- Self-Directed Accounts
- Investment Types
- Why Equity Trust
- Institutional Solutions
Self-Directed IRA Concepts
The following is an excerpt from the book Activate Your Money by guest blogger, author, and investor Janine Firpo.
Whether you realize it or not, you’re already an investor. Your money is having an impact somewhere, somehow. This is true even if all you have is a savings account. Every entity in which you save or invest your money is using your assets for some purpose.
The question is whether this supports the things you value—or undermines them. When you take greater responsibility for understanding your investments, you can use the power of your capital to make a difference in the world.
Values-aligned investing, while novel, is not a new practice. In the US, it can be traced back to 1758 when religious societies like the Quakers didn’t allow their members to invest in companies involved in the slave trade.1
The momentum picked up in the 1960s when opponents of the Vietnam War blacklisted weapons manufacturers and continued into the 1980s as students demanded divestiture from South Africa as a response to apartheid.
Today many people are interested in “voting with their dollars” and boycott companies that do not support their values and patronize the ones that do. In the best-case scenario, 100 percent of your portfolio would be invested in the things that matter to you.
Personally, I have made a pledge to invest all of my assets in alignment with my values. But you don’t have to make the same commitment I did. You might prefer to make a smaller commitment initially and take this step-by-step.
Perhaps you could start by shifting some of your assets into investments that create positive change. Or you might decide to keep the investments you already have and allocate all your new assets to values-aligned financial products.
As you learn, you’ll gain more confidence and may decide to move even more money into alignment with your values. That is what happened to me. My increased desire and ability to reallocate my money to funds, companies, and financial institutions that deliver positive results is an outgrowth of gaining more confidence in my overall investing knowledge and skills.
Follow whatever approach and timing feels right for you. We’re not here to tell you what to do. Instead, we want to give you the tools you need to feel empowered and to make more informed investment decisions.
Before digging into what values-aligned investing is and how it works, let’s take a look at the dynamics around how women currently invest, what they want, and the potential women have to change the world for the better based on the investment choices they make.
Our current economic model has led to a world that does not work for all of us. It enables businesses to maximize financial gain without full consideration of the adverse impacts their operations have on people or the planet.
Since these damaging effects do not have a direct financial cost to the business, they are often ignored or underreported. Even worse, businesses have been known to obfuscate, refuse blame, or actively cloud an issue to avoid having to pay the full cost of their negative impacts. This has led to environmental degradation, social problems, and other adverse consequences that are known as externalities.
The prevailing winner-takes-all mentality is not the way women show up in the world. It’s not who we are. We are collaborators, coalition builders, and promoters of win-win scenarios. We definitely want to see our money grow and achieve great financial returns, but not at any cost.
Janine Firpo – Investor, Author of Activate Your Money
In economics, a negative externality is a cost that affects a third party who did not choose to incur that cost. An example would be a manufacturing plant that contaminates a nearby lake but does not pay for its cleanup. The cost is ultimately paid, but it is borne by the people who live near the lake, taxpayers, or both—not the company that created the problem. This approach is not sustainable, and it does not bode well for our health, happiness, or prosperity — or for that of our children and grandchildren.
Today’s financial system also undervalues the priorities of women. As wage earners, we garner only 81 cents on the dollar compared to men.2 As entrepreneurs, we get a mere 2.2 percent of the venture capital funding.3 And as money managers, women serve as the exclusive managers for only 2 percent of mutual funds.4
Across the board, the situation is even worse for women of color. We are also living in a country where the top 1 percent of the population holds more wealth than the entire middle class.5
However, it doesn’t have to be this way. The prevailing winner-takes-all mentality is not the way women show up in the world. It’s not who we are. We are collaborators, coalition builders, and promoters of win-win scenarios. We definitely want to see our money grow and achieve great financial returns, but not at any cost.
Of course, we want to make money through our investments, but it’s not enough for us to simply receive a competitive return. We want more, and guess what, so do our children. In 2017, a Morgan Stanley study found that 84 percent of women and 86 percent of millennials were interested in sustainable investing.6
Two years later, their biennial report showed interest had grown even more: 95 percent of millennials said they wanted to invest in alignment with their values, and 50 percent of all respondents in the survey already had at least one sustainable investment.7
As women, we are clear. We want to direct our dollars toward a future of prosperity, inclusivity, and sustainability. We want to see our children, our communities, and our planet flourish. We want the ways that we show up to support our values. We want to walk our talk. If enough of us align our money with our values, we can help change the face of the economy from a “profit at any cost” model to a more sustainable and equitable approach.
We can accelerate a movement to a financial system based more on long-term sustainability than on short-term gain. We can pivot markets to a model that works better for people and the planet, not just shareholders.
We can also dramatically increase the number of women-led businesses that receive funding, and we can underwrite the development of products and services that meet our needs as well as those of our children. And we can do all that without giving up financial return. Our combined potential is bigger than you think. In fact, it is incredible!
As women, we already control more than 50 percent of the personal wealth in this country, and that percentage is expected to rise to 65 percent by 2030.8 As of this writing, 45 percent of millionaires in the United States are women, and the number of wealthy women in the country is growing at twice the rate of wealthy men.9 We have become a financial force, and that financial power can create great change.
But that change will only come when we decide to take more control of our assets and invest in ways that make us feel good. With #MeToo and other female-focused movements, women are galvanizing change.
While advances have been made in many areas, women are still lagging when it comes to their money, even though their overall wealth is growing. When you think about your money, you probably consider what it will buy, what you and the people you love need and want, how much you have or don’t have, whether you’ll have enough to retire, and how to get more of it.
Regardless of how much money you have, you probably stress about it—in one way or another. You probably worry about whether it is invested wisely, whether it is safe, whether it is growing, what will happen in the next economic downturn, and whether you are getting good financial advice. Money is a constant theme in our lives.
If you are like many women, you probably wish you didn’t have to worry about it at all. To many of us, managing and investing our money seems overwhelming, hard, and often the least favored item on our to-do list. You might wish that someone else would just handle it for you.
And that is what a lot of women do. They leave their money in the bank—and hope for the best. Or they hand their financial agency over to someone else. We all do this. But at what cost? The first cost is to our ability to grow our wealth over the course of our lives.
Many women know there is a gender pay gap but might not be aware there is also an investment gap. Not only do men earn more, they also retire with three times more money than we do, even though we save more.10 According to a 2018 study by BlackRock, women keep 71 cents on the dollar in savings rather than take the risk of investing, and possibly losing, it.11
Meanwhile, men invest and grow their wealth. They’re more willing to take the risk, whether they feel fully confident or not.
Video: Women and Values-Aligned Investing with Janine Firpo
Our lack of confidence in our ability to invest and build our wealth is hurting us. This gap has led women to hand financial authority over to the men in our lives—husbands, male relatives, and financial advisors. When we pass responsibility for our money to others, we’re putting ourselves at risk. We’re also giving up our agency, our financial security, and the potential to change where money flows—and what it affects. Even worse, we’re setting up our daughters and granddaughters to be uninformed as well.
It’s time for us to take back our financial agency. When we invest, we do it differently than men. When we hand our agency to men, we are letting them invest in the way that works for them, not for us.
Women tend to be more cautious and more analytical as we assess potential investments. We want to understand risks before we take them. We are more willing to collaborate, whereas men are more likely to trust their gut and go it alone.
Our approach serves us well, and we create broad networks of colleagues along the way. This makes investing more fun and more effective, because it exposes us to additional knowledge and new opportunities.
We also have a greater propensity to invest in the things that matter to us, and increasingly we want advisors that listen to, and educate, us. Ask yourself, What would it be like to feel skilled, competent, and self-assured about my money? And how would it feel to be confident enough to teach your children how to be investment-savvy?
Eventually, you will most likely be put in a position where you have to take on responsibility for your money, whether you want to or not. As a woman, you will probably be alone at some point in your life—because you stayed single longer, or divorced, or outlived your spouse or partner. Whom will you trust when the person (usually a man) overseeing your finances is no longer there to guide you?
When the sands start to shift beneath your feet is not the right time to start learning. If you’re going to have to learn to be a better investor at some point, why not start now? And why not do it in a way that actually makes you feel good?
Some of you may be wondering if you have to give up financial return to invest with your values. No, you do not! Yet, perceptions of a trade-off between sustainable investing and financial gain have proven stubborn.
People who argue that you will give up financial return when you invest consciously are most often referring to investments made in the stock market. These naysayers are not even considering other asset classes, such as cash, fixed income, private investments, or alternatives, where the trade-off can be hard to find. They are primarily focused on stock funds that incorporate ESG (environmental, social, and governance) criteria, and even there, they are wrong.
The evidence supporting ESG investing is mounting. In 2022 Pathstone Family Office undertook a comprehensive review of research papers that looked at the potential trade-off between ESG criteria and financial performance. They analyzed over 1,200 studies from the past two decades and found the research consistently concluded that ESG standards do not compromise investment performance.12
A 2017 study by Nuveen TIAA Investments, 2016 research by Barclays Research, and three meta-studies in 2015—one by Deutsche Asset & Wealth Management, another by Oxford University and Arabesque partners, and a third by Morgan Stanley—provided similar results.13
The Morgan Stanley study looked at more than 10,000 mutual funds over a seven-year period. Their analysis showed that investing in sustainability not only met, but often exceeded, the performance of comparable traditional investments. This was true on both an absolute and a risk-adjusted basis. And it was true across all asset classes over the period studied.14 Follow-on research by Morgan Stanley in 2019 provided further support to these earlier studies.
Even with all this evidence, some people continue to argue that ESG results in lower returns. One of their arguments was that we didn’t know what would happen in a serious economic downturn. As a result of the market collapse in early 2020, now we do know. We learned that ESG funds performed better during this period, according to research by Morningstar, MSCI, BlackRock, and other leaders in the finance industry.
The first person you need to be satisfying with your investments is yourself. If it matters to you that your money supports the things you care about, then it matters, regardless of how much you have to invest.
It also matters on a larger scale because small things add up in a big way. Our greatest impact is a collective one. It is felt most acutely when large numbers of us choose to move our money where our hearts are.
And when enough of us make that choice, things change. Although investors have been voicing concerns about sustainability for several decades, it’s only recently that they have been translating their words into actions.
And those actions are making a difference. The Harvard Business Review states that in 2006, 63 investment companies with $6.5 trillion in assets under management (AUM) signed a commitment to incorporate ESG issues into their investment decisions. In 12 years, there were 1,715 signatories representing $81.7 trillion in AUM.
And today, more than half of global asset owners are implementing or evaluating ESG considerations in their investment strategy.15
Don’t underestimate the power of the purse. If women in the United States shifted an average of $20,000 in existing savings and investments into financial products aligned with their values, an additional $2.56 trillion of assets would move,16 and that would definitely cause the investment companies that manage our assets—as well as the business entities themselves—to take notice.
While some of us do not have $20,000 in assets, many of us have considerably more. How you invest your money also matters because it is a reflection of who you are. It mirrors your deepest values. It brings you into integrity with other aspects of yourself. And it is the part of your road to financial freedom that will bring you joy and make the entire process of investing deeply satisfying.
Janine Firpo is a writer, angel investor, impact investor, and social entrepreneur. For almost 10 years, she has been on a personal mission to invest all of her money in alignment with her values. In 2017 Janine left a 35-year career in technology and international development to focus on how women can create a more just and equitable society through their financial investments. In partnership with over 40 female financial experts, she wrote a book, Activate Your Money, that will help women transform their relationship with money and simultaneously create a better world.
Janine Firpo is not an employee of Equity Trust Company. Opinions or ideas expressed by Janine Firpo are not necessarily those of Equity Trust Company nor do they reflect their views or endorsements These materials are for informational purposes only. Equity Trust Company, and their affiliates, representatives and officers do not provide legal or tax advice. Investing involves risk, including possible loss of principal. As Equity Trust Company (“Equity Trust”) is a directed custodian, like any investment, it is your responsibility to conduct your own due diligence before investing and before choosing a provider that is right for you.
6. Morgan Stanley Institute for Sustainable Investing. Sustainable Signals: New Data for the Individual Investor. August 7, 2017.
7. Morgan Stanley Institute for Sustainable Investing. Sustainable Signals: Individual Investor Interest Driven by Impact, Conviction and Choice. Sept 11, 2019.
16. Calculation assumes 330 million adults in the United States, 77.6% of whom are adults (i.e., over the age of 18). Of that amount, i.e., 256 million, one can further assume 50% are women. That gives 128 million adult women, each saving an average of $20,000, which provides the $2.56 trillion figure.
You are leaving trustetc.com to enter the ETC Brokerage Services (Member FINRA/SIPC) website (etcbrokerage.com), the registered broker-dealer affiliate of Equity Trust Company. ETC Brokerage Services provides access to brokerage and investment products which ARE NOT FDIC insured. ETC Brokerage does not provide investment advice or recommendations as to any investment. All investments are selected and made solely by self-directed account owners.Continue