As she does at the end of each year,
What was different this year: These check-ins came just days after the shooting deaths of 20 first-graders and six teachers at
In fact, one client wrote a heartfelt email saying not only that he wanted to move away from guns in his portfolio, but also that the shooting made him rethink his own role in social change.
“After much thought, and no small amount of admiration for the move by Cerberus to sell its stake in a firearms maker, I’ve decided I’d like to move into socially responsible investing,” he wrote. “For me that means, at least for now, no fossil fuels companies and no weapons makers.” Because most of the client’s
NEW DEBATES ON WEAPONS
Ever since the shootings on
Yet some investors have begun wondering whether they can use the power of the purse to bring about social change. A number of big public pension plans, including those in
What has surprised some advisors is the extent to which shootings have made individual investors want to take matters into their own hands too.
Lee says he was a bit surprised by the reaction, given his firm’s location. “We’re a conservative state and we have some of the biggest gun manufacturers here,” he says — a reference to Browning, maker of automatic and semi-automatic assault rifles.
On the other hand, about 10% of his clients already ask him to exclude alcohol, tobacco and defense names because of religious beliefs, he says. And his clients do have a history of making portfolio changes as a reaction to news events. After the 2010 oil spill at a
Some advisors aren’t quite so fast to react to client requests.
But doing so would have meant incurring long-term capital gains taxes of
EVOLUTION OF SRI
While the growing focus on guns is new, the broader category of socially responsible investing has grown steadily in recent years, reaching
The industry has moved beyond simple indexes of companies that exclude alcohol, tobacco and defense stocks; new instruments now cover a multitude of asset classes and geographic areas. There are also exchange-traded SRI offerings, bringing the world of low-cost, transparent trading into the mix. Advisors say it’s now possible to build a well-diversified portfolio of just SRI funds.
Eliminating guns doesn’t sacrifice much return for clients, advisors note. “I can make more money buying other companies, so I just don’t care if I don’t own gun makers,” says
Until their recent slump, Apple shares did indeed outperform the gun makers over three- and five-year periods. But the firearms companies have held their own. Shares in
When asked to carry out a client’s wishes to divest of a sector, some advisors believe it’s their duty to comply. “I am here to guide them and help them achieve what they want to achieve,” Safran says. “If part of their financial objective is to create a better world for their future, and they feel like they can accomplish a better world through how they invest, then I’m on board.”
McDonald says the blog post generated quite a bit of interest among his clients — with some expressing wholehearted support and others vehement disagreement.
Soon after, McDonald took additional steps. He set up a new investment vehicle for his clients, based on the
“I’m not sure if this will make a difference,” McDonald says about the impact of excluding guns. “Fortunately for my clients, these indexes have outperformed.” FP
|Copyright:||(c) 2013 Financial Planning. All rights Reserved.|
|Source:||Source Media, Inc.|