“We were taught,” said Joe Keefe as he looked at me (his contemporary), that “we make money over here and then we spend it over there.” Keefe was speaking about what I call “values investing,” and what is variously called by market participants SRI or ESG or faith-based or impact investing.
Keefe was talking about the generational differences in investor preferences. Younger investors and women, the data show, want to make their money and accomplish social or environmental or corporate governance change at the same time, now, and not wait until they’re old and wealthier and can change the world with their accumulated assets a la Bill Gates or Warren Buffett or, in earlier times, Andrew Carnegie or John D. Rockefeller.
Investors are voting with their cash for impact investing, as our second feature story relates, with some $6 trillion allocated to values investing by institutions and individuals. But Keefe, president and CEO of Pax World Funds, which launched its first SRI mutual fund all the way back in 1971, says that advisors are trailing their clients in the values investing space. Citing data from Morgan Stanley’s Center for Sustainable Investing and Cerulli Associates, Keefe says that while millennials might be most interested in placing their money in sustainable investments, 71% of all investors say they’re interested (that’s the Morgan Stanley data) while 63% of advisors say they have little or no interest in sustainable investing. “What an opportunity for advisors to be early adopters!” Keefe said to me in a December interview.
Yes, showing interest in a topic is different from actually investing in a strategy. Yes, advisors have a lot on their plates when it comes to building risk-aware client portfolios and running their practices and even planning their business growth or exit plans. But as our cover story written by Savita Iyer-Ahrestani reports, Live Oak Bank has become a symbol and a major player in solving advisors’ succession planning and attracting-and-retaining-the-next-generation-of-advisors-and-owners human capital issues.
The Live Oak leaders and lenders are not philanthropists: They saw a market opportunity, hired people who know and appreciate the advisor model — particularly its cash-flow business model — and use good lending procedures and standards to make high-quality loans that allow advisors to acquire other practices.