About ten years ago, when I became an inheritor, all I knew was that I wanted to get the money out...
5 Questions to Ask Your Advisor About Values Aligned Investing
Why use a financial advisor in the first place?
Some life factors which may lead you to hiring an advisor:
- A major life event such as marriage or divorce, having kids, or new investable assets via an inheritance or a liquidy event (acquisition, merger, IPO, or other action that creates new investable funds).
- Complicated finances or need specific advice about retirement planning, charitable giving (DAFs), or tax strategies.
- Seek specific investments in particular asset classes.
- Feel anxiety about your finances and would benefit from being able to speak to someone who knows you and your financial picture.
Many investment advisors require a minimum account size to work with you, generally ranging from $100,000 to $5,000,000.
Three important factors when choosing ANY financial advisor
- Make sure they are a registered investment advisor (RIA), which requires them to operate under the "fiduciary standard" (meaning they are legally required to put your financial interests ahead of their own or their firm's, versus a "suitability standard," where investment decisions need only be "suitable" for the clients: you can read more about it here). Not all financial professionals are required to put your financial interests ahead of their own or their firms', so it's critical that you ask and confirm that any US-based advisor you work with is an RIA. (Here's a helpful article from Forbes magazine to learn more).
- Commissions. Ask whether they receive commissions, and, if they do, explore how that impacts their investment advice. For example, stockbrokers offer investment advice but can also receive a commission (an additional fee) when you invest in certain products like funds. Stockbrokers do not operate under the fiduciary standard, which means they are not required to put your financial interests ahead of their firms' so be sure to ask.
- Financial advisors cost more than robo-advisors. Advisor fees are usually charged as a percent of your assets under their management (AUM). Percentage fees tend to be deducted directly from your account and are often on a sliding scale: The higher the investment, the lower the fee. An advisor might charge 1.25% to manage assets of $500,000 or less, then drop to 1.0% for assets of $501,000 or more, dropping again to 0.090% after the first million invested, and so on. They can also charge a flat fee (by the hour). Because each person's financial situation is different, you need to specifically ask each advisor explicitly about their fees
The bottom line: be sure to ask what each advisor charges as an annual fee and that they are an RIA (requiring them to put your financial interests ahead of their firm's).
5 Questions to evaluate an advisor's impact expertise
Now that you know a little about advisors in general, you may be wondering how to evaluate an advisor's expertise in impact investing.
- Which asset classes will you invest in that meet both my values aligned investing and financial goals?
- Share specific examples of impact investment options in each asset class you're recommending to me.
- Share the names of asset managers (funds) or individual stocks you might choose that meet my values aligned investing goals.
- Share some examples of direct equity investments that align with my values (if you're investing in the private equity asset class).
- How will you use shareholder advocacy (for the public equities portion of your portfolio, if applicable) to further my impact goals?
You may also want to share your Values Investment Policy Statement with your advisor (don't know what this is? Our Values Aligned Investing Course guides you through the process of creating one). Notice how your advisor reacts to it. Do they receive it positively? Or do they tell you it's not possible to implement it?
In addition, you may also want to ask:
Values aligned questions
Other questions that may be of interest:
How to find a new advisor with values aligned investing expertise
ValuesAdvisor is a non-profit platform that allows you to search through a universe of advisors who have expertise in values aligned investing, while collecting no personal data about you. ValuesAdvisor was founded by Lisa Renstrom, with support from both Kate and Megan, as a way to help investors who had committed to the Divest/Invest pledge (to remove fossil fuel-based companies from their investment portfolios) find a new financial advisor to implement their goals.
To gain access to ValuesAdvisor
There are 3 ways to gain access to ValuesAdvisor:
- Join a group that is a ValuesAdvisor partner. Members of ValuesAdvisor's partners are offered complementary access as a member benefit. If you'd like to see if you're a member of a partner group, you can see a list of our partners here. If you're a member of a partner group, feel free to email us to get your access code: firstname.lastname@example.org.
- Sign up for ValuesAdvisor's ValuesAligned Investing Course. Students in the course gain free access to ValuesAdvisor.
- Sign up for an individual subscription at ValuesAdvisor.
There are a number of groups that offer lists of advisors who offer values aligned investing services.
USSIF (the Forum for Sustainable and Responsible Investing) offers a listing of its members, many of whom are financial advisors.
B Corp offers a listing of their members who are investment advisors.
Green America offers a list of names of values aligned investment advisors.
Blog post: " The Seven Attributes of a Values-Aligned Advisor," an excerpt from Activate Your Money: Invest to Grow Your Values and Build A Better World, by Janine Firpo.
Intentional Endowment Network’s Hiring an Investment Consultant: Making your ESG intention Actionable
Omidyar Network: Building an Impact Investing Team
Photo: Kari Herer