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MC Origin Stories – Sarah Ellis

What was the turning point for you in deciding to change careers?

 

What lessons have you learned from your past work life that you’ve brought to MC?

One of the key phrases I have kept with me over the years is one I learned from my first “real” job working at the local BBQ restaurant. Plastered on the wall to the left of the kitchen entrance was: “Work with a sense of urgency and always anticipate the guest’s needs.” This is a mantra I live by to this day, in all aspects.

I prefer to work quickly, yet efficiently, and I find so much value in taking a moment to think about all the “what-ifs” to ensure I am asking questions that haven’t even been answered yet. The best compliment I can receive is when someone says, “Wow, you beat me to the punch. I was just about to ask you that!”

 

Empowering a customer or client is something many of us hope to achieve in our work. What opportunities have you had to accomplish this in the past?

For me, this goes back to the saying, “Give a man a fish, and he will eat for a day. Teach a man to fish, and he will eat for a lifetime.” Being an overthinker, I always challenged this saying with follow-up questions: What if the person is too squeamish to put bait on the hook? What if the person doesn’t know how to swim if his boat gets turned over? What if he doesn’t have the resources to buy the fishing line and reel? What if he sets everything up right, but the fish are just not biting?

There is so much more that goes into empowering than just teaching. You must provide someone with the tools to accomplish the task well—the physical tools (bait, line, reel), the skillset tools (how to swim, how to drive the boat, how to overcome the aversion to baiting the hook), the learning tools (what is their learning style: doing, watching, listening?)—and in a way that makes sense for them. Empowering does not just teach someone to do something, but actually makes the person believe they can do it and do it well.

One of my favorite examples of this is with the daughter of a current client at our firm. Her mom wanted to start educating her about an irrevocable trust that was set up for the daughter when her dad passed away. Rather than just giving her access to the account (give a man a fish), or even just educating her on what a trust is, how to access the funds, and how to invest the funds (teach a man to fish), we spent time talking to her about her interests and her goals for her life. We did educate her on the basics of a trust and investing, but we took it a step further and explained the pros and cons of knowing the amount of money she had access to. We then put it back on her to make the decision to know how much was in the account or not. For some people, knowing that you have access to a large sum can actually be a demotivator. At the beginning of the conversation, she said she valued her work ethic and her pursuit of her passions. Would knowing that she had access to an inheritance cause her to sit on her laurels and not pursue those passions? We empowered her to make the decision and she actually chose not to know what the balance was. I was proud of her, not for the decision she made, but because she made that decision herself. She now has ownership of her life and goals. She knows she can ask for the balance at any time, but she made the decision that empowered her best to achieve her life goals and feel proud of her accomplishments.

The Societal Duty of Businesses: Happiness, Meaning, and Fulfillment for Your People

 

Before becoming the Chief Operating Officer, my primary role at Morton Capital was as a financial advisor. In 2017, I was working with a prospective client who ran a non-profit in Northern California. We were having a discussion about her life and wealth goals and began chatting about her role as the leader of an organization. I asked her to share her favorite aspect of leading the non-profit organization and she quickly said, “The dinner table conversations.” I was immediately confused but asked her to describe what she meant. She said, “As a leader, I am responsible for making sure my team finds meaning in the mission of the organization, is fulfilled in their career and ultimately goes home to have positive dinner conversations with their families.” I was blown away by this story and it transformed my views on leadership. Most books, articles, and podcasts define leadership as being about the processes and the people. And when it comes to the people, research typically focuses on boosting productivity and engagement within the organization. But in reality, the impact of leadership goes beyond the four walls of the business. The people leaders work with go home to family and friends, and they bring whatever energy they felt during the day home with them. Sadly, according to the most recent workplace studies, 40% of people are not bringing positive energy home; they are stressed and unhappy. I believe this is why my prospective client highlighted that her most important role was to impact dinner table conversations.

It’s been four years since that meeting and upon further reflection, I asked myself, “Does the influence leaders have on their people have to end at the dinner table?” The more I have researched, the more I am convinced it does not. If people are treated well at work, they will be happier, and studies show that happier people will be less stressed and kinder towards others. This made me ask the next question, “If we had kinder people in our society, could we create real change within society at large?” There are some obvious benefits to fostering a kinder society, such as better relationships and less depression. But a lack of kindness is also a root cause of more complex societal issues, such as political divisiveness, racism, animal cruelty, and shootings. These issues are obviously multi-faceted, and I am not proposing that kindness is the singular solution; but I am proposing that it can tilt the scales.

In the same way we ask the education system to influence better behavior in children, I believe it is fair to ask that workplaces do the same for adults. In fact, the workplace is probably one of the most influential places due to the simple fact that it is where we spend most of our waking hours. If leaders saw it as their societal duty to provide their people with fulfilling, happy careers, the trickle-down effect could be meaningful.

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Leaders are the new teachers

I should note that there is not much research on how workplaces impact society, so I have been digging into other sources to support this thesis. I mentioned earlier that 40% of people are stressed, unhappy or dislike their leader. This means that almost half of the people you meet had negative experiences that week. There is also research on the impact of positive “energies” vs. negative “energies,” and what the studies found is that these energies are learned behaviors. This means that unless there is a medical reason, people are not born unkind, they learned that behavior. So, there is an opportunity to help teach people how to be kinder and happier through positive relationships. These positive relationships can actually change your physiological health for the better by lowering your blood pressure and arming individuals with a heightened ability to navigate stressful situations. We’ve actually seen proof of this in classrooms when observing teachers who approach their students with positivity instead of negativity. Think about your favorite teacher growing up. What are the key attributes of that person? I’m guessing you thought of words like empathetic, caring, thoughtful, individualized teaching, etc. Likely when an issue arose in the classroom, that teacher didn’t say,  “why are you this way?” but rather “what habits have you learned that led to this behavior and how can I help you learn a new behavior?” The research shows that children who were approached with empathy in this manner are happier, and ultimately more successful. In my opinion – as adults – workplaces are just the new classrooms and leaders are the new teachers.

Be aware of cultural disruptors that prevent happiness

Cultural Disruptor #1: “It’s them, not me”

This is the most common excuse I hear from owners of companies who are not interested in taking on the societal responsibility of helping people be happier. What’s ironic about this excuse is that the business itself will likely suffer the most from this attitude. The most frequent example of this is when leaders complain to me about the “millennials” that work for them. They “want it now,” are “entitled,” and are “lazy.” My first response to them is “know your audience”, as I am a millennial myself, and second, “what led you to the conclusion that they are the problem?” Mark Sylvester referenced this issue on his TEDx covering problem solving. He said, “everyone wants a one-click solution to solve their problem, but it’s your problem to solve and your reward to receive.” Instead of pointing at millennials as the problem, if we started asking them what they desire in a workplace to be successful, we would learn that they have several needs. They desire to have a plan, need help building confidence, and want their company to be relevant. These seem like fairly reasonable requests, especially if they are asking to grow as individuals and contribute to the company. We have to remember that millennials are the first generation that grew up being told how “special” they are, but might not actually have the confidence to make meaningful “special” contributions to the company. Many people are not lucky enough to have attentive parents, or thoughtful mentors. In the absence of those role models, leaders should assume that part of their job is to empower people to be confident in themselves.

Cultural Disruptor #2: “There isn’t enough time to help people be happy”

The difficult part about this disruptor is that time is a precious commodity and asking leaders to give more time to their people can feel like a big ask. But we have to remember that while founders start companies, they don’t usually build businesses alone. People build businesses, so shouldn’t we spend time building up people? This means teaching people the skills that they need to be successful. And when they aren’t successful, we should be asking questions to get to the heart of the issue so they can learn from their mistakes. For example, whenever there is an issue, leaders can use the following three-question system: 1) what could I have done differently? 2) what could the individual have done differently? 3) are there any processes/systems that need to change to be more successful in the future? Using these three questions will help people feel supported and not fearful that they alone are to blame when mistakes inevitably happen. Sometimes the goal of helping people be happier can actually be accomplished just by helping them feel safer.

Cultural Disruptor #3: “Blind loyalty”

Every time someone tells me one of their core values is loyalty, I am equally thrilled they have this value and become cautious because loyalty can turn into blind loyalty in an instant. This blind loyalty causes businesses and organizations to keep people in leadership positions who are posing obstacles to a firm’s progress. For example, let’s say you run a family business and Uncle Dave is in charge of the sales team. Over the past 2 years, you have experienced 25% turnover in that department, and in exit interviews, people have expressed that they didn’t feel empowered by Uncle Dave. You chatted with Dave about this a few times but have been reluctant to fire him because he is “family.” This is the same story I hear when people in leadership have “been with the company for 20 years and it’s too late to change them”, so we just keep dealing with their negative energy/leadership style. This type of blind loyalty resulting from nepotism or company tenure, is detrimental to organizations and should be dealt with or avoided at all costs because your people are watching you tolerate this behavior. This tolerance will cause trust to slowly diminish within the organization, lead to increased gossip/turmoil, and undermine the mission of promoting happiness in your people.

Cultural Disruptor #4: “Throwing money at the problem”

There is ample research showing that money is not the best tool for truly motivating people. However, it is generally the easiest solution that requires the least amount of energy and thoughtfulness. In the short term, using money to motivate people or promote happiness will probably work. However, in three months, people tend to forget about their raise/bonus and revert back to habits that do not promote the business or workplace wellness. Leaders need to use a combination of intrinsic and extrinsic motivation to develop their people. Intrinsic motivation tends to be more feelings-based – i.e., feeling that their boss cares about them, or they are proud of the mission of the company, or the culture is awesome. Extrinsic motivation is generally about compensation and benefits. Both are important, but intrinsic motivators are best for long-term happiness and growth.

How organizations can influence change

1) Be curious about trust

It will be difficult for any organization to make progress if they have not taken time to address where a lack of trust exists within an organization. Trust is tricky because there are no simple solutions. In a podcast with Esther Perel, a renowned psychotherapist and author, she discussed trust and quoted a philosopher who  said, “Trust is a risk masquerading as a promise,” which is a profound concept. We often ask people to trust us because of our history or expertise, but what we are really asking is for people to take a risk on us. This is a bigger commitment than we may realize and takes a significant amount of effort on the part of the other person. To truly create a culture of trust, I recommend reading two books simultaneously – the Five Dysfunctions of a Team and the 15 Commitments of Conscious Leadership. Start with the first few chapters of the 15 Commitments so that your mindset is open and committed to learning. Then read the Five Dysfunctions with 3-6 leaders within the organization. There are some great practical applications in the book that will help any organization understand where a lack of trust is negatively influencing the business. At Morton Capital, we decided to take a year off from growth in 2018 to focus on trust and it was the best decision we could have made. Now, conversations around trust are normalized within our company and we more quickly and openly address issues that inevitably arise.

2) Develop career pathing that increases engagement

An increase in engagement is correlated to happiness and fulfillment. One of the most important ways to foster engagement is to create clear career paths for every employee within the organization. In order for these career paths to be effective, they need to both be scalable and customized. Start by creating general career paths within the organization that outline the qualitative and quantitative skills necessary for an individual to make progress. The qualitative skills should reflect the values of the company, emphasize respect for colleagues, and highlight the importance of learning. Then, survey team members to find out how they want to contribute and add value to the organization. If they have questions about their options, dig in and have in-depth discussions about the potential career paths within the organization. When their goals are clear, meet with team members regularly to develop customized timelines to help them contribute to the organization in a way that will grow the company and create career opportunities. This is especially important in a remote workplace, where managers will have to adopt “goal-based” leadership vs. “presence-based” leadership to measure success. In addition, create an educational program to help people grow their workplace skills (such as organizational or goal-setting skills) and their technical knowledge to scale learning and development. According to workplace surveys, this level of engagement/happiness results in an average of 21% higher profitability than unengaged organizations.

3) Have a vision people will rally around

Simon Sinek recently published a book called “The Infinite Game” where he proposes that all organizations should have a ‘just cause’ that influences the behaviors and vision of the company. This helps people find meaning in their work and do something that is ‘for others’ instead of just for the sake of making money. In our organization, we have a mission of “empowering better investors through education” with the goal of helping people make better financial decisions that align with their values. By working for the benefit of others, we are able to be clear about our company goals and strategies, leading to a better client experience and a vision that inspires our people.

Leaders can inspire people to be better members of society

It’s been said that leaders need to lead by example and be the change they want to see. When I think about my own career – starting as a wedding planner, then a barista, followed by fitness instructor, an operations administrator, financial planner, advisor, and now COO/business owner – I can certainly say that I would not have made it this far without leaders who believed in me and saw the importance of workplace happiness. Our CEO, Jeff Sarti, will openly share that one of his top priorities for our company is creating an organization where people love coming to work. This statement, along with his humble confidence, empathy, and positive leadership, gives our entire team motivation to continue pushing forward the mission of the company. This energy causes a boomerang effect, inspiring our firm’s leadership to empower our team so that they are fulfilled in their careers, bring positive energy into their dinner table conversations, and are kinder members of society.

 

To see research/references mentioned in this article, click here.

To view Stacey’s TEDx conversation on “The Societal Duty of Businesses,” click here.

Disclosures:

AUM information as of 12/31/2020. Morton Capital is an SEC registered investment adviser; however, such registration does not imply any level of skill or training.  Our disclosure brochure (Form ADV Part 2A) contains detailed disclosures regarding our services and fees, along with applicable conflicts and how we address such conflicts.  A copy can be obtained upon request or at http://www.adviserinfo.sec.govwww.adviserinfo.sec.gov.

 

 

 

MC Origin Stories – Joe Seetoo

1) What opportunities have you had to accomplish this in the past?

 

2) What personality traits do you believe have set you up for success at Morton? 

1) Passion for Learning
“I am always doing that which I cannot do, in order that I may learn how to do it.” — Picasso
I can remember at a young age my father saying, “Education is something no one can ever take away from you” and “knowledge is power.” I believe his views were shaped by his father, a Chinese immigrant who had escaped the horrors of communism in the late 1930s/early 1940s and fled to the U.S. I’ve adopted a less Machiavellian approach to learning, one that is founded more in a naturalistic belief that we as humans have a proclivity towards growth and expansion. I am constantly reading and learning new things, everything from psychology to neurolinguistic programming to guitar scales. I believe learning allows us to cultivate aspects of ourselves that we might otherwise overlook.

2) Organized/Structured
I still make my bed every morning (okay—6 days a week), my calendar is color-coded, and I can’t go to sleep with a messy house. Given the volume and speed of information, we are required to process in today’s environment, staying organized can be a challenge. I believe having routine systems and processes (i.e., habits) in place both personally and professionally reduces the cognitive load on the brain, which can lead to mental fatigue. By reducing my decision fatigue related to mundane but necessary tasks, I’m able to free up more space for deep work with our clients. Naturally, many clients have scattered random questions and concerns that feel disjointed even though they relate to their financial affairs. They are challenged to organize their thoughts and are stuck in analysis paralysis. I’m able to help organize their thoughts and formulate an action plan that allows them to move forward. And, if I’m being honest with myself, organization gives me the illusion of control. If I’m operating from a place of peace, my ability to listen carefully to a client’s question or concern and respond in a thoughtful manner increases exponentially.

3) Empathy
“We are all just walking each other home.” — Ram Dass
Easing the burden of our fellow man is part of what we do as humans. We are wired to be social creatures. I’m a deeply spiritual person. There is a level of emotional intimacy that evolves over the life of a relationship between an advisor and a client because money is one gateway to many other aspects of our lives. Ensuring our families and loved ones are taken care of, sending our children to college, buying a new home, and having the ability to retire are all major milestones in the human experience. For many, money is an emotional topic because it represents our hopes and concerns about what we want in our lives. Being able to put myself in my client’s shoes in the moment and see where they are coming from helps foster trust and open lines of communication.

 

3) How have your career aspirations changed over the years leading to this point?

I’ve been in wealth management since 1998—over 22 years. I am 44. Early in my career, I was determined to become an advisor. I elected to obtain the Chartered Financial Analyst® charter in the early 2000s. I continued down the path of becoming the best advisor I could by completing the CERTIFIED FINANCIAL PLANNER™ designation in 2008 in addition to coursework on behavioral finance and advanced estate planning. In 2014, I was blessed with the opportunity to become a partner at Morton Capital and work more closely with senior leadership, not only as an advisor but also as an owner. Our company has grown to over 50 teammates responsible for more than $2 billion in assets as of 12/31/2021. We have 13 owners/partners.

More recently, I have been focused on broadening the scope of our expertise in a few key areas:
Exit Planning—I am committed to helping owners maximize the value of their greatest asset: their business. As part of my journey and being involved in a Generation 1 to Generation 2 succession plan at Morton Capital, in the summer of 2018, I completed a designation called the Certified Exit Planning Advisor, sponsored by the Exit Planning Institute. By experiencing firsthand what many current business owners and next-gen owners will deal with, I believe I can use my knowledge both as a financial planner and owner to help improve outcomes. To that end, in July 2020, I launched the Conejo Valley Chapter of the Exit Planning Institute https://exit-planning-institute.org/chapter/epi-conejo-valley-chapter/. It’s a forum for advisors and owners to share knowledge and best practices related to business succession planning.

Additionally, I have recently launched a podcast called The Ripcord Moment, where we interview owners (and their advisors) who have made the jump and what pearls of wisdom they can share with owners contemplating a sale/transition at some point in the future. These firsthand experiences are a powerful tool to help shape more successful outcomes for other owners.

Mentoring and Recruiting—I’m passionate about what we do at Morton Capital and have been able to help recruit a number of talented professionals to our organization over the years. I am committed to making Morton Capital an even more resilient firm. I enjoy mentoring our talented staff and helping them become the best versions of themselves.

MC Origin Stories – Thao Truong

1) What was the turning point for you in deciding to change careers?


After I left England, I moved to the United States. I just wanted to accelerate my college education and finish it quickly so that I could start making money and be my family’s savior. I moved to the States for more affordable options. I attended a community college in Seattle and graduated from the University of New Hampshire. I decided to study finance, hoping that the degree would give me the knowledge on how to become rich sooner.  While in school, I tried to make money from several different channels, started a few different businesses with friends, and invested in options and penny stocks. But like what your advisors would normally tell you: “Don’t try to beat the market.” I lost money from those risky moves.  Looking back, what helped get me through my hardships were: (1) the support from friends; (2) my personal emergency fund (which I had before my family hit rock bottom); (3) discipline for a long-term financial plan; and (4) my stable college jobs like tutoring in economics, financial accounting and statistics, and being a teaching assistant for microeconomics. During my last two years of college, I worked as an economic forecasting analyst for a professor at my university, and then as one of the 35 financial analyst students specially selected to manage the university’s endowment. Then, through working with affluent clients in the wealth management business, I slowly discovered that I had put the wrong attention on MONEY matters. Prosperity and happiness are far beyond money. There is also knowledge, health, and mental wellness. Financial planning is not about getting rich, it is about long-term planning for your money so it works for your values.

 

2) What lessons have you learned from your past work life that you’ve brought to MC?

 

3) Empowering a customer or client is something many of us hope to achieve in our work. What opportunities have you had to accomplish this in the past?

I believe in the power of financial literacy. I want to be able to extend my knowledge to others who do not have the means. I strive to promote financial literacy to the public by providing free financial workshops for my local community. I also volunteered with San Diego Junior Achievement to promote financial literacy to middle school and high school students. I was an active member of the Financial Planning Association (FPA) and the National Association of Personal Financial Advisors (NAPFA). I co-founded a small women-advisor-only study group that is comprised of younger minority advisors. We have learned the power of having a community of friends and peers to turn to for advice and support. I was humbled and honored to be a recipient of the 2019 Diversity and Inclusion Scholarships for both FPA and NAPFA. These awards were granted to professionals willing to demonstrate and act upon an intense desire to affect the diversity of the financial planning profession.

MC Origin Stories – Jason Naiman

1) What was the turning point for you in deciding to change careers?

 

2) What lessons have you learned from your past work life that you’ve brought to MC?

If I were to find the common thread in the last 50+ years of my working life (OMG!), I guess I just mentioned it above: do the right thing. It wasn’t always easy in the life insurance business because of the inherent conflict of interest that existed based on how you were paid. What was best for your client wasn’t necessarily best for you. From the moment I joined Morton Capital, that issue has been in the rearview mirror.

 

3) How have your career aspirations changed over the years leading to this point?

Having had 14 years in the life insurance business, empathy was baked into your psyche. Selling an “intangible” requires being able to connect at a much different level than if you’re selling a product the buyer WANTS to buy. An axiom in our business was that life insurance wasn’t bought; it was sold. When you think about it, life insurance is a very empathetic purchase: it is being bought for the potential benefit of others. That’s empathy.

MC Origin Stories – Chris Galeski

1) What was the turning point for you in deciding to change careers?

 

2) What lessons have you learned from your past work life that you’ve brought to MC?

You can always improve and learn more. Most of us ignore our weaknesses and spend time doing the things we are good at. In order to give our clients what they deserve, we need to constantly reflect on our weaknesses, understanding the why behind them, and learn from those weaknesses and turn them into strengths. We can accomplish a lot more as a team than as individuals. Most of us have the same struggles and fears in life when it comes to money, so we have built a team here at MC that is inspired to work together collectively and come up with ideas and solutions to help clients move away from fear about money and towards the enjoyment of their wealth.

 

3) How have your career aspirations changed over the years leading to this point?

I went from trying to change or improve one client’s situation at a time to a place where we work together as a team to impact a larger audience and community. Working at Morton Capital and having a true team atmosphere allows us to deepen relationships and impact so many more people both internally and externally. I am driven by our ability as a team and company to impact the community and inspire others to think about money differently.

 

4) Has there been a common thread in the work experience you’ve had so far in life?

Besides competing and playing golf for a living, I have always been a financial advisor. I really enjoy helping people better understand money and investing. To me, relationships and trust in the process have been the most common threads in all the work I have done. Success is achieved by the consistent things we do each day, which compound over time and give us the ability to achieve great things. Rarely in life does something significant happen without sacrifice, having a process and being consistent in our actions. The best advice ever given to me is to enjoy the process more than the achievements. All great things happen when you enjoy and trust the process.

Has empathy been a quality you’ve drawn on in roles you’ve held before Morton? As an advisor, friend, husband and father, empathy is the key to a successful relationship. Without it, how can you possibly put yourself in someone else’s shoes? Understand where they are coming from? It is a crucial piece in order to be a good communicator. It’s not my job to put my values on someone else’s money or wishes. It is my job to help guide people in the decisions that will help them find success and get the most life out of their wealth. Empowering a customer or client is something many of us hope to achieve in our work. What opportunities have you had to accomplish this in the past? Helping clients identify that “bucket list” of things that they want to accomplish and then planning them one at a time is an exciting exercise. There have been several instances of this in my career with clients. There have been other instances like helping give to charities, retire earlier, or just even retire that have been just as much fun. Anytime I have a conversation with a client, and they walk away feeling better, more comfortable or happier is a great feeling.

MC Stories – Save Your Portfolio . . . and the World

Climate change hasn’t always been terribly high on my list of concerns. Don’t get me wrong, I believed the science, but it had been a selfish, somewhat conscious choice to ignore dealing with something I was pretty sure wouldn’t greatly affect me. I’ve lived in Santa Monica, where the beach is vast, and in Pasadena, where the sun shines hot, and I could never envision a time where either would become undesirable, let alone unlivable.

My wife, Alyssa, began her career preparing for and responding to natural disasters, first in California, then in a similar role with the U.S. government at FEMA, which moved us to Washington, D.C. She dealt with fires in the West, hurricanes in the Northeast, and tornados in the Midwest. She even traveled to Japan to understand the impact of their disastrous tsunami in March 2011. Throughout her 15 years working on climate and conservation issues, she’s spent innumerous hours educating governments and businesses alike on the perils of increasing temperatures and global sea-level rise.

While I once may have felt captive to these data-dense presentation rehearsals, I came to first merely absorb, but later to seek, the alarming data she was gathering. It was then that I began to make the inevitable connections between her professional world and mine. I thought, “I’m likely investing in companies that do the same damage my wife is devoting her career to remedying. Could I invest and make money in companies that were doing less harm? Or even some good? Environment can’t be the only social issue affected by investing. Could I make even a small impact by limiting exposure to companies that profit in guns, tobacco, child labor, etc.?”

I’ve devoted an increasing amount of free time over recent years to the pursuit of educating myself in the nuances of socially conscious investing and marrying my values to my own personal investment choices. At Morton Capital, we’ve been deeply involved in our local communities and charities and offering investments in socially conscious funds for years. True to our mission and investment philosophy, I’m proud that we consistently seek knowledge and resources that allow our clients to pursue these investments at our firm.

When I introduce my clients to the concept of investing with their heads AND their hearts, I begin, as below, by exploring some of the broader definitions and themes. I also ensure that I address some common misconceptions associated with socially conscious investing. I most commonly see that people think that socially conscious investing means having to sacrifice returns, or that they are more expensive and harder to access. And while not all investments will be available or appropriate for every investor, I find it helpful to address multiple disciplines within the socially conscious investing realm to help provide more insight into the wide variety of strategies that exist. Below are three commonly implemented ones, listed from broader value-focused strategies to those purely focused on impact.

ESG (Environmental, Social, Governance):
This common strategy evaluates companies based on how well they are managing the various environmental, social, and corporate governance issues they face in their businesses. A top-down ESG investment strategy invests in companies that rate highly in environmental, social, and governance factors while still maintaining a focus on the returns and associated risks.

SRI (Socially Responsible Investing):
Socially responsible investing goes one step further than ESG by actively eliminating or selecting investments according to specific ethical guidelines. The underlying motive could be religion, personal values, or political beliefs. Unlike ESG analysis, which shapes valuations, SRI uses ESG factors to apply negative or positive screens to the broader investment universe.

Impact/Thematic Investing
In impact or thematic investing, positive outcomes are of the utmost importance—meaning the investments need to have a positive social or environmental impact in some way. The objective of impact investing is to help a business or organization accomplish specific goals that are beneficial to society or the environment. One example might be investing in a nonprofit dedicated to the research and development of clean energy, regardless of whether success is guaranteed.

As I mentioned, there are many more strategies associated with socially conscious investing than I’ve listed above, evidence of how seriously the investment world is paying attention to not only climate change but social impact as well. Investing with your head AND your heart can and will shape the future of investing as we know it. Knowing how to invest is only the beginning

 

DISCLOSURES:

This summary is for informational purposes only. It should not be taken as a recommendation, offer or solicitation to buy or sell any individual security or asset class. This document expresses the views of the author and such views are subject to change without notice. Morton Capital makes no representation that the strategies described are suitable or appropriate for any person.

All investments involve the risk of loss, including the loss of principal. Past performance is not indicative of future returns. A Fund’s concentration in a certain sector and lack of diversification across other sectors present risks specific to its strategy and should be carefully considered. You should consult with your financial advisor to thoroughly review all information and consider all ramifications before implementing any transactions and/or strategies concerning your finances.

Introducing Brian Mann, Wealth Advisor

What moments in your career have given you the most satisfaction and fulfillment?

In 2009, at the Otay Mesa Detention Center thirty minutes east of San Diego, and just a mile and a half from the U.S.–Mexico border, I met my 20-year-old client for the first time. I had recently finished law school and was working for a nonprofit representing asylum seekers, most of whom were from Eastern Africa. He arrived in the U.S. seeking asylum from Somalia, his entire family victims of ethnic cleansing outside Mogadishu. He was shot in the stomach, slashed across the face, and left for dead the day he decided to flee. He was one of the lucky ones. The virtually nonexistent medical care at the detention center left him dying from infection, our translator, Omar, and I his only advocates. After somehow surviving his trip halfway around the world with a bullet in his abdomen, he miraculously survived. Those two enormous hurdles cleared, it was now my responsibility to prove in a U.S. immigration court that he would be killed if he were forcibly returned to Somalia.

Eight years later, I was in another hospital room, this time at Methodist Hospital in Arcadia, CA, and under very different circumstances. My client, 61, had recently suffered a massive stroke, leaving him capable of little more than eye movements and the slightest facial expressions. In this state, he was soon to inevitably leave behind an adorably loving and utterly terrified wife and two young adult sons. I began working intently with the couple about two years prior as their financial advisor. Their goal was to simplify their chaotic estate and finances so they could return their full attention to their local Los Angeles medical practice and Doctors Without Borders work in South America. I don’t think it’s a stretch to say the three of us spent 15 hours together those first two years. We’d become close, and I was the only non-family member allowed in the hospital during this time.

I have walked two very different paths in my career, but both have intimately shown me elation and despair. At the time, I questioned if I should have even been in the hospital rooms alongside my clients. These moments were filled with pain and worry, and I felt helpless in them. But sometimes it’s in the hardest moments where we find purpose and fulfillment.

My client from Somalia was granted asylum. Eleven years later, he regularly writes and sends me pictures of his wife and children, braving still unfamiliar Minnesota winters and taking every opportunity to remind me of our connection and his gratitude. Even after my client passed away at Methodist, his wife continued her frequent trips to the office. After months and months of work, their financial matters were finally buttoned up shortly before he fell ill, so her visits were not to conduct any business. She calls and visits just to share about her charity work and family and to hear stories of my own young kids. “My husband knew I was going to be okay, and that’s because of you,” she still says to me.

When I reflect on what’s fulfilling and what’s satisfying about the work I’ve done, I think about each of them.

MC Stories – Liquid vs. Illiquid Investments – What’s the Difference?

We all know that having the right types of investments in your portfolio is critical to achieving your goals. But did you know that you can’t create a successful mix of investments without first knowing what you need each asset to do for you? It’s like trying to pack for a vacation without knowing your destination. Get unlucky and you might be unpacking flip-flops when there’s a foot of snow outside. The same principle applies to your financial success—not knowing your desired destination (aka your financial goals) can hinder your investment selection and overall performance.

In addition to knowing your destination, an important ingredient when it comes to your investment mix is understanding the liquidity or illiquidity of a particular asset. Liquid investments are holdings that can readily be converted into cash with a certain level of price stability and include such assets as cash, money market funds, Treasury bills, and bonds. Illiquid investments are assets that are not easily sold or exchanged for cash, often referred to as “private placements”. If forced to sell before the end of any holding, or lock-up, period, these illiquid assets may suffer a substantial loss in value due to their limited marketability and/or greater price volatility.

So, assuming you know where you’re headed on your vacation (your financial goals) and you’re preparing to pack your bags for this trip (creating the appropriate mix of investments in your portfolio), my question for you is this: what do you carry on to the plane versus check down below?

When organizing your carry-on, you know the contents will be easily available and accessible to you throughout your journey. Usually this includes some snacks, a book or laptop, and, of course, your wallet (so you can buy more snacks if you run out). Even if you don’t do anything with these items during the flight, you’re able to relax knowing they’re within arm’s reach in case you do need them. That accessibility mimics that of your liquid investments. You want these funds to be quickly available to you to help manage any expenses that come up as you make your way towards reaching your financial goals. Liquid holdings serve a specific and important purpose in your portfolio and may need a place in your investment mix, just as your carry-on has a place on the plane (tucked under the seat in front of you).

Unlike your carry-on, the items you choose to put in your checked bag are not easily accessible to you during your journey. While we all get a little nervous watching our luggage disappear into the darkness of the conveyer belt, we also know that at our final destination the items in our bag will maximize our vacation experience. We didn’t have to limit ourselves to a three-ounce shampoo bottle or have to choose between two pairs of shoes. This checked bag will provide us with both the variety and volume that our carry-on can’t. This inaccessibility is typical of the illiquid investments in your portfolio. Locking up your money can also be nerve-wracking, but just like your checked bag provides benefits over your carry-on, illiquid assets can also be beneficial as part of your portfolio when appropriate: higher targeted returns to compensate you for that lack of accessibility, predictable cash flow compared to publicly traded assets, and lower relative volatility due to the lack of daily pricing.

As you can see, both liquid and illiquid investments can serve specific purposes in a portfolio. Some travelers may choose to only bring a carry-on. They understand the limitations of their decision but believe the convenience of access outweighs the benefits of delayed gratification. Other travelers may always choose to check their luggage, knowing they prefer to be greeted with a larger bag (with more to choose from) upon their arrival. But once you know what you need your assets to do for you, you’re better able to prepare so that you can both enjoy your journey towards achieving your financial goals and maximize your success once you do reach your final destination.

 

Disclosures:

This information is presented for educational purposes only and is not intended to constitute investment advice.  Morton Capital makes no representation that the strategies described are suitable or appropriate for any person. Investments in illiquid assets are available only to eligible clients and can only be made after review and completion of the applicable offering documents. Illiquid investments involve a high degree of risk, including the loss of capital. You should consult with your financial advisor to thoroughly review all information and consider all ramifications before implementing any transactions and/or strategies concerning your finances.

MC Stories – Financing Life Insurance . . . with Debt?

America is a society that has become extremely comfortable with financing. It’s rare nowadays for someone to pay cash for large purchases like their home, a car, or education costs. It’s also, however, more popular than ever for people to finance small purchases. Credit cards are used to buy groceries, gas, meals, clothes—pretty much everything.

With such widespread comfort around debt, it’s not a surprise that it’s used to finance life insurance premiums as well. This strategy has, in fact, been around for over 20 years (even longer in the property and casualty marketplace). Life insurance premium financing is where an insured borrows money from a bank to pay their life insurance premiums. The borrower is then responsible for posting collateral for the loan and paying the interest on the debt.

Today, financing represents around 25% of all policy premiums for in-force insurance policies. However, many people still haven’t actually heard of premium financing before and it has to do with the history of the strategy. In the early 2000s, a time known as the “Wild West” in life insurance sales, premium financing was used incorrectly and with limited regulations. Many people lost money and got hurt by taking on investments that they didn’t fully understand. Because of the stigma and reputation of its past, premium financing remains out of the mainstream conversation for many.

Fast forward to today, where the pendulum has swung far in the opposite direction and premium financing is now under strict regulation. The National Association of Insurance Commissioners passed Actuarial Guideline 49 in mid-2015 to protect consumers from misleading illustrations by limiting the growth rate and by limiting the policy design options that advisors are able to use in marketing to their clients. Also, all carriers now require the insured to have skin in the game by posting collateral and/or paying interest on the loans.

With stronger protections in place, the benefits that make financing life insurance special are much more attractive: the guarantees and the flexibility and optionality of the design, both from the onset as well as throughout the life of the policy. Because of these guarantees, financing life insurance can be a lower risk strategy to compound your wealth. That’s why the fastest-growing segment for premium financing is high earners in their 30s–50s. Rather than purchasing insurance for a death benefit, investors are looking to maximize their investment growth and increase their wealth to establish a future tax-free income stream in retirement. With interest rates near all-time lows, the benefits of using debt in a thoughtful way have never been greater.

But, as with any investment strategy, premium financing has additional risks not present when purchasing a policy without financing, such as having enough liquidity to post collateral, interest rate risk, and market risk. Financed life insurance should be considered for someone who has a need for a large-premium life insurance policy or is interested in compounding their wealth. Specifically, for business owners, financing should be considered as a smarter way to protect their company with a buy/sell agreement or key-person policy while keeping more cash available for other ventures within their business. If the business is a C-corp, there are even greater strategies to amplify the benefits. Given the nature of premium financing, it’s recommended that you consult your professional tax and legal advisors before purchasing a financed policy.

In my role as a financial advisor at Morton Capital, I collaborate with our internal financial planning team as well as outside insurance professionals to review and evaluate our clients’ life insurance policies. Although we don’t get paid for selling insurance, reviews are an integral part of ensuring our clients have the appropriate risk coverage and are taking advantage of investment opportunities when they align with their goals and risk tolerance.

 

Disclosures:

This information is presented for educational purposes only, and should not be treated as tax, legal or financial advice. This information should not be taken as a representation that the strategies described are suitable or appropriate for any person. All investments involve risk, including the loss of capital. You should consult with your insurance professional to thoroughly review all information and consider all ramifications before making any decisions regarding your insurance coverage.