Young, rich, anti-capitalist capitalists

Young, rich, anti-capitalist capitalists

Andrea Pien is a 35-year-old millionaire. The wealth manager once warned her to be careful with her money, saying inherited wealth is often wasted in just a few generations. “But my partner and I have no plans to have children,” Pien said. “What are we hoarding money for?” Especially when the world is literally on fire. ”

So in March 2020, Pien hired Phuong Luong, founder of financial planning firm Just Wealth, to help her redistribute some of her wealth back to society. That means taking part of it off Wall Street and investing in ventures that promote people’s well-being and economic justice instead of profit.

Pien is one of the small but growing number of wealthy people looking for a more radical approach to investing. Some call it a seemingly contradictory term “anti-capitalist” investment; others call it “transformative investing.” In general, advocates go beyond simply discouraging unethical behavior in companies. They are trying to shift much of the balance of financial power into the hands of the working class, transforming an economic system that they believe has only unjustly given control of most capital to a few people. Some investors want to spend all their wealth through anti-capitalist investment, while others still want a return on their investment, but make sure those investments are in ventures they believe promote social justice.

Financial professionals in space say they have taken a growing interest in this type of investment strategy in recent years and attribute part of the interest to social justice, which is becoming an increasing priority after the 2020 racial justice showdown. a deeply unequal pandemic who killed so many black and brown working class people.

Another factor that encourages this small shift: a lot of money is currently changing hands in the US. Over the next 25 years, American baby boomers will move on some $ 68 trillion to their children. It will be the largest wealth transfer in US history, but the money will not be evenly distributed. Even more wealth will be concentrated at the top.

Kate Barron-Alicante, financial advisor and director of influence at wealth management firm Abacus Wealth Partners, which helps some clients with transformative investment, told Recode: “What I see is more people on the other side of that wealth transfer wanting it. otherwise, ”she said.

“Sometimes I joke that there are many more socialists who need a financial advisor than socialist financial advisers,” said Zach Teutsch, financial advisor and founder of Values ​​Added Financial, a financial advisory firm for the Progressives. “It simply came to our notice then. They want an adviser who shares their contempt for the US economy, which is dominated by obscenely wealthy billionaires. ”

There is a longing, but an important question to ask at the beginning is how much impact anti-capitalist or transformative investment will have.

Attempts at ethical investment are not new. The concept of socially responsible investment dates back centuries, and today there are different approaches that fall under this umbrella. They have been attracting in recent years increased skepticism about their efficiency and ethics. The positive impact that socially responsible investment strategies claim to have is often difficult to measure, and there is no rigorous definition of what “socially responsible” means – what is ethical to one person may be unforgivable to another.

“There was a lot of interest, but also a lot of competition and marketing dollars spent by those larger investment firms that basically want to make money fast,” said Sonia Kowal, president of Zevin Asset Management, a socially responsible investment management firm. investment. “It simply came to our notice then shock washing it happens.”

Since this is a relatively new idea, anti-capitalist investment still does not have a clear definition. Anti-capitalist investments and efforts are in a series and not everyone would use the term “anti-capitalist” to denote them. As Pien told Recode, “I would not go so far as to describe myself as an anti-capitalist because I am still involved in this economy. “But I would like a world that is different from the current capitalist system we have.”

It forms part of this spectrum “transformative investment”, whose goal is to transform the “extractive economy” – which means the system we now have, where limited resources are extracted and only a few people are rewarded with profit – into a “regenerative economy” in which capital is more fairly distributed and democratically controlled. It’s a concept he popularized Resource generationa social justice organization whose members are wealthy young Americans who have pledged to redistribute all or most of their money.

Doing business at the more radical end of the anti-capitalist investment spectrum is such a firm Chordata Capital, which offers an explicitly anti-capitalist approach to wealth management. Some of Chordata’s clients do not want any return on their investment and could work on a plan to spend their fortune over a period of 20 years.

“Sometimes when we use that language, [anti-capitalist investing], people say it’s a paradox. I think it comes from the place of people who believe there is no real alternative to capitalism, ”said Kate Poole, who runs Chordata with co-founder Tiffany Brown.

Poole advises clients on investing in workers’ cooperatives, which are companies owned by workers whose profits are shared among them, or in community-controlled loan funds, such as one run by The Boston Ujima Projectwhich gives members of the working class a vote on which companies participating in their community should receive funding.

However, the financial services industry is not currently built for transformative investment. The general principle of investing is to minimize risk and maximize profits by keeping different types of assets instead of putting all the eggs in one basket. It’s harder to maintain a variety of assets when you avoid all publicly traded stocks. Financial advisers are also required by law to manage their clients ’investments through custodians, who are often large banks, who guard assets. “Many of these firms do not keep investments outside of Wall Street,” Luong said. This means that investing in a small business in the community requires investment advisers to do more research and paperwork than when you invest in traditional investment funds that involve many publicly traded companies.

It can also be a challenge to find decent non-Wall Street options that are in line with the transition to a regenerative, more equitable economy. Kelly Cahill, a 34-year-old member of the Resource Generation, told Recode: “I liked the idea of ​​moving my money to community investment instead of the stock market, but … where do I put it?” While a growing number of pension funds – the most common way most Americans hold stocks – offer socially responsible investment opportunities unless you can hire a financial advisor, you are unlikely to have the knowledge and approach to work in the investing community.

Cahill, who received a significant settlement due to the accident, initially followed the usual financial advice and put half of her money on the stock exchange. “I ignored it for a year,” she recalled. “And then when I finally looked at him, I was just thrilled with how much he had grown during that time.” She realized she didn’t need everything, so she joined Resource Generation and found a financial advisor who could help her redistribute a third of that to community investment.

Resource Generation offers a database of financial professionals and firms qualified to help people with transformative investment. For now, the list is still small, with fewer than 30 investment firms being able to provide at least some investment options outside of Wall Street and transformative investment support. But Nadav David, an organizer at Resource Generation who helped create the database, told Recode that there has been a rise in interest.

“In the last few years, I’ve definitely seen a lot more talk about the actual complete separation from Wall Street and public markets, and more in communities,” he said. Meanwhile, Resource Generation membership has grown. According to the organization, at the end of 2019 it had 702 members; by the end of 2021 he had 1,155.

“We are interested in ending the legacy we know and being the last generation of people who can accumulate wealth in this way,” David said.

As transformative investment grows, even if it remains part of a niche in the financial market, emphasizing how it differs from other types of ethical investment will become even more important, especially if it seeks to avoid the fog surrounding socially responsible investment. For now, the latter is much more popular. Almost 2020 36 percent professionally managed assets at the global level are classified as socially responsible investments. Within this category, the integration of environmental, social and corporate governance (ESG) was the most popular strategy – just over $ 25 trillion in assets that benefited from ESG integration in 2020. This includes factoring in the company’s carbon footprint or how well it treats employees when calculating risk or return on investment, as such factors can affect a company’s financial performance. The ESG does not necessarily give priority to social values ​​over financial performance.

By comparison, only $ 352 billion went to influence or invest in the community. Still, that $ 352 billion is an increase of 42 percent compared to 2016. This speaks to the growing appetite for alternative investment strategies outside the surface impact wash that is often associated with ESG investing.

While no one seems to harbor illusions that only radical investment will solve the problem of wealth inequality, the emergence of this trend suggests that the next few decades could be transformative for the financial services industry. For the small number of wealthy young Americans who inherit, it is not enough to donate for a few charitable reasons – one of the loudest critiques of great philanthropy is that it lacks transparency and is undemocratic. They recognized the need to move away from feelings of guilt over their own privilege and the deep inequality that exists in the world. They try to change the power imbalance in the relationship they have with others and feel like they are part of a community that is not only connected by wealth.

Pien recalls his late father’s advice on how to manage money. He said, “Listen, Andrea, I know you like to reallocate money, but know that you have to have at least $ 13 million to be absolutely safe,” which I thought was absurd, “she said.” Part of why I want to participate in This redistribution movement is that my dad worked really, really hard – and he was really isolated. He didn’t have a lot of close friends. “

“I want the future to look like everyone has a little more than enough,” Pien continued. “Everyone can feel affirmed in their identity and feel connected to their communities around them – not isolated.”



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