Episode 20: Advocacy Investing in a Nutshell

ABOUT THIS EPISODE

On this episode of the Build Your Life Podcast with Financial Expert John Browning, we're discussing what advocacy investing is all about and why you might want to get involved with it.

Advocacy investing is all about supporting companies that are "doing the right thing" in the world. Clients often get involved with this type of investing if the company's goals match with their goals. Listen in for details on John's point of view when it comes to this and how you can get started.

For more information, visit www.GuardianRockWealth.com to learn more about what John can do for you. Or, give us a call at (312) 372-5000.

Welcome to the building your life podcast with John Browning. Building your life is a relaxed and unedited conversation with financial expert John Browning. John's the founder of Guardian Rock Wealth in Lake Forest, Illinois. He's also the author of the Book Build Your Life, not a portfolio, a guide to your financial future based on your personal values. Now you can purchase John's book on Amazon, or you can stay around to the end of today show and I'll tell you how to get a free copy milk right to your door. I'm Michael Lawn, your host for the next few minutes as we chat with financial expert, business owner and author John Brownie. And Aloha John, aloha. Hey, I'm trying to practice my Hawaiian even though I'm not there. How are you doing? I'm doing well, doing well. The brother's weather is great and things are just barely starting to open up here. So cool. I was going to ask you how things are on the on the islands. Than businesses are starting to open up, then restaurants and things. Yeah, we're a little slower than that. I think most states. They're very cautious here, but the Nice thing about being here is is really peaceful and people are, you know, generally following the rules, whether they like him or not or agree with them or not, and so it's great people here on the islands. Yeah, great, well, I'm glad to hear that, buddy. Well, okay, well, let's you go. She'll f into another episode of Your podcast and we're talking all things financial with the in today. You know, we've talked about a lot of things, John, over the last few weeks with the pandemic and everything, but today I want to jump into a topic that we hear a little bit about, but I wanted you to really unpack it for us, and that's something that you is called advocacy investing, and I mean it's a pretty broad term. So is there a way that you can kind of put that into a nutshell force and help us understand...

...what is advocacy investing? Sure I can, I can put it into a nutshell for you, but the reality of it is that it expands with, you know, outside of that nutshell, if that makes sense, and I think you'll understand what I mean as I explain it a little bit more. So, while the typical thing that you'll hear when you start talking about investing to your values is you'll hear the term or the the ACRONYMSG, which stands for environmental, social and governance. So people who are concerned about the environment or social justice and corporate governance, that's what they're looking for. And typically, when organizations or advisors want to invest towards these things and towards somebody's values, they take a mutual fund or change traded fun that just blanket covers. They say, well, we are concerned with our entire investment portfolio, about ESG. Very, very broad right, okay. What we've found is that many investors, especially when they have substantial assets, have very strong feelings, especially about a few things. And while the ESG idea is largely exclusionary and that they just take companies or businesses out of their entire universe, what we do is try and include companies and support companies with our investment dollars that are doing the right things, and we're very specific about it. Hence the idea of advocacy investing. So we are our clients advocate and they are advocates for what they believe in and what they want to support. So as we chat with them and we get to know them better, as we've talked about earlier on earlier podcasts. Getting to know them and what their values are is of...

...paramount importance. So if they are concerned about a particular area, we include companies that are involved positively in that area and of course, will also exclude companies if they're very opposed to something that a company supporting as well. But it's much more were directed. So yes, it's a broad term, but it can it can also be very narrowed down to the individual. Okay, I don't know. It was that clear and help me. Well, I think so. So. So what you're saying is is, and help me out here, but if, for instance, a mutual fund, as an example, may exclude an entire company or a host of companies if they would fall outside of a specific esg, whereas what you're doing is you're working with that client individually, understanding there their bent, their goals, their perspective, and you might be able to find a company within with that. A mute to fund might exclude, but you're going to include it because it actually matches what your client is wanting to to align themselves with. Is that right? Very specifically to the clients that that's right. And while a lot of ESG mutual funds might again exclude an entire industry like and, for instance. Many people are concerned about the environment and they might exclude the entire energy space. Yeah, there are, if you look deep enough and really explore there are companies, there are businesses that are in the energy space, considered in the energy sector, and some might even consider them, oh, they're and you know, quote unquote, Oil Company. Well, that's a dirty, non environmentally friendly company. What you find sometimes is that some of those companies that...

...are maybe even old line companies have been around for a long time, have switched their business model such that they're doing even more to support the environment than a smaller company that is dedicated just entirely to to the environmentally friendly energy space. So we dig really deep into the companies and businesses to find that out for our clients. Okay, all right, cool, and and I'm guessing somebody would would want to have advocacy investing. I mean, this something new for every client, or is this something that a specific client would come and say as you get to know them? And that's one of the one of the things that you've talked about multiple time and times, John Is, is how deeply you want to get to know your client, and this is just one reason for that. But if a client specifically wants to be pro environment, let's say, or anti a bad environment, or so they want to they want to stay away from companies that are harming the environment and in their mind, like you said, it might be a gas company or an oil company. But you may do the research and come back and say, but actually, this company's actually doing more for the environment and this is how it would play into your your portfolio and really match your goals. Is that kind of the discussion? That's that's exactly right and and you kind of alluded to to because this something that we do for every client and and to some extent the answers he has. But but really to do this and be involved with a full advocacy investing program it does require quite a lot more work and effort on our part. So we do have a minimum requirement of a million dollars under management to do that. But if you're a smaller client and you've got a very strong feeling about something, because we're doing this other work for other clients, we can help you steer clear that. It just wouldn't be the full program that, like we have for some of our other clients. Okay,...

...very cool. And how would somebody know, or I mean how would they get involved in something like this? Is that just through the discussions they have with you? When that when you first meet them, that part of your questioning process? How do you discover that somebody that this is good for somebody or that they actually want to do this? Well, we find out pretty quickly because as we go through our normal process of you know, what does this money that you're talking about mean to you, and and why does it mean that? And it just comes out right because this is something that these type of people, and you know I include myself in these type of people, we have, you know, we wear it on our sleeve. You know, we believe some of the stuff very passionately. It is absolutely going to come out. So we find out really quickly if they would be a potential advocacy investing client. Okay, well, that's pretty cool, and I would guess that it depends on which sector they are pro or against or whatever, as you go and advocate for them, the number of options they have available to them. So I presume that there's not just one company that you're going to find that helps them in that they can invest in. There's probably a whole broad range of them. It's just that you're doing all the due diligence to to match that up in my tracking. Yeah, that's exactly right. And and what you find, like in so many other areas, when you really do the deep dive and deep research, you find businesses that are are involved in dispirit things. Right for instance, and I won't name name the bank, that there's a particular bank that we actually have we don't include in those advocacy clients that have a real desire to, you know,...

...enhance the environment and support the environment, and the reason that we don't have this particular bank in those portfolios is that they don't, and this is one of those examples of an exclusionary screen that we would use, because they are the largest issue were of debt to pipelines and companies that are specifically doing fracking and those type of things that can be very harmful for the environment. So it may be in the banking sector, but it's actually an environmental play. It might be in the retail sector, but what they're doing with all of their buildings and with all of their electrical as. They're going more solar powers. So they're actually a company that we would want to support if we were environmentally incline. That's fascinating. You know that that both of those examples right there just put a whole new spin and really just opened it up to me, because it's it's not enough to say well, I want to protect the environment. There for environmental sector gone, because it could be, like you said, a bank or a real estate fund or probably a host of other things that impact one I'm for or against in a sense. Right, that's right, that's right. And the other really interesting thing that we've seen over the past ten years or so. Many, many years ago I ran a exchange treated fund that was those you know, I ran the whole portfolio in this particular fund that I was in charge of was called the clean energy fund. So I learned a lot about the environmental aspect of things and how to produce energy and be environmentally friendly. I learned a lot about it, a lot about the companies. Well, back then that was goodness. I'm giving away. My Age was about fifteeneen years ago when I was running that fun and back then you couldn't make through the argument that hey, this is a...

...great way to invest because your returns are going to be better, because they really weren't it. If you did make more money or you didn't make a better return, it was simply because the government was supporting these companies. Well, now that side is really changed and we're finding that companies really can do well by doing good, and we're finding that more and more and companies are being getting to find that out as well. So we're getting more and more companies that are jumping on the bandwagon. So, frankly, all of those investment dollars that have gone towards inclusion and and purchasing shares and supporting companies that are doing good has made a difference. It's actually worked and now those companies can produce great returns. Very cool, I love that. The way you said that, and let me see, try to work at a companies can do well by doing good. May they can do well financially by doing good to the environment or something else, is that it was at the phrase companies can do well by doing good. Yeah, that's that's exactly right. Yeah, I like that. And so advocacy investing is, I'm saying it as a two part or double phrase. Is One it's it's investing, being an advocate in what I want to invest in, types of things or what I don't want invest in. But let's say I'm be proactive, I want to invest in certain things that are pro environment let's say, and it's you being an advocate for me, your client, to do all the research and to bring things to the table say here's what I would recommend you do. So it's a it's kind of a double ed sort right on a good thing. Yeah, exactly. And and you know, it doesn't have to be environmentally, could be social, just justice as well. You know, there's a lot of companies that are doing a lot of good, especially not just here in the United States, but also even in third world countries, because so many of the businesses out there today it's a global economy and they're doing business...

...in third world countries. Are they doing anything to ensure that their products don't get in the hands of the of the wrong people or that their profits don't get in the hands of the wrong people, and are they doing anything to, you know, help the oppressed, so to speak, and and contribute to two things that are going on there? So it can be any number of things that people really have at the core of their value set. Yeah, that's really cool and that takes me all the way back down to one of our early podcast is, where not only do you get to know your clients really well, but you talked about how you want to dig into the companies and understand their management team and their philosophy, and that ties right back into this, because if a company's doing business overseas but they're just running a sweatshop, that may not be the company you want invest in. Yet if that company is using overseas talent and they're providing great work environment and helping those communities grow and thrived, maybe something you want invest in, but you don't know that unless you do the due diligence that you and your team do a guarding rock and digging into the companies and their management team, their philosophy and understanding why would we want to bring this this company into your portfolio? Right, it's exactly right. Yeah, and that takes a lot of time, a lot of every lot of expertise, and that's why you are who you are and why you do what you do, because that would drive men of US Battie, but I'm glad that. I'm glad to do it young because it makes a difference. It really opens up a lot of probably hidden opportunities, is what I'll call them, of people who are it's not just you don't, you don't just you know, and we've talked about this another episode. You don't pull off the shelf a portfolio and say, Oh, John and Mary, you get to go into portfolio se because that's what we have for you. You're digging around and understanding John and Mary and their heartbeat, their values and and if they're going to want to do advocacy investing, you're...

...going to do the research and the due diligence to find the right companies to bring it to bear. And then, as we've talked about in other podcasts, by the way, if you haven't listen all of John's podcast you need to go back and listen to them because there's just a wealth of information there. But but doing the portfolio and then revising that, having these meetings on an ongoing basis with the clients to make sure that that portfolio is what rebalanced, as we say, but is still aligned with the life that they're trying to build exactly. Yeah, so that's what you talked about in your in your book, John. Build a life, not just a portfolio, and make sure you reach out to John and get a copy of his book and make sure you understand advocacy and investing. This was a nutshell version by far, but you help me understand some things and how it's not as black and white as I thought it was and as many people might think it is, because you can't necessarily just exclude an entire industry, because you need to dig deeper and really match what that client wants to be investing in as part of their portfolio with the companies that are out there and as you do your research and you bring those to the table. So well done. Wait Way to help clarify what add advocacy investing is. Can't say that too fast, right. So that's good. Any last partning car thoughts on this topic before we wrap this this episode up. Well, if, if you anyone wonders how deeply we hold this, this idea of advocacy investing, it's actually part of our email. So if you ever want to email me and get in touch with me, it's Info, Info at advocacy investingcom so we do take this very, very seriously and if you do want to learn a little bit more and take a deeper dive into it, you can go to our website, wwwg rock wealthcom. You look across the top where it says about us,...

...there's a dropdown menu where you'll find in our investment philosophy and underneath that you'll find advocacy investing, and it's probably more than you would ever want to know about advocacy investing. It goes into fairly, fairly deep detail on how we do that. That's awesome that that act on clear instruction. So go to go to the website, learn about that and while you're at your website, just shoot an email to John. Go to their I think it's contact page or something, and shoot him an email and set up a time to call and talk with John About Edgis. Add Yeah, about this type of investing and and anything else related to your financial future, because John and his team at the Guardian rock wealth can help you do that. John, thanks so much for helping US understand this and for another great episode of Your podcast. All Right, thanks a lot for having me. All right, buddy, we'll talk to you soon. All right, but by so thanks for listening to the building your life podcast with John Browning. Be Sure to subscribe to this podcast so each new episode will be sent to you automatically when it is released. Have a terrific day.

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