Charles Goldman has deep experience working with independent advisors and broker dealers, and is President and CEO of AssetMark, Inc. As an Advisory Board member and one of Green Alpha’s early backers, Charles recognizes that our Next Economy thesis is an effective investing strategy that focuses on buying stocks based on solid fundamentals – stocks that will be future world leaders. He’s also a neighbor who shares our passion for the outdoors and the natural beauty that surrounds us here in Boulder.
The Green Alpha team recently caught up with Charles over lunch at Salt, a delicious Pearl Street institution, and asked him about his work with financial advisors and how sustainable investing may continue to evolve in the marketplace, among other important and fun topics.
Betsy: From your perspective as President and CEO of AssetMark, what’s the state of the investment advisory business?
Charles: The investment advisory business is very strong right now. We’re seeing more and more clients engaging with investment advisors in meaningful ways. We’re seeing great leaps in technology around the way people think about constructing portfolios, and the way portfolio results are displayed so that consumers and advisors can understand those results. Lastly, we’re seeing an incredible reduction in the price of investing, which has obvious strong benefits to clients. From my perspective, if clients are doing better, the industry is doing better, which is exactly what we’re seeing.
Betsy: Research shows that sustainable and impact investing demand is growing among investors. Are you seeing a similar trend in demand among investment advisors?
Charles: We are seeing more and more investment advisors think about impact investing, SRI, ESG… and all of the related buzz words. But we’re not seeing widespread adoption – yet. We work with over 7,000 advisors and only a handful are proactively offering or adopting sustainable investments in a significant way. We do see some advisors taking advantage of different negative screening capabilities, either our own or others, but a very small percentage of AssetMark advisors are asking for these strategies or implementing them meaningfully. That may be changing. Younger clients – millennials for example – are asking to use their wallets to implement their ideals. But at AssetMark we haven’t yet seen this nascent trend translate into significant asset flows.
Betsy: Do you have any advice for advisors who may be thinking about developing a great understanding of or deeper expertise in sustainable investing?
Charles: I would recommend that advisors start talking to their clients, and their clients’ kids, about sustainable investing. Advisors need to find out if their clients are interested in these products. In addition to assessing client demand, engaging in a conversation about sustainable investing gives advisors another tool to learn about their clients’ needs and desires.
I do not recommend that advisors try to become experts in stock picking and building portfolios themselves, however. Instead, advisors should seek out and work with asset managers who are focused on creating sustainable investing options. Investment management is actually a very difficult job and the more nuanced the investment philosophy and process, the more difficult it is to implement well.
At AssetMark, it’s our belief that advisors should spend their time helping clients plan for the future, including evaluating risk-reward tradeoffs. Successful advisors educate their clients about options they have to achieve their financial goals, rather than trying to build some kind of great portfolio. Manager selection and portfolio construction is better left to people and firms that have the time and resources to do it really well. That is true with any type of investing, including impact-oriented investing – advisors should look to the experts to do it.
Betsy: The fiduciary standard is in DC purgatory. But you believe there is an opportunity to improve upon what you termed in the recent Barron’s article as a “regulatory morass consumers face when receiving financial advice.” In a nutshell, what’s the answer?
Charles: The answer is simple. Any client, any consumer who is getting holistic financial advice from a professional should be getting that advice under a fiduciary standard. The fiduciary standard is a term of art and law. It was written into law in the Advisers Act of 1940. It basically has two standards that matter.
- The duty of care: This requires that the advisor put their client’s needs ahead of their own.
- The duty to disclose conflicts: This requires that the advisor disclose any conflicts of interest that exist to their clients in writing.
That is what the fiduciary duty in a nutshell and we should demand that the SEC, Congress and the President apply this standard to all retail financial advice.
Betsy: As extreme weather and water events affect more individuals now than ever, how might they start taking steps to create the kind of future they’d like to see in the world?
Charles: We live in a very interesting time where people can vote with their wallets. I think it’s very important that consumers, who care about the environment as I do, use the power of their wallets to create change. Businesses respond when consumers tell them to. Companies respond when investors tell them to. The power of the purse can and will make a difference.
Betsy: You’re an investor in Green Alpha and you sit on our Advisory Board. What originally drew you to our Next Economy investing thesis?
Charles: I was drawn to Green Alpha, because I believe that market-based solutions to global problems are the best solutions. At Green Alpha, the Next Economy investing means finding companies whose growth is focused on innovations that are likely to help us thrive. Their growth enables the global economy to address risks related to the intertwining of economics and the planet’s sustainability. Green Alpha then looks at the quality of the revenue and profit streams – that is, in stock picker terms, fundamental analysis. I believe that this fundamentals-based approach is really important for the success of sustainable investing, because it’s most likely to generate returns over the long-term. I don’t believe most people are going to trade investment returns for something that helps them feel good. I know that Green Alpha believes that as well, which is part of what drew me to your team.
Betsy: When you’re not in California running AssetMark, you’re here in Boulder. Of all the things I know you enjoy doing in an around town, what’s your favorite thing about living here?
Charles: I love the climbing in Boulder Canyon, Eldorado Canyon, and in the Flatirons. Hiking is also world-class wherever you go around here. I also love our access to Rocky Mountain National Park, which includes fantastic backcountry skiing, real alpine ascents and rock climbing. Boulder is clearly the place to be.
But don’t move here!
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