Two Traverse City financial advisors weigh in on how following your heart can help you follow the money.

Financial advisors Mecky Kessler-Howell and Kristi Avery of FOR Investment Partners in Traverse City are empowering clients to invest with a focus on their values and profit. We checked in with them about what socially responsible impact investing (SRI investing) looks like, who it works for and why you need to think about it in an unstable market.

Give us the 30,000-foot view on your field.

MKH: We specialize in socially responsible impact (SRI) investing. These days more people are familiar with investing with an eye to environmental, social and governance responsibility, which is called ESG, but SRI investing goes further.

How so?

MKH: SRI also includes clients’ values. For example, clients may not want to invest in companies that are engaged in mining; or those who produce weapons, tobacco products or violent video games targeted at kids; or utilize unnecessary animal testing. We customize each client’s  portfolio specifically to match personal morals, ethics and values.

How do you create a strategy out of those values?

MKH: If there’s a company a client doesn’t want to support, we find a comparable company to invest in; as an investor, you don’t just throw a type of business or an entire sector out of your portfolio, you look for a well-run company that does the same or similar work.

Using what criteria?

MKH: First and foremost, you look at a company’s financials, which also should have a great forward-looking management team that looks out for shareholder value. With an ESG and SRI focus, you additionally look for a management team that considers, for example, employees’ well-being and/or environmental risks of a company’s operation. A sustainable company mitigates risk, making for an attractive investment.

So instead of rejecting whole sectors, you tease out the businesses who are doing well by doing right by people, or the environment, and so on?

MKH: Yes. For example, if a company takes care of its employees—good benefits, onsite daycare, etc.—those employees will stay and work well, and the company doesn’t have to replace and retrain constantly which is a draw on resources and finances. It might cost that company more in the beginning, but in the end, it will reduce costs. Let’s look at a company that is more environmentally conscious in its operation/production. That company lessens the burden of costly lawsuits and/or environmental cleanup of their site of operation. It not only mitigates some financial risk for the company and investor but also addresses the investor’s values.

KA: We don’t discredit a company for not being perfect; that change takes time. Plus, SRI is a long-term strategy overall. We’re not day trading, trying to pick penny stocks here—we’re looking for long-term, sustainable growth. And of course, our investors want returns. When we create a portfolio of SRI investments matched to traditional investments, sector to sector, we don’t have to give up returns.

MKH: That’s part of our social responsibility—to have the investor reach their financial goals. That’s very important; the client wants to earn money toward their goals and with their values.

Are your clients comfortable with making money?

MKH: They are and they should be.

KA: However, we do ask clients as part of our intake if they are willing to give up returns if they decide on a very strict values-based negative screen, especially if a client opts out of a whole sector of the market.

Are there misperceptions about your investing strategies you have to deal with?

KA: We’re still beating down that mentality that sustainable means giving up returns. It’s not just screening out what you don’t want; it’s what you do want to support, what companies excite you, what industries excite you. Let’s get those things into your portfolio! The stuff you don’t want falls away naturally.

Some of the older generation of advisors is still repeating that if you do this type of investing, you take a loss. There is a lot of solid research about how you’re not giving up returns by investing in SRI. In the recent stock market downturn, a study of socially responsible funds showed that they performed better and suffered less volatility. So hopefully that old mentality will die out.

Who is a typical client for you?

KA: Right now, we work with a lot of institutional nonprofits to invest for them in ways that align with their missions and institutional values. In the last five years, there’s been more interest from individual clients using their personal or retirement savings to invest in a socially responsible way.

MKH: We actually work with more couples when they share the same values. We see a lot of younger people, female and younger male investors in particular, that are concerned about the future.

What prompts people to find you?

KA: Any kind of change in their personal value structure. Marriage is a big one, as couples talk about combining resources and saving for the future.

MKH: If they have children or are thinking about children, couples think about what kind of world they want to raise their children in.

KA: Retirement and divorce are huge, too. These are life changes that give someone the opportunity to form a personal relationship with an advisor who takes your values into account. The other thing to consider is at FOR, we are independent and not tied to the products we use. I think that appeals to people, and when they have the option to, say, get out of their company 401K plan and pick an advisor on their own, they want someone working on their behalf as a fiduciary.

What’s new in your field in 2020?

KA: There has been recently published research by John Hale of Morningstar about the reduced volatility in socially responsible investing, and sustainable equity funds fairing better than their conventional peers in this recent environment.  As advisors, we look for less downside, less potential risk.

MKH: We are also seeing some companies taking certain environmental issues like climate change very seriously. We’re seeing corporate reaction—for example, some banks are not loaning money to the coal industry anymore. The issue of plastic waste is also huge.

KA: So is water tech, and investing in clean water resources.

What’s hot on your clients’ minds right now?

MK: Clients are interested now in environmental justice and sustainability. That’s a reason we’re seeing a rise in ESG mutual funds/investments. It’s great and wonderful, but it’s not all that investors can do. Sometimes there are companies that investors feel are environmentally not doing a great job and investors, or groups of investors, invest their time and participate in shareholder resolutions to hold companies accountable. One example is how shareholders pushed the largest fast-food chain to end its use of polystyrene packaging. As a shareholder you can write, you vote your proxy, you can go to annual meetings.

Is there something you wish more investors knew about your business?

KA: That we exist! That SRI investing is an option and a viable one. That SRI can be holistic, it can be your entire strategy, not just a niche fund to make yourself feel good. There’s just such a lack of awareness in this space and that gets perpetuated by traditional advisors who aren’t familiar. We’re not just picking a few mutual funds and throwing them into a client’s portfolio, we are taking a holistic approach to all of the various investment vehicles we offer with an SRI lens. True SRI investing makes a difference. It really, really makes a difference.

MKH: Education for investors out there is key; people still think you have to sacrifice performance which, like we’ve explained, is not the case.

KA: I wish potential investors knew this is so much more sophisticated than a tree-hugging mentality. It goes above and beyond traditional analysis; it takes it a whole step further. We look at more granular things inside your investments so that it is truly customized and personalized. It has nothing to do with my values or Mecky’s values; it’s about the values of the client sitting in front of us. It’s their money. We’re completely agnostic. This strategy has nothing to do with a political affiliation—it is truly aligning values with how you invest your money. To be honest, my personal goal is to have someone turn to me years later and says, ‘Wow, you helped me save TOO much money.’”

Securities and investment advisory services offered through Western International Securities, Inc., Member FINRA/SIPC. FOR Investment Partners and Western International Securities, Inc., are separate & unaffiliated entities.

Photo(s) by FOR Investment Partners