Bruce Herbert | Newground Social Investment

Welcome to the Advisor View brought to you by Citizen Mint. Join us as we explore the origins, business journeys and unique insights of exceptional wealth management firms. My name is Josh Heil and I’m the co-founder and CEO of Citizen Mint, a platform that provides access to exclusive private market investments. This is our inaugural episode of the Advisor’s View podcast, where we’ll highlight exceptional wealth management firms, including what led them to the space, how they built their business, how they may use alternative investments in their client portfolios and what trends they are seeing in wealth management.

Our first guest is Bruce Herbert, who founded Newground Social Investments in 1994, the first social purpose corporation and a pioneering sustainable impact money management firm for individuals and institutions. He is also co-founded and served as first director of the Northwest Coalition for Responsible Investment and has served on the governing boards of the Interface Center on Corporate Responsibility, sustainable Seattle and Northwest Board of US CIF. He has also served overseas as a human rights observer and has been a shareholder engagement consultant to public funds, mutual funds, student organizations and legislators Trained on Wall Street with Merrill Lynch. Bruce grew up in Virginia Farm that has just celebrated its 200th year in the family. There he learned the value of hard work as well as the importance of accountability and sacrifice for the common good. Welcome, bruce, to the inaugural episode of the Advisor View podcast.

Thank you, Josh. It’s a pleasure to be with you.

So let’s just start out with what led you to be a financial advisor.

Well, I got to Wall Street in the typical way, really by studying Buddhism in an Asian monastery for half a year.

But, seriously, I did spend a half a year traveling and studying in Sri Lanka and Nepal and Thailand, pakistan and India, and I found myself in countries that were dictatorships and in places where people enjoyed none of the rights or prerogatives that we so take for granted here in the United States.

And so, after my return, in addition to teaching English to Asian refugees, I decided that I really wanted to learn something more about both our business and our political systems, and so a long story, just a little bit longer. Just then, my southern grandmother turned 90 and I wanted to spend more time with her while I could. So I pulled up stakes here in Seattle and moved to Columbia, south Carolina, where I live with and help care for her until her death at age 92. And we had such fun. It really was one of the best things I’ve ever decided to do in my life, things I’ve ever decided to do in my life, and this was circa 1984. And it was during that time I was introduced to the head of Merrill Lynch there in the state and he hired me, and the rest, as I say, is history.

And so what do you love about your job? What gets you up every single day and gets you ready for work?

Well, after the alarm clock, it’s first and foremost certainly is the satisfaction of really helping individuals, families and institutions to meet really important financial goals, but in a way that aligns with their ideals and hopes for the future. A close second in terms of motivation, and one which directly supports the values aligned investment is using our rights as shareholders to negotiate with companies about improving their operations, whether from a fairness, equity, human rights or sustainability perspective.

And I need not tell you, josh, that this can all be accomplished without sacrifice to a company’s long-term profitability or financial return, and I think that’s such a big, important point, because I think everybody assumes well, you’re going to give something up there and I don’t think you have to, and I think that’s our philosophy as well. So what differentiates Newground from other wealth managers? I mean, there’s so many wealth managers out there at the current point in time, a new shop coming up every single day, so what is your really differentiation from the others?

Well, where to start. I was thinking about this and I think there may be six things that actually really come to mind, and the first one pivots off of what you just said new startups and its longevity. You know, in just February of this year 2024, Newground celebrated its 30th anniversary, and now I have 40 years in the business, and since inception Newground has really had an exclusive focus on what’s currently called ESG impact investing, and I think that might make us now the oldest still independent registered investment advisor in the country, and so that kind of storied tenure can be seen as a proxy for high conviction, which certainly separates us from other firms in the crowd of advisors who, frankly, either don’t understand ESG at all or maybe just keep some small ESG product offering gathering dust on their shelves until somebody comes along asking about it. So that’s one. Being a fee-only fiduciary, I mean 30 years ago, that totally set us apart from other firms and even now still distinguishes us from many advisors and, of course, all broker-dealers, insurance agents and the like, who continue to earn most, if not all, of their income by selling product and third shareholder engagement. I mentioned that earlier and that really makes Newground totally unique among wealth advisory firms and even kind of stand out among our ESG peers and colleagues.

An advocacy of this sort also constitutes a second key indicator of high conviction. We do a lot of policy work, wading into the legislative fray, to ensure that the rules of the investment road don’t just benefit Wall Street but actually are fair, just and equitable for all, and one can probably count on fewer than two hands the number of advisory firms that devote time and resources to this kind of policy work, particularly if you’re just on the progressive good-for-all side that we act upon. And financial planning is still somewhat unusual across the broker-advisor spectrum. And lastly, tax planning. Tax planning for clients is now really the cutting edge and Newground has been involved with that since 2019. So there may be our other things, but these six considerations we think constitute the real highlights that listeners should consider and be aware of when they’re when they’re considering any firm.

And I think that’s key, like just how long you’ve been in the space and your longevity in the space and your knowledge of these policy issues is so important. And can you talk about you know you’ve been pretty active in your work with companies and just talk about that activism and what you’re most proud of, or an example of ways you were able to change things at a corporate level.

Thankfully, over the 30 years there have been a lot of ways. Political spending, the disclosure of political spending and use of corporate money has been a real hallmark of our work. We got started in that in colleague with friends at the Center for Political Accountability in Washington DC, bruce Freed and cohort, and we got started about five years, half decade before the Citizens United case came down. And thank goodness that we did, because now quite a large number, about 60% of the S&P 100 have signed very thoroughgoing disclosure policies and are doing that. And had that happened after Citizens United, not a single company would be there. And I think that Newground has filed more shareholder proposals in this arena than any other firm in the country and I believe we’ve been successful with everyone we filed at. So probably about 10 or 15 percent of the S&P 100 have adopted these kind of policies as a result of our efforts.

Mcdonald’s is another case and NPR actually did a feature on this work and it resulted in a global reduction of the use of highly toxic pesticides, starting in their potato supply chain but then reaching out into all their other agricultural products and then actually reaching from there to their peer and competitor companies. They thought what they were doing was so important that it shouldn’t just be a McDonald’s initiative, it should be an industry-wide one. I think, about Starbucks. They actually were one of the companies that designed thoroughgoing disclosure policies around political spending. But they also one time went out and trademarked some place names, some area region names in Ethiopia, the birthplace of coffee and the Ethiopian government was really outraged by this and said these are our patrimony, these are our country and countrymen’s property, not yours, starbucks. And so the government reached out to Oxfam America and Oxfam America reached out to Newground and we put together a shareholder campaign in concert with Oxfam, and that led to Starbucks returning the patents on the trademarks rather to the Ethiopian government, and also pledging that they would never engage in that kind of activity again.

And I might last mention just DuPont. Dupont had a strip mining plan, an operation to mine along the entire eastern border of the Okefenokee National Wildlife Refuge, and this is an internationally known gem. People come from all over the world to study the unique ecology of that region, and this 50-year-long dredge mining operation would have really wrecked the ecosystem in some irretrievable ways, and so through shareholder action we got them to permanently retire the mining rights and start to mine elsewhere. I didn’t mention they were mining for titanium dioxide, which is the seventh most common mineral on the planet. So those are a few of the things that we’ve been able to accomplish some lasting and enduring benefits, both in policy realm, in terms of political spending, but also in really tangible terms in terms of things like the okie-finokie and lowering pesticide use.

That’s amazing and it just kind of shows you can make like a very strong difference, like just the work you’ve done has real, like real impact. So that’s awesome. And so how have you seen the financial advising space evolve over the last decade? We kind of are in this realm of like new technology, but also different demographics are impacting financial advising, and so what have you seen kind of as the big changes?

Mm-hmm. Well, there’s clearly been a decided shift toward fee-only and operating under a legal fiduciary standard or framework. However, we shouldn’t be mistaken although rhetoric may be spoken so-called best interest and suitability and hybrid model this sort of terminology there still is a furious backlash from the usual suspects against being held to a truly higher standard of fiduciary care. Now, that said, there are widening pools of fiduciary care opening up, and this, along with what you mentioned new pricing models and significant leaps forward in technology have really allowed an increasing what I like to think of as a democratization of the planning services, and this makes these kinds of tools and assistance really available to many, many more people at lower dollar thresholds, lower wealth thresholds, and you know perhaps the people who need it most in my book, the folks who are well, very well off. They don’t they. They benefit from financial planning, but they don’t need it as much as people who are playing their cards closer to the chest. I think that’s been one or two of the main things that we’ve noticed.

Yeah, and I think that’s so true this democratization and just better tools that even democratizes. The capabilities of firms at different sizes and what they can serve and how fast they can serve clients is huge.

Exactly.

So how do you see your business evolving over the next few years? What are you concerned about? What are you thinking about?

Well, I hope it won’t seem immodest to say that Newground has always been somewhat ahead of the curve I mean significantly so in becoming the nation’s first social purpose corporation and, 30 years ago, choosing an exclusively ESG impact focus for the company and becoming very early on a registered investment advisor, which eliminates the conflicts of interest that commission-driven product sales has.

We also were early in adopting a holistic financial planning approach, as opposed to just being a money manager, investing portfolios and then also again actively engaging in shareholder dialogue and negotiation, which, as noted above, clearly separates the wheat from the chaff in terms of high levels of conviction. And so, from that perspective, the future certainly holds more of the same, as other firms really try to catch up in certain ways with Newground. But beyond that, we continue to deepen our tax practice, rather our tax expertise and advanced planning services and capabilities. We’re building on our team and building on my own law school experience and four decades of being active in the field. And, yeah, we’re also building on and forging new strategic alliances, like ours with Citizen, mint and others, which allow us really to broaden our scope and also deepen our level of service to clients.

Yeah, and I think that’s you know kind of. One of the keys for us is, you know, coming and being that partner to wealth advisors like yourself. They want to have an extension of their investment capabilities and we can be that extension to provide those kind of investment solutions for clients. What are your views on alternative investments and how have you incorporated them into client portfolios in the past? And how do you think about that going forward?

Well, there might not be any universally accepted definition of what constitutes an alternative investment, in the mean we think of them as investments or asset classes that don’t typically correlate to the equity or fixed income components of a portfolio. So for this reason, they tend to dampen volatility and improve the consistency of portfolio performance, though, it has to be said, they can sometimes create a little more of a heavy lift in terms of regulatory scrutiny, performance and tax reporting and occasional client questions over fees and manner of billing. But where clients are accredited and therefore qualified and they don’t mind some modest level of additional complexity, alternatives can really benefit the investment experience over the long haul while also providing meaningful and enduringly positive impacts on the ground.

From an investment standpoint. What drew you to utilizing a platform like us CitizenVent?

Oh well, you’re kind to say it that way. I don’t think there are any platforms like you, and so the answer to this question is really quite simple. There are four things really. You know the integrity of the principles of you, josh and others, your founders, co-founders, the ingenuity, I think, of the platform. You know the impact of the investments, as mentioned, and also the democratization of access, with the lowering of both cost and minimums. You know thresholds to entry. I think Citizen Mint has really taken a complex. I think Citizen Mint has really taken a complex, opaque and potentially risky area of investing and made it quite approachable, scalable and also more safe for institutional investors like Newground. And then, when you add to that, the foundational model of your enterprise, as well as your consideration of each project along the way, is infused with the real values and positive impact orientation. That’s why we feel Citizen Mint, you know, is a powerful and almost, really almost ideal sort of strategic partner.

Yeah, and that’s what we’re ultimately trying to be is just a great partner to the wealth advisors we work with, like you, bruce, and you guys do great work for your clients and we’re trying to do also that great work where we can provide solutions for your clients at both on financial security point of view, but also from an impact point of view and really hitting their values and the things they care about. What are your clients asking for? Just this is a great like curiosity question. I always ask this what are your clients asking for solutions? Are they asking for income, reduced volatility, growth? What are they asking about?

Yes. Well, first and foremost, values alignment is what draws clients to new ground. They seek us out. That’s what they’re seeking and they find us. And then I’ll sort of separate.

For older clients it’s retirement and estate planning, drawdown efficiency, meaning what’s the optimal sequence of disbursement from accounts, how to maximize the tax benefits of philanthropy, and then integrating each of these things into considerations of lowering the lifetime taxes paid. Now for younger clients, it’s a different set of things. They’re navigating and making sense of really a myriad of life stage transitions, all of which are new and so sometimes quite daunting Marriage, children, homes, businesses, jobs, including some very complex compensation plan packages. Sometimes you know, college planning, elder care for their own parents and then also eventually their own retirement, and you have to start early to make sure that works out as well. So I mean, when you lay it all out and think about it in one fell swoop like this, it can almost seem really daunting and tiring. But what it means is that there’s really never a dull moment and, importantly, almost never a point in a person’s financial life when trusted counsel and expert financial and excellent financial planning can’t really improve a person’s well-being and their outcome and their outlook.

And I think that’s you know it, and it’s a little bit different for everybody, but essentially, like what I would always tell clients is like you know, I lose sleep, so you don’t have to like that, you know it’s. It’s their biggest concern is their finances. In a lot of cases. I mean, if you can be that trusted advisor, to be like Bruce has got it, he’s taking care of it, he’s setting us up for success over a long period of time. That gives people so much security and they can live their life which they’ve worked so hard for, for that retirement or maybe even just like my kids going to college or that big purchase, and so knowing that you’re alongside them is such a value add.

What are the?

biggest challenges advisors are facing today.

What are the biggest challenges advisors are facing today?

Well, you know, there’s quite a list, but I think one of the biggest is the perpetual need for advisors to remember what our role as advisors truly is.

My view is coming up with hot stock tips, or predicting the daily gyrations of the market, or frenetically changing course in response to every piece of new news.

And, yes, we do analyze trends and markets, as well as specific investments, when we’re making portfolio allocation recommendations. But the most important job of an advisor falls into the realm that’s called behavioral finance, and it involves really coaching clients through their fears and misapprehensions toward really staying faithful to, and invested in, a well-grounded and well-thought out plan, financial plan. And, from this perspective, a huge challenge to both investors and advisors alike is the 24-hour news cycle you know, populated by a plethora of titillating but inaccurate, short-term and scaremongering information, and all this does, frankly, is feed anxiety, and it causes clients to take short-term steps that will almost always be detrimental to their long-term best interest, and so, for this reason, we always advise clients to adapt a media diet when it comes to both economic as well as political news. And I’ll just stop there. I think that that’s one of the biggest things. You know, getting the right mindset is the most important setup to successful investing.

And that is so true, and I think that, honestly, is number one. You see, clients make the biggest mistakes in the news cycle or things are happening, and it’s like you’re investing for the long run, you’re not investing for today or tomorrow, and so you can make way too big of mistakes if you start moving that plan around. And I think that there’s an expression for that it’s time in the market is more important than timing the market. You know so Exactly so. So what excites you about the future of the advisor space in your practice’s future specifically?

Well, let’s see. I think there are several lenses one can take from a financial perspective. The more complex the world gets, the more beneficial a qualified advisor becomes, and add to this that technology as well as pricing models can and have democratized and lowered the point of entry for larger, ever larger cohorts of people. I think that’s very exciting for the industry as a whole, and together these things evidence real growth potential for the industry From a values perspective. In our experience, every piece of bad news awakens a new cohort of people to a desire to use their money and resources in profoundly different, much more sustainability and fairness-oriented kinds of ways, and so that means that there’s growth of the ESG impact advisory field generally, but even more for the most respected and tenured industry pioneers like Newground. That gives us even more opportunity as people understand the nuances and distinctions between different forms and practices of ESG.

You know, for decades many of us have said that the goal of responsible investment was to simply have it become investment, that these practices and levels of analysis would just become what everyone does because it makes good financial sense. And really interestingly, that is becoming the case as ESG considerations are becoming more and more mainstream. And why? Because they allow a deeper understanding of a company’s operations and the opportunities that they have, as well as, perhaps, the liabilities that they may face. And it also provides really enhanced insight into the numbers.

And everybody crunches the numbers first, but ESG analysis it gives a different tone, different sheds, different light, even on the numbers. And so then, lastly, from an impact perspective, each of the trends just mentioned, you know, multiplied by an increase in the number of investors exercising their shareholder engagement rights, should greatly leverage our influence on companies and the ability to influence them toward the good, to act with high standards of transparency and accountability. And, frankly, we view transparency and accountability as the true bottom line of responsible investment, being the metrics that both advance all milestones and also the tide that raises all boats. So, from each of these perspectives, there certainly is quite a lot, I think, to look forward to.

Yeah, that’s amazing, and so where can individuals find out more information about your capabilities? Where can individuals find out?

more information about your capabilities.

Well, probably our website is the best place http://www.newgroundnet N-E-W-G-R-O-U-N-D dot net, and we’ll also have a link to that in the description so that individuals can grab that. And then, if you’re ever interested in finding out more information about CitizenMint, we have ours at CitizenMintcom. And Bruce, this has been amazing. I’m so excited for what you have going on and the way you treat your clients. You talk about integrity and you live it each day with how you treat your clients and their wishes, and just the way you work with them.

So thank you again, and we look forward to having many more conversations like this in the future. We do as well. Thank you for everything you. We look forward to having many more conversations like this in the future.

We do as well. Thank you for everything you have done in the industry or doing for us as a company, and for being who you are. All right, thanks, bruce.