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Financial Advisors are on the Front Lines of Democratizing Access to Impact Investing: Experts Weigh in on the Future of the Industry

SOCAP Global February 19, 2020

Financial Advisors will play a key role in democratizing impact investing for the retail market. A panel of industry experts, including Jackie VanderBrug, the Head of Sustainable and Impact Investment Strategy at Bank of America–who will be speaking at Total Impact Philadelphia, convened at SOCAP19 to discuss their latest efforts on this front and consider what new resources financial will advisors need to meet the rapidly growing demand for socially responsible, ESG, and impact investing products.

Panelists

  • Christina Leijonhufvud, Managing Partner, Tideline (Moderator)

  • Adam Connaker, Principal, Rockefeller Foundation

  • Joshua Levin, CSO, OpenInvest

  • Jamie Martin, Executive Director, Morgan Stanley

  • Rehana Nathoo, Founder and CEO, Spectrum Impact 

  • Jackie VanderBrug, Head of Sustainable and Impact Investment Strategy, Bank of America

Democratizing Impact Investing, One Financial Advisor at a Time: Full Session Transcript 

Christina Leijonhufvud: We’re here to talk to you about democratizing impact investing one financial advisor at a time. My name is Christina Leijonhufvud. I’m one of the managing partners of Tideline, a specialized impact investment consulting firm and I’ll be moderating this incredible panel on a really important topic. 

…democratizing access to impact investing is truly an urgent priority for our market. I think we spend a lot of time talking about access to capital amongst entrepreneurs who need it the most. Here we’re talking about access from a different angle–access to impact investment products from your everyday households, individuals across the world and the country who really want to see their capital being invested in responsible and impactful ways. 

Just to kick it off I’m going to give a few brief introductions so we don’t spend too much time on bios, but first I’d like to say we’re all here I think because we believe in impact investing at some some deep level in our souls, but it’s a market I think we are all aware is dogged by perceptions of elitism, perceptions that it’s reserved for a few ultra high-net-worth individuals or the institutions that have been created to serve them. So in that context, democratizing access to impact investing is truly an urgent priority for our market. I think we spend a lot of time talking about access to capital amongst entrepreneurs who need it the most. Here we’re talking about access from a different angle–access to impact investment products from your everyday households, individuals across the world and the country who really want to see their capital being invested in responsible and impactful ways. 

We have an incredible lineup here. First all the way on the my left Jackie VanderBrug who’s managing director and a head of sustainable and impact investing at Bank of America’s Global Wealth & Investment Management Group. Jamie Martin who’s representing the other big platform in our country, Morgan Stanley, executive director of the global sustainable finance group, also across the wealth and institutional investment management businesses. Rehana Nathoo who runs Spectrum Impact, a boutique consulting firm but has many years of experience in this market both from the Rockefeller Foundation, BNY Mellon, and other parts and Josh Levin who’s the co-founder and chief strategy officer of Open-Invest a venture based public benefit corporation bringing wealth management solutions to the market; and Adam Connaker from the Rockefeller Foundation who’s running the innovative finance strategy and zero gap portfolio and deeply involved in helping to seed some of the solutions that this market needs. 

So with that I’d love to get started and I’m going to start by just asking each of you to give a few brief introductory remarks. What, concretely, are your institutions and you personally doing to help democratize access to impact investing? Jackie, do you want to start?

It’s about training those advisors in different ways in how to talk about this, how to think about it. It’s about access to product on the platform and specific portfolios and then putting those pieces together.

Jackie VanderBrug: Thanks Christina. Great to see everybody. If you want to get really specific, wealth management for Bank of America you’ll know as Merrill Edge, Merrill Lynch, and– what was formerly known as US Trust–now known as the Private Bank at Bank of America. So that’s the broad spectrum that we’re talking about. And and if we think about those advisers (there are) about 16,000 of them and clients who range from the person who walks into a Bank of America branch office with the first $10,000 that she saved beyond her retirement account and is trying to make an impact with that investment, all the way up and through institutions. And so, specifically, what are we doing? It’s about training those advisors in different ways in how to talk about this, how to think about it. It’s about access to product on the platform and specific portfolios and then putting those pieces together. We can get into that a little more later.

Christina Leijonhufvud:  Great thanks. Jamie?

A big part of our job is really being the scout team or the radar for innovative strategies that are coming to market that have the capacity to be able to scale through our broad distribution pipes. (We’re) spending a lot of time on, not only the product and solutions, but the education to enable advisors to feel empowered to have these types of conversations.

Jamie Martin: Yes thanks. Hi everyone. Jamie Martin for Morgan Stanley. I sit in the global sustainable finance group at Morgan Stanley and we actually sit at the firm level–working across our capital markets business, our asset management business, and our wealth management business really building in the intelligence center inside Morgan Stanley and all things sustainable and impact investing, and really partner with the various businesses to bring sustainable investing solutions available for our clients for their large institutional clients or families or individuals or through our large wealth management business. (I’m) here today with the wealth management hat on. At the end of the day, similar to Jackie, we are an intermediary. We play a matchmaking role and increasingly you know our clients are signaling their interest in sustainable and impact investments across public and private markets. A big part of our job is really being the scout team or the radar for innovative strategies that are coming to market that have the capacity to be able to scale through our broad distribution pipes. (We’re) spending a lot of time on, not only the product and solutions, but the education to enable advisors to feel empowered to have these types of conversations. We’ve got some new tools to help with that, which I’ll get into as well. It’s been a very interesting perspective obviously this is a space that’s moving incredibly fast. Trying to stay on top of it is a full-time job, but we’re seeing the demand coming from all sides of our organization now. 

Rehana Nathoo: Hi everyone my name is Rehana. I run a strategic advisory company called Spectrum Impact. We focus specifically on building impact investing strategies. So our work in this big messy ecosystem is really about getting investors, suppliers of capital, slightly up further along the education curve and better partners to many of the folks that are here on the stage. We mostly use strategy. Why do impact investing? How does it look to allow those folks to think about impact investing as a framework that serves its core mission not the other way around? And we do that through an education process and so we have the great pleasure I think of watching fund managers, corporations, public and private companies move across their education journey in the hopes that they can be better purveyors of capital and use it more effectively. 

Joshua Levin: So I’m Joshua Levin. I’m from OpenInvest. I was thinking about, if this is the conference of patient capital, to some degree we are the impatient ones. We are dedicated to using technology to mainstream values based investing and we happily use impatient capital to do that. We want to see this move fast. We believe that we need technology to achieve a step change in this space. We’re about twenty five people, based in San Francisco. It’s a combination of ESG folks like me and hedge fund engineers and technologists. We build technology to disrupt ETFs and mutual funds. We think that’s what stands in the way and so our software skips funds and manufacturers, buys up underlying securities, that would be in your portfolio and then streams those strategies directly up to advisor workstations and to client interfaces so that people can deeply customize around their values so they can have impact reporting, so they engage in shareholder resolutions, and do all the things that the traditional highly intermediated asset management supply chain is standing in the way of.  

Adam Connaker: I want to step back for just a quick second to say, from the foundation perspective, we don’t have the built in investment clients, we don’t have that same perspective. So when we get involved a lot of the perspective we’re taking is how to foster and grow the field of impact investment more broadly. And, for us, a big step in that path is not just to give individual and retail investors access, but to really inspire them and get them excited about what we’re doing in this space because I think ultimately we want them to challenge the fundamentals of what finance is and can do. And they’re only going to do that if they can really participate in this movement in the same way that some of the larger accredited investors have been able to today. 

For us, retail has been a really important avenue for us to explore. I would also say it’s been by far the most challenging avenue that we’ve explored. I’ll just give you a quick backdrop of what we’ve done. We use the grant funding side of the house largely to set up product, to do R&D on new financial products, both for institutional investors and for the retail side. Those products span all asset classes. We look at public and private stuff, we look across all geographies, really trying to say where is it that we think we can get traction with the various investment we’re trying to approach. 

The other thing that we’re doing is we have an investment fund that we launched in partnership with our friends at MacArthur Foundation to really invest in the managers and the products that are coming out of this sort of innovative thinking. So to think about what would it take for them to scale, recognizing that if they’re ever going to land on a B of A or a Morgan Stanley or any of the big distribution platforms, they’re gonna have to get to be a lot larger size than they’re at today. So the question is how do we get them to that stage? We’ve approached it both from the grant side and the investment side but all with this idea of we’ve got to build new products we’ve got to inspire individuals and really try and let them in.

So I think one of the big things, even from this introductory commentary, is what we’re what we’re trying to do here is ‘mass customization.’ Right? We want clients to have mass access to impact investing. We want them to be able to get solutions that are customized to their preferences on a massive scale.

Christina Leijonhufvud: Great thank you. All those are great introductory comments. I’ve got some pointed questions for each of you, but I just want to be clear let’s make this the discussion so feel free to react to one another and jump in. 

So I think one of the big things, even from this introductory commentary, is what we’re what we’re trying to do here is ‘mass customization.’ Right? We want clients to have mass access to impact investing. We want them to be able to get solutions that are customized to their preferences on a massive scale. To make this successful we’ve got also got to make it easy we’ve got to take out the complexity. 

Jackie, I know Bank of America is doing a lot already to try to make this accessible and easy for clients with the Merrill Edge platform. What are the tensions between trying to make this easy, simple, but not so simple that we’re not achieving the customized needs of clients? Can you talk a little bit about some of the challenges as you try to build that out. 

Jackie VanderBrug: I think you hit you hit something we experienced. If it’s easy for those of us who have been in the impact space for a while to get really frustrated with the advisors as the intermediaries. Jamie and I can quote you, and you probably can quote back at us, our own research saying over 50% of our clients want this. Over 90% of millennials. What’s wrong with the advisors, right? But you do have to understand that, for a lot of them, this is really confusing. They’re not sitting in this room. They haven’t been on this journey. They are still somewhat, quite frankly, afraid about the returns here. They still have, in the back of the head, is this concessionary? Is it something that we’re confining the access? etc... And then they have the question of so what do I do to customize? If Rehana wants something and Jamie wants something else–how does that play out? So there are different approaches there. 

this is really for you about a client’s preferences and their motivations. How are they coming to this? What is that motivation? And in some sense what do they want to avoid, either because they think it’s risky or because it’s their values? And just to be clear, not to overcomplicate this, but that tension is very real across the board. Are you coming to this from a financial perspective or from a values perspective? And it’s usually both but that can get tricky for advisors.

I guess for us part of it has been simplifying it so that the conversation with advisors is to go through some training. But then in the end to say this is really for you about a client’s preferences and their motivations. How are they coming to this? What is that motivation? And in some sense what do they want to avoid, either because they think it’s risky or because it’s their values? And just to be clear, not to overcomplicate this, but that tension is very real across the board. Are you coming to this from a financial perspective or from a values perspective? And it’s usually both but that can get tricky for advisors. But back to the (question). 

We put this into an ABC framework. What do you want to avoid? How do you want to broadly have benefit? And what in the world do you want to contribute? And then when advisers get their head around something super simple, like an ABC framework, they can start to say okay how do I have a conversation that allows me to know a client better and get on the journey. 

Because the other thing, Christina, that’s a challenge, at least that we’ve found, is advisors feel like this can be binary. It’s a hundred or not as opposed to it’s a journey. They don’t have to have all the answers right away. The client doesn’t have to move that quickly and so forth. So our process has been one to simplify into a framework and then two to make that connection between the clients’ preferences and the motivations that they have and the products that we have on our platform. And so the advisors can start to say, okay if I have a client who’s really motivated, just to buy better companies and they’re not really a specific thematic investor, what are a set of products that are compelling for that person versus if I have a client who’s really motivated by a specific theme, healthcare or something else, then how do I help them avoid benefit and contribute. With all of that, mapping preferences to products, I’ll admit we’re still moving that forward, in terms of how we play that together and that’s the piece that I feel like–the field we can talk about that as we go forward. 

Christina Leijonhufvud: Well the ABC, it’s brilliant it’s obviously grounded in the Impact Management Project’s work. So kudos to them for coming up with that, but it’s also a brilliant framework for advisors to feel like this is simple right this is not that complicated. Jamie, I mean Morgan Stanley’s facing the same challenges right? How do you think about how to deliver a customized experience, particularly in a public markets product context? Let’s face it, most of the clients of B of A and Morgan Stanley need public markets securities and funds in their portfolio. How do you give that customized experience? 

Our firm spends lots of money on understanding the portfolio allocations and the risk profiles of clients, but on the impact side–how can you, at a kind of portfolio level, distill, in an easily comprehensible way–what ultimately is the impact in the alignment of the portfolio.

Jamie Martin: Absolutely. I mean our experience is–our over two and a half million clients have very different sets of financial goals and can have a very different set of impact goals as well. And so we need to basically deliver a full spectrum of solutions across the entire sustainable and impact investing opportunity set, with the funds that have the track record and the capacity and the kind of operational skill set to interact with a broad distribution platform like ours. 

Ultimately at the end of the day we think this is really about putting the client in the center of the conversation and asking some pretty basic questions when it comes to what wealth management really gets at–at its core. What’s the most popular question a financial adviser gets from their client? It’s how am I doing? or how are we doing? We’ve always had a very good answer to that on the financial side, we can give you a quarterly statement. Our firm spends lots of money on understanding the portfolio allocations and the risk profiles of clients, but on the impact side–how can you, at a kind of portfolio level, distill, in an easily comprehensible way–what ultimately is the impact in the alignment of the portfolio. We spent a lot of time going out to try to find a partner to help us do that and we ultimately decided to build it in-house. Many of the broad financial services firms now are essentially technology companies. Being able to turn on these types of tools in that intermediary role we think makes a lot of sense. This tool it’s called Morgan Stanley IQ and we’re gonna see on the impact quotient and it’s being turned on for all of our advisors on their desktop in the way that they can turn on different client reporting as they would present to any investment committee or family or individual to help them understand how their investments are performing. It’s really designed to do three things: it allows us to capture what a client cares about from an impact perspective and really try to prioritize. Some clients want to pick absolutely everything and so having them really focused on what matters most to them in terms of their vision of a more sustainable oriented world. And once we have that information, since we’ve got this big distribution network, we can start to basically crowdsource where the product demand is. We can play that back to asset managers to help them inform investment product development, which is a little bit, you know, flying blind up to date now. 

I think, on the public versus private side, we’re turning this on first in the public market context. The private markets, you know sometimes people come to us and they want to invest in an early stage solar Lantern Company in sub-saharan Africa. And they’re super passionate about that, but they don’t have the resources or the investment dollars to do that type of investing or it would be an extremely risky approach. You’ve got to walk them back to understanding different approaches in the public market context. 

So we did litigate between the impact solution side, which is the products and revenues that a company is producing, versus the sustainable corporate practices–just more ESG. And then, once we have that information, we can now x-ray a portfolio, essentially benchmark it and make a determination of how aligned or unaligned the portfolio is at the entire portfolio level, which is what the client cares about most. Before we used to joke that’s great we’ll give you an impact report but we’re gonna bring you a binder because we gotta go to each manager to understand their exact sustainability report, their engagement report, their CSR report, whatever they might call it, and send you back all eight or ten managers into a big binder and no one really has the time to go through that. So this tool is trying to break that down into the portfolio level and being able to aggregate it at the firm level and then at the portfolio level and ultimately also make suggestions to the adviser for funds that have very similar financial characteristics but superior impact alignment and that’s where the adviser sets them up really nicely for an impactful conversation, which is at the end of day they’re there you know to provide advice to help their clients meet their wealth goals. And so we think this is a key component going forward.

Christina Leijonhufvud: Very cool. Well maybe we can return to the question of those clients who are really craving an impact solution product set, but they’ve got to be walked…

Jamie Martin: Yeah its about telling them insights to make a much more informed decision about that. But for the adviser and for the client–(the question is) how do you give them the information to make an informed decision. We think that tool, because you know it’s journey, as you said, that’s a good first step.

Christina Leijonhufvud: Rehana you’re working as an independent adviser right now but you’ve also have experience working on a bank platform trying to break down the walls of a wealth management business. Without opening kimono on internal politics, I wonder if you could share a little bit of your lessons learned from that effort and how you’re carrying that into your work today?

Who is actually going to kick off this massive demand? Is it the clients themselves? Is it the advisors? Is it the product structures? And I think, as is the case in many large institutions, it can be a little bit challenging to figure out who pushes the door open so everyone else can follow.

Rehana Nathoo: Yeah, very happy to. When I was with Bank of New York Mellon we were trying to do two things at the same time. We were trying to understand how we could create our own fund of funds mechanism that would really reward and celebrate managers, in both the venture side and the private debt side, that were really investing in companies that fit the corporate mission particularly around technology and access to financial services. And then we were trying to bring this at scale on the wealth management side. And as Jackie and Jamie have both perfectly articulated the model in and of itself rewards some behavior over others. And so on the wealth management side, I think what I had experienced in order for impact investing to actually become a set of services provided they need to promote and/or sell products on the Bank of New York Mellon platform. And in order for the products to get on the Bank of New York Mellon platform you need a whole set of stakeholders within Bank of New York Mellon. They’re finding the right managers are onboarding the right managers or creating bespoke custom product. In order for that to happen you need enough critical mass on the institutional side or on the individual side to make that cost make sense. And so what I think many of us have struggled with, and there are folks that are figuring out how to do it on this very stage, was that the mechanism of informing that critical mass is very, very complex. There’s power embedded in multiple different places and ultimately at the end of the day it’s very hard to figure out who is going to start the flywheel. Who is actually going to kick off this massive demand? Is it the clients themselves? Is it the advisors? Is it the product structures? And I think, as is the case in many large institutions, it can be a little bit challenging to figure out who pushes the door open so everyone else can follow.

And in large institutions it’s even harder because everyone has their own reporting mechanisms, they have their own benchmarks for the year, they have their own quarterly performance. So sort of learning from that process, Spectrum is particularly focused on educating the suppliers of capital. And so this is something that you all at Tideline deal with all the time, but the education process is it’s not a fee based process always right? The education process is a long, cumbersome, exhausting, sometimes not very rewarding process of getting folks to really be able to ask better questions, demand the right things, expect from their financial advisers reasonable practical things, right? So that you’re not facing ten clients that are all asking for something totally different tomorrow and no one else wants to do that. But educating suppliers of capital is actually as important, if in our perspective not more important, to make sure that they are responsible clients and customers in this ecosystem. They’re investing in actual companies. Are they being responsible investors? Are they thinking about the impact they can have–the things that they can demand in a thoughtful, cost-effective, reasonable way? We really focus on the suppliers of capital in the hopes of changing their education journey so that they can come to basically every organization on this stage and be much more reasonable about how they can feed that ecosystem. And that really came from, I think, seeing at Bank of New York Mellon just how complex it is for someone to take the first step. And so our theory of change is suppliers of capital can help take that first step but they need to go back to school in a very sort of euphemistic way and be able to be better and more responsible stewards of that money.

Christina Leijonhufvud: Yeah it’s interesting I mean there’s some tension in our conversation already between you know Jamie saying we’re a financial service company, essentially a technology company at this point, so we need to bring these solutions at scale–technology based solutions to the needs for this education. That’s deep hand-holding amongst advisors and clients. Josh you’ve run a technology company that’s really trying to sort of mainstream access through the power of technology. How are you dealing with the ongoing need for education, the ongoing need for customization in a technology context? 

Joshua Levin: Let me tell you a story. We started our company OpenInvest in 2015 in Y Combinator. There were three co-founders. I’ve been in this space for about a dozen years now and then two other guys from Bridgewater Associates–the world’s largest hedge fund–who by the way had never even heard of ESG or SRI. Didn’t even know–they thought they had to just leave finance to find their souls. And I was like, ‘hey guys there’s this thing here and it’s growing pretty fast, but you know the product menu is kind of crappy and it’s high-priced’. But the biggest problem we saw was that everyone has different values. So if we’re actually going to tackle this market, let alone unlock the opportunity, you have to solve for infinite combinations. And I don’t know if you guys talk about these things, if large firms are not equipped right now to address that. We see it on our platform all the time. People come in (saying) I care about gender diversity and net neutrality. And I love Tesla. I don’t want Facebook and I inherited a bunch of GM stock so I shouldn’t have that in my portfolio, oh but now I just watched this documentary I changed my mind again. Even around your family–try and go home tonight and have a family conversation about your shared values and it’s going to be a long conversation. So we founded the company with a mission. We are a public benefit corporation so we have a mission in our legal charter, which is to use technology to mainstream values based investing. And at the time my thesis was it’s all about personalization and once we can make this truly personally engaging then you know it’s going to take off. I was wrong.

This whole space that we’re in has been built up around a fund based business model–switch from this Vanguard fund to this Calvert fund–so everything inches along. Instead you should go out to clients and say hey here’s this button and if I press this button whatever you care about most, the Amazon and deforestation or whatever it is, the risk of that is going to be virtually eliminated from your portfolio and it is not going to affect your performance or your cost structure. Do you want to hit the button? That’s when everybody wants to do it.

It turns out that personalization is very valuable, but it certainly does not unlock the dams of demand for what we’re all doing here. But I now have full conviction as to what it is that will. Which is that ESG is going to mainstream as features, not as product. And let me explain that. So in wealth management you have something like 90% retention rates. Clients do not change products or providers. And this shapes the entire industry. If you’re frustrated about the rate of innovation it’s because if Morgan Stanley spends millions of dollars on something, they face all the compliance risk, operational burden, and how many Goldman clients are they going to steal at the end of the day, right? So it’s you know fundamentally–it stops before the client and it’s a slow industry as a result, because the client’s never going to switch. So what you need to do is be able to go out to advisors and clients and say, hey I’m not gonna ask you to switch funds. This whole space that we’re in has been built up around a fund based business model–switch from this Vanguard fund to this Calvert fund–so everything inches along. Instead you should go out to clients and say hey here’s this button and if I press this button whatever you care about most, the Amazon and deforestation or whatever it is, the risk of that is going to be virtually eliminated from your portfolio and it is not going to affect your performance or your cost structure. Do you want to hit the button? That’s when everybody wants to do it. And so I think you need to use technology to fully abstract the values conversation away from the financial complexity and implications. So that you don’t need the advisors to get all educated on these new managers and tell these whole new stories and also have to explain why they didn’t have them in this before. Instead they can say okay let’s talk about sports, let’s talk about College, let’s talk about what you care about, boom right? And that needs to get seamlessly overlaid on the portfolio. 

It’s also impact reporting, which you know, it’s amazing what you guys have done. We do this as well. So here’s your performance this month, this quarter, and here’s how many tons of carbon you saved this month, this quarter, and it’s equivalent to planting this many trees. Here’s how many cigarettes you avoid financing. It’s proxy voting, it’s a whole ecosystem of features that become available, and many others we’ll build, that will be reliant on a clean data reactive supply chain that actually supplies these things and you know that’s a whole nother conversation. Actually implementing what I’m talking about is very disruptive, but at the end of the day I believe that features is how we get the 90% ESG uptake–the Holy Grail–that we’re all looking for. 

Christina Leijonhufvud: Can you guys react to that? I mean, I think this is a sort of revolutionary thought. Josh is talking about ultimately, what I’m hearing, is disintermediating the advisor from the supply chain. Disintermediating the managers from the supply chain, making this completely flexible open architecture that clients can manipulate for their own. 

Josh Levin: I’m sorry I just want to correct that real quick, because I don’t want to have the robo-advisor conversation. I actually think the advisor is the star of the show. What’s happening, and what people missed, a few years ago people were like oh are robots going to take over advisors? Dead wrong. Robots are going to take over manufacturers. The people that are in trouble are folks like Vanguard, BlackRock. I mean the scale they’ve created doesn’t even matter anymore because they’re dropping their fees to zero. And even with the move to indexing, you’re basically saying this whole thing can be automated. When technology hits a vertical, at the end of the day, all that matters is the raw, inter-subjective human interactions. That’s where the margins are. Everything upstream of that is going to ones and zeros. And that’s why Goldman bought United Capital. That’s why we have Aladdin Wealth. Everyone’s racing downstream, because we can basically move light manufacturing into the fingertips of advisors now. And their client relationship is the only remaining strategic asset in this value chain. So I’ll shut up. React, but I think we agree on the role of advisors. 

Jamie Martin: Yeah absolutely. I mean advisors are hungry to have the tools at their fingertips to have these types of conversations with their clients. We have solutions that are on our type platforms that are a kind of version 1.0 of what Josh is describing. They’ve just raised quite a bit of assets in the public market context because they are able to have this kind of menu approach and you can tilt the portfolio with minimum track record or tracking error. And then the other dynamic, for high net worth individuals, is around this idea of tax loss harvesting, which can be a component as well in terms of a carrot to get people engaged in in the discussion and especially in the next-gen conversation. There’s a lot of talk obviously on the next generation of wealth transfer. Advisors are using impact and sustainable investing as a hook to engage the next-gen. They’ve got the relationship with the patriarch and matriarch, but there’s some shocking statistics on how unlikely that next-gen client is actually going to necessarily stay with the adviser that their parents or grandparents had. And so I think these types of tools are facilitating that. I think obviously they’re gonna be disrupting incumbents and they’re gonna be scaling and getting their technology out there. Our firms are very risk averse to startup type, asset managers, but they’re out there proving that their technology is working. And at the end of the day, if that’s what clients are reacting to, and if they can see their views, their impact, and their values expressed in that type of solution, start to translate to positive outcomes it’s a very, very powerful concept.

Jackie VanderBrug: I mean we’re going to have violent agreement here on the role of advisors. So you know in terms of that conversation, although we do, on our Merrill Edge side, have the equivalent of the Robo (Advisor) where folks are making those choices and it’s interesting. Right now you can choose an impact portfolio or a traditional portfolio and we’re seeing somewhere between 20% and 25% choosing impact portfolios. And that’s with zero additional marketing or a push or anything like that. So that’s a bellwether of what’s to come.

I think I agree that the features or customization does matter. It’s interesting. I will say advisors find oftentimes you can get a little bit of a blank stare or almost overwhelm people when you ask them what they care about. So that conversation is important for the advisor to be able to go through that, because it can sort of almost become a little bit of whiplash. Like, well do I care about the Amazon and Ocean plastics and gender and all of a sudden you made it harder for me than when I came in here. You gave me almost more of a burden. So there is some, at least for us, simplification. We’re finding big themes that people really resonate with as opposed to absolutely everything has to be impacted through your public market portfolio and then I guess we’ll go to this a little bit more, Christina, maybe later in the conversation. To pick up what Jaime was saying, this aspect of active-passive, there is a conversation about the next generation of active managers and how they’re picking up sustainability business models that’s not currently in the ESG metrics so that’s a great conversation.

Christina Leijonhufvud: Let’s go back to that question–I think that’s an important one. Adam I want to bring you into this conversation. Rockefeller Foundation is an interesting player in this market. What I mean, with all respect, why is Rockefeller Foundation even engaged in this conversation? I mean why isn’t this retail product gap being solved by the private markets institutions that are represented on this panel? What role is Rockefeller particularly looking to play to help solve this gap? 

Adam Connaker: Yeah well I think, to be clear, we’re also not solving it because it’s a very complicated gap. I think we’re certainly working towards it and trying to support a lot of partners that we think can have significant contributions. But there’s a number of reasons why, even in our portfolio, you’ll see a lot of struggles. Back to your point Josh, around is it product or is it this sort of additionality this engagement something else that gets tacked on to the product? I mean our core strategy for the last several years has been, let’s find products that we think in if you will leverage track record where we think it exists you know big market opportunities like CDFIs or the investments DFIs are making in emerging markets, those kind of things where we think there’s actually a big opportunity, let’s try and push those things towards retail where we think there’s a natural connection. And it’s a lot harder than that to do it. Basically those products aren’t landing and they’re not inspiring. We’ve done some really creative things, actually, I think. 

We’ve got one product that we supported which is really cool called Impact Shares. They’ve launched three ETFs, public market strategies, and what they’re trying to do is basically say you know we’re gonna partner with, in this case it’s the NAACP, it’s the YWCA, and it’s UN-CDF, to launch a gender empowerment, a minority empowerment, and then sort of a low-income, least income economies sort of strategy. And in all cases you know those are great strategies. They’re designed by those partners and they get a hundred percent of the net management fee because Impact Shares itself is a non-profit. And so our thinking on this was, when your FA goes to have this conversation, is trying to explain a very complicated ESG metric, you know MSCI or whatever it might be, strategy, maybe would be easier if we just said this is the NAACP, who you already have a relationship with. They’re validating it and by the way they’re getting paid for their active engagement of this portfolio over time. And it’s not that I don’t think that strategy can work, because I actually do think it’s gaining traction and it is working in some cases, but it’s not scaling to hundreds of millions of dollars because it’s just not that simple, right? The product is not going to be the one thing that’s missing and I think that’s been a big part of our learning over the last couple years is maybe there are opportunities inside and outside the product space.

And you know, Josh we’ve talked before about, for example, you know what should we do with shareholder voting, proxy voting? Is this an opportunity, is that a place to inspire people without asking them to change, entirely, their portfolio? And so I think you know we’ve looked at a lot of these sorts of themes in that sense. 

we think this is a critical step for the impact investing space to take–to really begin to get actual traction at the individual level and drive it down so that we’re including a lot more people in the conversation of what this is and what finance can be.

But, I want to revisit your question about why Rockefeller. And why do we continue to engage, beyond the fact that we think this is a critical step for the impact investing space to take–to really begin to get actual traction at the individual level and drive it down so that we’re including a lot more people in the conversation of what this is and what finance can be. But it’s also that we have very interesting capital. We don’t have the same boundaries that basically everyone else in this stage is going to run into. We’ve got grant capital. We can innovate. We can really test different areas. We can partner with totally different groups. We can partner with all the independent advisers or we can try and build something that heads towards you know the sort of the big shops like Morgan Stanley and B of A. So I think you know there is a role for innovation. There is a role for testing. There’s a role for incubating new technologies, new thinking that can support a lot of the work that happens here and that’s really where we see ourselves is really incubating that. The other, one last thing I’ll say on that front, is there’s also a historical role for supporting the industries as they grow into these paths. And so, as we think about you know the catalytic capital that we can deploy and the fund that we’ve got to to support products and managers, it really is saying you know how many investments is it going to take to get you onto one of these platforms? It’s saying what is that handoff going to look like and how do we be very strategic about, not just supporting you in fund one but really growing the manager capacity and building it and recognizing that in some cases that’s a five, ten, or longer year investment. It’s not as if foundations are really great at staying in one lane for ten years, because I fully recognize they’re not, but they do to some degree have that scope and can lock in some of that thinking. I think we want to incubate and grow these big areas and opportunities that we hope do land in this space. We want to think about the additional, tack-on engagement strategies that I think are really critical. And product for us will still be a very important piece, but recognizing all the limitations why product is not going to be enough.

we homed in on this common theme, which is, even on the end of the spectrum where you’re innovating and incubating new products, it all boils down to the access piece. Right? What are the access points? The advisors obviously. It seems we have consensus on this panel, the advisors are not going away and they’re the front lines. 

Christina Leijonhufvud: Fantastic. Well it’s amazing to me, we homed in on this common theme, which is, even on the end of the spectrum where you’re innovating and incubating new products, it all boils down to the access piece. Right? What are the access points? The advisors obviously. It seems we have consensus on this panel, the advisors are not going away and they’re the front lines.

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