Tapping the client’s interests and concerns, Delavan, an investment team manager with BOK Financial Private Wealth, said the discussions frequently result in lengthy exchanges that reflect the client’s passions around such topics. Increasingly, they also serve as a springboard for him to explore investment solutions that help the client align a portion of their portfolio with those passions.
“When a client learns that their values could be reflected in their portfolio, they just light up,” Delavan said. “It doesn’t matter what your values are—liberal, conservative, religious or not—we can help you find a way to integrate them with your investments.”
With values-based investing, BOK Financial takes its client-centric mission beyond the confines of fundamental portfolio construction. Through an exploration of a client’s interests and passions, Wealth Management advisors can integrate the personal with the practical.
“We’ve seen a change in mindset in many clients, especially during the pandemic, where they are reassessing what really matters to them,” said Lynne Amerson, an investment manager in BOK Financial Private Wealth. “They realize they don’t have a connection with their wealth, so they’re reaching out for deeper value and meaning.”
Matching values with investmentsValues-based investing takes its cues from the responsible investing discipline, which has been around for decades. Originally developed to avoid companies with ties to weaponry, gambling, alcohol and other “sin stocks,” analysts have increasingly focused on environmental, social and governance (ESG) analysis, which integrates consideration of traditionally non-financial measurements into investment decisions.
As ESG-focused offerings have entered the mainstream, investment managers have also created mutual funds and exchange-traded funds built around specific themes such as renewable energy, climate change and social impact issues.
“Values-based investing takes ESG a step further,” said Carrie Clasen Porter, director of strategic initiatives with BOK Financial Wealth Management. “We start with what’s important to the client and then identify investment solutions that best match their values, relying on many investment managers who employ ESG analysis.”
And, according to research firm Morningstar, returns on investments with higher ESG scores are at least comparable to funds that only use traditional financial analysis.
“We’ve found that with values-based investing, clients want to talk about the performance and more,” Delavan said. “They’re engaged in the portfolio and interested in making a positive impact beyond their wealth and what it generates for them.”
To help flesh out clients’ values, advisors at BOK Financial have developed a series of conversation starters, including:
- What are you passionate about?
- With unlimited resources, how would you impact the world in a positive way?
- What’s your family’s mission statement?
- How would you like to positively impact society outside of philanthropy?
- If appropriate, why not ask the younger generations and beneficiaries what is important to them?
In 2019, 90% of the companies in the S&P 500 Index issued sustainability reports featuring some ESG data. Although the consistency of what’s measured and reported is a work in progress, corporations’ broad acceptance of producing such content reflects considerable marketplace demand.
“With the growth of ESG funds, we’ve been pleased to see that we can address the concerns of the client while also impacting other areas positively, which they appreciate,” Delavan said.
Values worthy of investmentThough they anticipate many BOK Financial clients will warm to the values-based investing, Amerson and Delavan expect the majority to get stuck on a critical question: What are my values?
“That can be tricky as we certainly don’t want to steer them in any way,” Amerson said. “But it’s very similar to conversations around philanthropy—what matters to you—as well as a self-exploration of your travel, your interests at home and your children’s passions.”
In a legacy trust situation, investment decisions must also account for how they’ll impact the value of the trust for the next generation of beneficiaries. Yet, values-based discussions that involve multiple family members can raise awareness among those who have previously been disinterested and potentially increase their level of engagement with the family wealth.
“Sometimes the children are off making their own way and they don’t want to learn about investments or any of the traditional aspects of the trust,” Amerson said. “But this can help their interest blossom.”
Contact your advisor for additional information.
Investors should carefully consider investment objectives and risks before investing. The Department of Labor adopted a rule for ERISA accounts in January of 2021 that addresses the importance of financial factors in selecting plan investments. The rule can be found here.