The question of personal values comes up daily. As Americans we believe in life, liberty and the pursuit of happiness living our personal values. We encourage religious freedom. However, when it comes to questions of money that the expanse of our values is often not considered. I was once told by a financial professional from a well-known elite firm that is portfolio would help me make lots of money and then I can help others later or give it to charity later. He said this after I had told him specifically of my desire to work with firms that had pro-women and minority business hiring practices. I did not consider that charity.
Integrating personal values and your financial plan
I think often that in conversations with financial professionals the issues of personal values are often discussed in terms of charitable giving and estate planning. One of my clients, has a goal to tithe 20% to their church. They see this as a reflection of living their religious beliefs. Have you had a conversation with your advisor regarding your religious beliefs? Have you told him/her about other areas of your lifestyle that are really important, such as theater? What drives you other than the pursuit of money for money’s sake?
You may even find that going to your local coffee shop and getting your favorite drink made by your favorite barista is an expression of your values. After all our personal values are yours. From a financial planning perspective this is a goal that we need to plan to maintain or to achieve.
Considering aligning your personal values with your investments
Some of your personal values may be reflected in your investing. Options include faith or your concerns about climate change and sustainability. You may have convictions supporting companies that are pro-women or anti-firms that manufacture abortifacients.
Have you shared these concerns with your advisor? More importantly does your advisor work for an independent firm so that they can provide an investment portfolio that reflects these values? Many advisors work for firms that restricts their investment choices. That may be the reason they have not asked you about your personal values. This has led many financial professionals to say that you will lose out on returns if you align with your personal values. If one compares the MSCI USA to the MSCI 400 you will see this is not necessarily true. From April 1990 to August 2014, the MSCI 400 returned 10.53% vs. the MSCI USA 10.13%. The MSCI KLD 400 Social Index comprises companies with high Environmental, Social and Governance (ESG) ratings and excludes companies involved in Alcohol, Gambling, Tobacco, Military Weapons, Civilian Firearms, Nuclear Power, Adult Entertainment, and Genetically Modified Organisms (GMO). The Index aims to serve as a benchmark for investors whose objectives include owning companies with very high ESG ratings and avoiding companies that are incompatible with specific values-based criteria. All indices are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. Past performance is no guarantee of future results. The MSCI US Broad Market Index is the aggregation of the MSCI US Large Cap 300, Mid Cap 450, Small Cap 1,750 and Micro Cap Indices. This index represents approximately 99.5% of the capitalization of the U.S. equity market and includes approximately 3,900 companies.
Getting a personal values financial plan
In order to deliver on this for personal values financial plan. Your advisor must get a 360° of you. That also means that you need to be willing to share. When you interview advisors, it is important that you find one that you can feel comfortable in opening up with. You should also ask questions of your advisor regarding their knowledge of values based planning and any limitations they may have in implementing. Do they have tools to assist in the screening process? Do they work with other advisors or providers that specialize in this area? Let us know if you would like to learn more about our approach.
No strategy assures success or protects against loss.