 1973, Burton Malkiel wrote the investment classic A Random Walk Down Wall Street. His work encompassed several tenets of successful investing: save regularly, invest in low cost investments, stay diversified and allocate your money into asset classes that properly reflect your time horizon and your risk tolerance. Despite the current turmoil in the financial markets, these principles will remain part of the core philosophy of the most successful investors and their advisors. Many investment products have been designed to capture the benefits associated with these principles.

In the 1950s and 1960s, psychologist Abraham Maslow created his now famous hierarchy of human needs. His work identified and ranked these layers of needs in a pyramid-like structure in the following ascending order:  physiological, safety and security, love and belonging, esteem and self-actualization. His belief was that as we satisfy one layer of needs, we become increasingly interested in the next layer. The highest level, self-actualization, refers to a state where we continuously desire to fulfill potentials to become "all that we can be." He contended that when your lower needs are unmet, you can't fully devote yourself to fulfilling your potentials. As we satisfy the lower needs, we are able to transcend them and live from a higher level of consciousness. The global growth of democratic capitalism combined with the convergence of the social and consciousness movements has accelerated this transcendence toward self-actualized living.

The conscious capitalists stand at the forefront of this trend. They represent an emerging market of enlightened investors who are likely to embrace Malkiel's principles and have them implemented by a trusted advisor. However, they will do so while being tethered to Maslow's hierarchy of human needs. They're compelled to weave a tapestry of meaning and significance around their beliefs and behaviors, and their values will inform their investment decisions and drive their actions. In subsequent articles, I'll share ideas on how you can better understand and serve these investors.

Ghandi's famous quote, "You must be the change you want to see in the world," has become the mantra of the conscious capitalists. My corollary for financial advisors serving them is "You must be the agents for the changes your clients want to see in the world." This is the work of the transformational advisor.

James Buro, CFA, CFP, ChFC, CPA, is president of Conscious Capital, based in Nutley, N.J. He provides training, consulting and coaching services to support the marketing and communications activities of financial services companies and advisors who seek to better understand and serve the conscious capitalists. He can be reached at [email protected].

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