The ESG Update Episode 26: A New Era of Hyper-Personalization in Investing
Transcript
This transcript has been edited for clarity.
Dan Carreno, Change Finance:
Welcome to The ESG Update presented by Change Finance. I'm Dan Carreno.
Brittany Damico, Change Finance:
And I am Brittany Damico.
Dan Carreno, Change Finance:
Brittany and I manage the business development efforts at Change Finance. We are an ETF provider dedicated to sustainable and responsible investing. And our mission is to help investors align their portfolios with their values without sacrificing returns, Brittany, how goes it today?
Brittany Damico, Change Finance:
I'm pretty great. It's so good to be podcasting with you again. It feels like it's been quite some time since we've been doing this.
Dan Carreno, Change Finance:
Summer vacations and schedules have not matched up as of late, but we're getting back and into the flow of things as we get into the fall. Well, let me introduce our guest this week, who is Lisa Mougin. She's the president of Positivly and a partner at TIFIN, which is a fintech firm in the investment management industry. Lisa, thank you for joining us today. How are you?
Lisa Mougin, Positivly:
Thanks Dan and Brittany, happy to be here on hump day before a long weekend. Looking forward to our conversation today.
Dan Carreno, Change Finance:
Thank you again for being on. We are going to change up our usual format a little bit. We are hoping to cover a short white paper that we produced here at Change Finance as part of a series that we refer to as SRInsights. This white paper is about the psychological and behavioral drivers that lead investors to invest in a sustainable or responsible fashion. Part of that white paper is Positivly, which I believe is a really amazing tool that advisors can use to engage and understand their clientele better. What we're going to do this time is talk first about Positivly and what the platform is all about. Then we're going to go into the white paper. Lisa, if you could, provide us with a high-level overview of Positivly and what your firm does.
Lisa Mougin, Positivly:
Sure. It is important to understand the holding company behind Positivly. That firm is TIFIN, a fintech firm based here in Boulder, Colorado with 11 different operating companies. The central thesis is aiming to define the future of the investor experience and doing that through combining the powerful investment intelligence, data science, and technology to help investing be a more powerful driver of overall financial wellbeing. Our platform, Positivly, has been designed to address the lack of engagement between investors and their investment portfolios. It's an issue that's long plagued our industry. The heart of the matter is when people are more deeply engaged with their portfolios, they're more likely to stay invested during turbulent markets and more likely to stay loyal to their advisors, all of which leads to long-term better financial outcomes. Positivly has two key components. The first is a scientific financial personality assessment. The second is the platform for advisors to take the data from that assessment and use it to create hyper-personalized portfolios for individuals at scale across their entire client base. It allows for a one-to-one ratio between the uniqueness of the individual and the individual portfolio. Doing that at scale just hasn't been possible so far in our industry. Within our assessment, there's four key dimensions that we're assessing an individual on. We refer to those as PURPOSE, SECURITY, TOUCH, and VIEWPOINTS. Purpose questions are helpful in identifying the specific causes that an individual believes in. ESG type themes but really taking a much more granular look at those. It could be clean water, global warming, gender equality, and other things along those lines. Security questions are risk type questions. Risk obviously remains an important component of understanding an individual and shaping portfolios. Touch questions are gathering info and insights on the depth of the relationship the individual wants with their advisor and how they want to be communicated with. And then lastly, Viewpoints. Viewpoints moves beyond ESG themes and seek to understand the socioeconomic trends that an individual sees shaping the world. It could be genomics, it could be space exploration, or others. And then again, Positivly captures all this data to use it for portfolio construction.
Brittany Damico, Change Finance:
Thank you. I've taken the financial personality questionnaire, which I really enjoyed. Can you tell us a little bit more about how you went about creating that questionnaire?
Lisa Mougin, Positivly:
What was your leading dimension? Do you remember?
Brittany Damico, Change Finance:
I believe I was about 90% Purpose.
Lisa Mougin, Positivly:
If you had said anything else, I would have been surprised. Purpose was my strongest dimension as well. Positivly was created in partnership between TIFIN’s Founder and our CEO, Dr. Vinay Nair and Dr. Tal Ben-Shahar, who's a Harvard professor and the leading voice in the academic field of positive psychology and happiness. So Positivly is really the confluence of investment science and science from the field of positive psychology in order to assess an individual's core beliefs and their interests, and then incorporate those into their investments. The real breakthrough revelation with positive psychology is rather than looking at an individual to understand what they're trying to avoid in life, you assess the inverse of that. What does an individual drive toward? For an analogy in the field of physical health, a doctor, rather than saying how do I prevent you from becoming obese, would instead work toward helping you become physically fit? Our assessment is using those findings from positive psychology to understand those purposes and those interests that drive an individual and then help incorporate those into their portfolios to drive that engagement that I spoke to earlier.
Dan Carreno, Change Finance:
I just wanted to quickly interject here. You do see a lot of different questionnaires that are being provided in the marketplace these days by third parties for financial advisors. Sometimes I'm not quite sure where the questions are coming from or who's designing them. In this case, I really liked the fact that there's some serious psychological science backing up how this questionnaire has been assembled.
Lisa Mougin, Positivly:
There is a scientific framework for the entire construction of it. What we're doing is putting a tool in the hands of advisors that gives them the ability to move beyond the single dimension of risk, which is how they've typically looked at their clients, and get a much more holistic understanding of the individual in ways that just traditionally haven’t been done in our industry.
Brittany Damico, Change Finance:
What kind of feedback have you been getting from the advisors who have been working with you?
Lisa Mougin, Positivly:
The community of advisors that we're working with have been leveraging the Positivly platform to truly differentiate their practice and thereby grow. They are differentiating by having much deeper conversations right out of the gate and also to take the ESG conversation to the next level. Positivly gives advisors the ability to take away that uncertainty or fear that their clients may have in talking about ESG because they don't fully understand it and help take it to that very individualistic level. By doing so we are helping advisors engage the next generation of investors. The generation wealth transfer is talked about so much in our industry. Gen Y and Millennials don't want to interact with advisors the same way we traditionally have. This is a much more engaging tool to both initiate and then manage those relationships. That’s the core feedback that we've heard from the advisor community that we work with.
Dan Carreno, Change Finance:
Lisa, is there a way for advisors to embed the financial personality assessment into their own websites?
Lisa Mougin, Positivly:
It's a question and request that we get from a lot of our advisors. Yes, we provide them with a hyperlink to our financial personality assessment and we work with them build it into their website. Our advisor success team is doing that work on their behalf. They have had a lot of success marketing their business through the use of that financial personality assessment within their marketing materials and website.
Brittany Damico, Change Finance:
Great, thank you so much. If listeners would like to learn more about Positivly, where should they go?
Lisa Mougin, Positivly:
The best place to start would be our website, www.positivly.com. From there, you can take the financial personality assessment yourself, find out more about your own unique financial personality. You can then connect to our team if you want to get a demo of the platform. Ideally, you can join our community of advisors that are future-proofing their practices to bring personalization at scale to their clients.
Dan Carreno, Change Finance:
Lisa, thank you so much. I really appreciate the insights into Positivly. Now to transition and talk a little bit about our most recent SRInsights piece, which was written by our very own Brittany Damico. The title is “From Dollars to Dogmas,” and it presents the behavioral drivers behind sustainable and responsible investing.
Brittany Damico, Change Finance:
Thanks for the intro, Dan. We've collected and analyzed data from behavioral driver analyses conducted in eight countries and across various market indices that included institutional, high net worth, and retail investors. The results of the research indicate that investors pursue SRI portfolios for three primary reasons. Those reasons are altruism, autonomy, and performance. In regard to altruism, research shows that individuals are more likely to invest larger sums into ESG-oriented portfolios. They also express a willingness to forego a degree of return to maximize the positive impact they're having on people and the planet.
Dan Carreno, Change Finance:
There was a study that came out in 2019 from the Institute for Sustainability Leadership at Cambridge University that showed US investors have a strong preference for sustainability. And as a result, they are willing to sacrifice 2% to 3% of their returns for it.
Lisa Mougin, Positivly:
That’s consistent with what we have discovered. Of the thousands of individuals who have taken our financial personality assessment, the vast majority are Purpose dominated individuals indicating that they see investing as a means to promote a better world.
Brittany Damico, Change Finance:
So, the second component is autonomy. Many investors can reinforce their own social identities by aligning their portfolios with their viewpoints. By integrating personal values and investments, individuals can feel a sense of autonomy that improves engagement and feelings of personal accomplishment.
Lisa Mougin, Positivly:
Autonomy definitely aligns with how we think about what Positivly is doing in the investment management space that has long been accomplished in other facets of our daily lives. For example, our music experience is curated specifically to us through Spotify. Our entertainment experience is through Netflix. Shopping through StitchFix. I'm amazed it's 2021 and we're just now bringing it to the world of investments. It’s exciting that people can have the same level of autonomy in their investments.
Brittany Damico, Change Finance:
Then the third component is performance. Research indicates that a majority of individuals believe that integration of ESG data will mitigate risk and enhance returns. One analysis from over a thousand individual studies validates those viewpoints and confirms that most researchers find a positive, or at least a neutral correlation, between ESG portfolios and superior risk adjusted returns.
Dan Carreno, Change Finance:
I'll jump in with a shameless plug for our own podcast. If anybody is interested in exploring the relationship between ESG and performance further, go back into our podcast feed where just two episodes ago, we interviewed Tensie Whelan from the NYU Stern School of Business. She discussed that meta-analysis. Before we wrap it up for the day, why don't we take a minute to sit around the campfire? It's going to start getting cooler out there and that campfire is going to feel a little bit better. Maybe we're drinking more whiskey around the campfire as opposed to beer at this point. I think that sounds right. So Brittany, when you're out there sipping on a bourbon, what are you going to be talking about?
Brittany Damico, Change Finance:
Today, I wanted to share a podcast called The Wild. It's a production of KUOW in Seattle and is made in partnership with Chris Morgan and Wildlife Media. Chris Morgan is the primary host and he digs deep into certain species and their ecosystems. He pulls in academics and does interviews. I recently listened to one about orangutans. They might be one of my favorite animals. There are just very few things that rival a baby orangutang. But anyway, it's a great resource to learn more about various species.
Dan Carreno, Change Finance:
Lisa, how about you? When you're chatting with friends and family, what are you going to be talking about?
Lisa Mougin, Positivly:
I would literally be around a campfire, but my daughter has soccer tournament all weekend. It'll be more soccer sideline conversations, but that's okay. I think these last few weeks have felt like there's so much in the world. Afghanistan. The wildfires. Hurricanes. All of it. The timing has aligned well with a book that just came into my life just a couple of weeks ago. This incredible man who I met this year, he's actually built his career in our industry on Wall Street, but then he left Wall Street to go into the monastery and was a monk for five years. He’s been very influential in my life since meeting him. He recommended this book to me called “Holy Discontent.” The subtitle is “Fueling the Fire that Ignites Personal Vision.” It’s drills down on that one thing that brings you the most heartache. I think sometimes we're just all so overwhelmed and feel helpless about what's going on. I've loved the book because it's helped me distill my thoughts around how I can take my energy and turn it into action in the world. It really speaks to how much energy you're filled with when you do start working towards that one cause that matters most to you.
Dan Carreno, Change Finance:
Excellent. Thank you for sharing, Lisa, and to round it out. I think anybody that listens to this podcast on a regular basis is probably used to any yoga conversation coming from Brittany. But I'm actually going to talk about yoga this week. That is because just a couple of weeks ago, I tried doing goat yoga for the first time. If anybody is not familiar with this concept, which I was not up until three weeks ago, you go to a venue and you do a yoga class. As you're doing yoga, there are little baby goats that climb on you as you're doing yoga. It is simultaneously one of the strangest and one of the coolest experiences I've ever had in my life. still not sure how I feel about it other than I want to do it again. So, for anybody out there that likes yoga and also likes baby goats, or animals in general, I can't recommend it enough. It was a really cool experience.
Brittany Damico, Change Finance:
I think if we should add the picture on the website with this podcast.
Dan Carreno, Change Finance:
Well, we'll wrap it up there. Lisa, thank you again for coming on and sharing your insights with us and the story of Positivly. If anybody wants to find the articles or resources that we discussed during the podcast, you can always find those on our website. I mentioned it before, but it's change-finance.com. Of course, if you have questions or feedback for us, you can always get in touch with us through the website. Thank you for listening and we will be back soon with another episode of The ESG Update.
DISCLOSURE
Change Finance pays Positivly $2,500.00 per month to appear as the recommended fund for the "Reducing Carbon Emissions" theme. Positivly is a paid endorser of certain products of Change Finance based upon the Client’s completion of the questionnaire provided by Positivly that may or may not recommend the use of Change Finance. There may be a conflict of interest based upon the fact that this is a paid endorsement of the Change Finance services. Positivly may have financial arrangements with other asset managers and financial advisors. Change Finance has no reason to believe that the services of Positivly are misleading or inaccurate.