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Values and Investments By Richard Todd and Sarah Newman

Why Evaluate the Values of Your Investment Providers?

Organizations with a strong focus on environmental concerns have not been shy about requiring that the money managers and vendors they work with hold values congruent with theirs. We believe religious organizations should likewise evaluate whether their advisors and managers are in alignment with their values and mission.

A primary role for an investment consulting firm is to perform due diligence on the products, managers, and strategies that are utilized in an investment portfolio. Managers should be evaluated both qualitatively and quantitatively. That should include an assessment of whether they can construct a faith-based portfolio. An example would be a manager who can screen out “sin” stocks – those involved in the abortion or pornography businesses, for instance. Positive screens might selectively include companies that are deemed to be pro-family and pro-religious rights.

We believe that another step should be taken to determine if the values of the consultants, managers, and other vendors are aligned as well. It is surprising how often that firms that manage assets and take fees and commissions from religious organizations have contrary values.

Below are some important considerations for religious organizations when evaluating consultants, managers, and vendors.

Explain the faith-based management process

Comprehensive due diligence means not just taking the simple answer at face value. It must be measured. A couple of examples can explain this point:

In evaluating a manager with a Christian denomination in their name, we learned that they were only 95% morally/biblically responsible. Our portfolio screening discovered that they were invested in a Chinese bio-tech company that was engaged in research using embryonic stem cells. While the client’s manager seemed comfortable with the 95% guideline and a questionable position in the portfolio, the religious foundation was not, and the manager was terminated.

Our due diligence on a faith-based hedge fund product revealed that their approach was simply to eliminate the “performance impact” of the stock in question. The portfolio actually held these stocks, but they took the net positive or negative impact away from the Christian portfolio and applied it to the secular portfolio. In other words, the portfolio was really no different; just the returns were. After explaining this to our client, they voted to terminate the manager.

Explain your company’s charitable donation practices and recipients

Responses to this request can be shocking. There are firms that are happy to work with faith-based organizations, collecting fees from them, but their own philanthropy dollars may go to organizations that are in complete conflict with the values of faith-based groups. Religious organizations should be aggressive in asking all their vendors about where they send their donations and what kind of organizations they sponsor.

Explain your company’s benefits practice as it relates to abortion services

In the aftermath of the U.S. Supreme Court overturning Roe v. Wade, many companies have been vocal about a new benefit of paying for abortion services and related transportation across states lines. Although less common, other companies have increased their benefits for pregnancy and adoption services. Understanding how a company designs their employee benefits can be revealing with respect to their values.

Provide a client list

The SEC requires that client lists cannot be cherry-picked. Dig deep and understand how a manager, consultant, or vendor creates their list. Many firms that market to faith-based organizations are also doing business with clients that are in direct opposition to their values.

Describe the culture of your company

Management expert Peter Drucker famously said, “Culture eats strategy for breakfast.” Culture is the wheel that turns any organization. It should be very well defined, with a process that maintains it. At Innovest, we define our culture as “stewardship” and we feed it through a flat management hierarchy, monthly team charity events, corporate tithing, and empowering our professionals. As such, we have been awarded as a Best Places to Work* in money management eight of the last nine years by Pensions & Investments. If your vendors have low employee turnover, have consistent growth, and clients that are raving fans, you can bet their culture is positive.

Seeking quality investment firms to manage your organization’s assets is a fiduciary responsibility. That should include experience, investment performance, organizational reputation, and value alignment. As consultants, our role is to help define values and educate on a spectrum of possibilities within well-established fiduciary principles.

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Richard Todd is the Innovest CEO, Co-Founder & Principal. He has more than 35 years of experience in investment consulting and currently provides consulting services to institutions and families. Rich has been named as one of America’s top 100 independent investment advisors by Barron’s and was selected a 2017 outstanding CEO by ColoradoBiz magazine. 

Sarah Newman is a Vice President at Innovest Portfolio Solutions and is responsible for business development in the religious and nonprofit markets. She works closely with marketing and is responsible for developing new business and relationships within these two sectors. Sarah has more than 18 years of experience in nonprofit development, marketing and event planning, and business development.


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