By Stephanie Cook
Gone are the days when many financial advisors cautioned people about weaving humanitarian and environmental values into investing. Today, many investors consider the social impact of their portfolio construction. Options abound for seeking financial return while avoiding negative effects in areas of concern, as well as for investing for positive impact on the world.The public and advisors have access to mutual funds that exclude various individual areas of concern (for instance, fossil fuels, human rights abuses, and weapons involvement). ETFs track associated indexes. Public and private equity opportunities offer positive impact investing for critical change in areas such as renewable energy, women in the corporate structure, and community development.
An impact-oriented portfolio leaves a legacy of social impact to your heirs that might not be apparent to them when they receive their financial inheritance. Be proud of the effort you’ve made to leave them a portfolio with values behind it and let them know. Communicating the values embedded in financial assets strengthens the tie with any age heir, even the very young. The effects will extend beyond your lifespan. Because money and ethics are challenging topics, this significant conversation often does not occur naturally. If it does, you might not convey the ethical heart behind your portfolio choices the way you intend, without significant preparation. Use this guide to plan and execute an impactful conversation with your heirs about the value legacy inherent in your portfolio. You won’t regret it!
Step 1. Know Yourself
Self-discovery paves the road to communication. Ideally, as an investor, you should examine you whole life before crafting a portfolio. Critical to proper financial planning and portfolio design, a review of dormant non-financial goals, projects, and dreams sets the stage for seamless integration of personal and economic priorities. Devote time to this endeavor on your own or with a life coach. For now, use this quick-start to prepare for your conversation with your heirs.
- Write down your best understanding of your current life plan in 100 words or less. Challenge yourself to get it on paper in ten minutes.
- List the values that a disinterested person would surmise are yours from reading your life plan statement. Health and wellness? Autonomy? Fairness? Respect for others? The environment? Again, aim for ten minutes.
- Note which of these values your investments reflect. Add any additional concerns addressed in your portfolio design.
- Pray for five minutes regarding your unique life purpose. Whether you think you received an answer or not, spend five minutes or less writing down your best understanding of your mission.
Now you have a life plan outline, a record of your investment-related ethical considerations, and a mission statement. When you know your purpose, your message to the next generation becomes clearer.
Step 2. Clarify Your Message
Reflect on these questions, write about them, and discuss them with each other or with friends.
- What impact do I seek?
- How did I come to this decision?
- How do the values reflected in my investments reflect concern for my family, my heirs, and the next generation?
- If I had one message for the beneficiaries of my estate assets about the importance of values-based investing, what would it be?
A school shooting prompted one of my clients to divest from gun-related holdings. Previously, she hesitated to reallocate according to her values, fearing a reduction in return while saving for college education. Her family discussion could combine school safety with the importance of a college education in her family.
Step 3. Tone and Schedule
Next, choose your time and location. For a more formal tone, ask your financial advisor to host the conversation (an added benefit — your advisor can address the mechanics of estate administration). Despite the topic’s weight, keep the tone lighter if that fits your situation. If dealing with the young or distractible, plan a break or split into multiple conversations. If an opportune moment is likely to arise in the course of your usual interactions, then an impromptu talk might work (still develop the structure via Step 4). If so, make a deadline. Remember to minimize distractions. Consider your energy level at various times of the day. Maybe the conversation will take place via phone or video call or at a mutually convenient location like a restaurant (consider the restaurant’s volume level).
Set the stage for the conversation’s tenor in how you broach your topic. To accommodate shorter attention spans, I requested just twenty minutes with my sons. I highlighted the brief appointment’s importance by saying I would be ready to schedule after I had prepared my thoughts.
Step 4. Structure the Conversation
Particularly crucial for less formal conversations, memorize three bullet points. That way, you won’t come away wondering whether you delivered your message. List the values incorporated in your portfolio as one of your bullet points. Outline the conversation with a few words to remind you of your introduction, bullet points, and a planned transition out of the conversation.
You may wish to state your main point in one sentence right off the bat. For instance, “I want to share the principles of environmental protection and gender equality incorporated into my investment portfolio.” Alternatively, you may prefer a lead-in such as, “I’ve been thinking about how my values relate to investing.”
Focus on yourself and articulation of your planned message, not on instructing your audience or trying to influence their views. Leave space for questions and remember to ask some yourself. Be open to surprises. You might ask:
- How does this fit with your values?
- Do you want to research together how to incorporate issues vital to you as well?
- What do you want to learn about investing?
Keep your expectations modest, creating a low-pressure environment for you and your heirs. More than likely, your heirs won’t have the response you envision, but you can be confident that they will remember when you are gone.
Be flexible about time. The conversation may be much shorter than you anticipated. If attention spans are short or time runs out, continue the conversation another time. On the other hand, leave time for an extended discussion to develop. If meeting away from home, then schedule a low-stress outing afterward. If at home, plan a favorite downtime activity.
What’s Next?
After the conversation, acknowledge yourself and celebrate. You tackled a challenging topic. Before starting your planned fun activity, take five minutes to celebrate yourself with a mental pat on the back. You are on the path to clear communication with your heirs on the impact you intend on the world. Congratulations! And remember: keep discussing your style of impact investment with your heirs.
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Stephanie Cook, CFP®, CPCC holds a bachelor’s degree in mathematics from the Massachusetts Institute of Technology, with a minor in women’s studies, and a master’s degree in counseling psychology. Find out how to screen your investments for impact issues at http://www.stephaniecook.com.
Stephanie Cook, Certified Financial Planner® and Certified Professional Co-Active Coach, offers socially and spiritually responsible investments and comprehensive financial planning through Stephanie Cook Financial, a registered investment advisor. The God-Centered Financial Plan system powers your life purpose with sound financial strategies that impact your life, your community, and the world.
Stephanie is a food, fitness, and fashion enthusiast who is semi-proficient in Spanish and likes to crochet granny squares, play the flute, and attend the theater and movies. She is the proud mother of two young adult sons and grandma to a cat named Puma. Happiest when cycling, Stephanie celebrates life by seeking peak moments in resplendent natural locations around the world.
Most important to Stephanie in her volunteer activities and impact investment portfolio are women’s safety, advancement, and equality; environmental concerns (in particular, fossil fuel-free investing and improving people’s relationship to the natural environment); and access to health-care.
