Where Investing and Progressive Politics Mix

Q&A January 31, 2023 at 03:40 PM

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Politics and portfolios align at Modernist Financial, an RIA in Portland, Oregon, whose investing focuses unequivocally on progressive politics. At this firm, talking politics with clients is far from taboo.

"The golden rule for giving financial advice is that you never talk about politics. But everybody I talk to is hungry to talk about politics," Georgia Hussey, CEO and founder of Modernist, tells ThinkAdvisor in an interview.

Launched in 2015, the firm is a certified B Corporation managing $70 million in client assets.

Folks in the creative arts and those connected with the real estate and property development world constitute much of Modernist's clientele.

Hussey, 43, a former writer and sculptor, started out as a financial advisor at Wells Fargo Advisors in 2011, then moved to Rosenbaum Financial Group, a small Portland firm.

At both, she felt stymied.

During her Wells Fargo stint, she says, "I took a loss on a lot of clients because I needed to be able to charge financial planning fees to do the work I'm doing."

"My entire career was people telling me that what I wanted to do was crazy and that no one would pay for it. I've learned over the years that that's not true," Hussey says.

She continues. "I'm not making my business based on the industry. If anything, if the industry disagrees with me, "I'm like, 'Oh good. I must be on the right track.'"

When Hussey left Rosenbaum to start her own firm, again because of financial planning frustrations, she knew that her company "would have to be oriented toward the good of all people, not just my financial benefit," she says.

Through sustainable investing options and financial life planning, Hussey helps investors structure their wealth according to their progressive values.

In the interview, the certified financial planner discusses the savings and investing advice she's providing in this market downturn and recessionary environment and her technique for keeping clients calm when markets do plummet.

ThinkAdvisor recently chatted by phone with Hussey, who was speaking from Portland.

The Sarah Lawrence College graduate declares in her firm's manifesto: "We reject stereotypes — cheapskates, spendthrifts, bootstraps, silver spoons."

Here are highlights of our interview:

THINKADVISOR: What's your ideal client?

GEORGIA HUSSEY: I want to work with folks who are interested in how we make simple decisions in a broken culture and how to help make the world better through the choices we make — not just our own families richer.

What's your overall objective?

A lot of our work is about acknowledging that investment management is constructed in an inequitable society, whether it's gender, race, class or immigration status.

The work we're doing is to bring that forward and help people make grounded decisions that are more about collective benefits than just their own benefits by including the greater community's needs in their decisions.

Modernist has become a laboratory for understanding what ethical decision-making means when we have resources.

You're politically progressive and chose to specialize in progressive investing. Please elaborate.

When I started in the business, I worked with creative professionals — designers, writers, musicians — because so many have money stories about whether they're able to be successful.

When I [founded] Modernist in 2015 and then with the 2016 [presidential] election, I saw there was an overlap with the creative clients I had and the political work I've always done personally.

As the Trump administration took power, it became very clear that all I wanted to do was talk about the political impact of the decisions our clients were making.

They felt constrained within the systems we're all operating in. I looked at my client list and saw that everyone was politically progressive because they were already attracted to working with me — and they wanted to work with a Certified B Corp, which we became in 2017.

In 2018, we made the full pivot to progressive politics, making that the explicit focus of the firm. In some ways it was there the whole time.

Have you encountered pushback from the, largely conservative, industry?

I'm not making my business based on the industry. If anything, if the industry disagrees with me, I'm like, "Oh, good. I must be on the right track.'"

My entire career was people telling me that what I wanted to do was crazy and that no one would pay for it. I've learned over the years that's not true.

People will be like, "Wait — you talk about politics with your clients!" The golden rule for giving financial advice is that you never talk about politics. But everybody I talk to is hungry to talk about politics.

You were a financial advisor with Wells Fargo Advisors and a financial planner with Rosenbaum Financial Group. Why did you start your own firm?

At Wells Fargo, I took a loss on a lot of clients because I needed to be able to charge financial planning fees in order to do the work I'm doing.

I left Rosenbaum so that I could do financial planning.

Also, I needed to choose my investment committee.

I felt that I was actually being forced to start a company because the industry so deeply didn't believe or see the vision I had for what was possible in working with clients.

We have clients who pay us $25,000 in cash for financial planning fees, and they're fine with it. They understand the value of advice.

I was told that was insane, that nobody would pay more than $2,000 a year for financial planning.

My goal is to [increase] clients' assets so they're well over $1 million and aren't paying us financial planning fees anymore.

How have your portfolios performed during this market downturn?

Quite well. Several positions outperformed the benchmarks significantly. Everything performed the way I would expect in a rising-interest-rate, recessionary environment.

Broadly, what stance should investors take?

I think the mistake a lot of people make in a recession or economic downturn is to turn off their financial structures because they get scared and panic.

But you shouldn't turn off savings and investing. Just save a little less for retirement or start living off reserves from your business, not cash flow.

That way, you throttle back, so when the economy [revives], you just throttle up again and turn on the gas.

You ask clients to tell you what they want you to do when the market corrects, and you archive their answers. When the market plummets, you remind them of that. Do they follow through with what they said?

They do. When I ask that question, I'm reminding people that in a down market, they [typically] make decisions when they're anxious, fearful or angry. But during the planning process, they're grounded, hopeful and focused on envisioning the future.

When I trot out [their answers] and remind them that they have a plan and that they don't have to panic, that this is included in their plan and that they have lots of reserves, they say, "Oh, I did say that. I get it now."

This allows them to step back into that grounded, hopeful, envisioning state and step out of anxiety and fear.

Your investing approach is to apply evidence-based insights. Please explain.

It's the belief that academic principles are what we should use when we make investment decisions. Our portfolio construction is rooted in science, not news-driven trends.

We utilize Vanguard, Dimensional Funds and index-based filtered portfolios for U.S. holdings specifically.

They're mimicking the indexes. For me, active investing is out the window.

What interests your clients about investing in ESG?

It's the low-level, constant anxiety about the systems they're profiting from based on their advantage in the world — whether it's the color of their skin, the family they come from, the education they attained or the inheritance they have.

I think the most conscious way people are aware of [and express] this guilt is in the investing world. They want to assuage their sense of culpability.

What's your reaction to the statement that BlackRock CEO Larry Fink recently made that some people are "demoniz[ing] ESG issues," creating "huge polarization," and that [the] "attacks are now personal"? BlackRock considers ESG investing to be a big opportunity.

I find it exciting that there's this much talk about ESG because awareness is helpful.

But this is a reflection of an American hate-based social conversation that's extremely violent and unhelpful. It's not just ESG. It's everything.

[Regarding ESG], I think there are probably a lot of people with conservative politics who want clean water and to have their children breathe clean air.

That's what we need to come back to — the things we share, not the things we disagree on.

The ESG [narrative] is the messy reality of change. I'm kind of glad Larry is getting some of it too — not just queer people, women, trans folks and black and brown people.

We can't just let the folks who are being damaged by racism [for example] to be the only people fighting. We need to have the folks who are benefiting from racism be the fighters too. It's an allyship, if at all possible.

What types of companies are your clients shunning in their investing?

Our sustainability funds filter for greenhouse gas emissions, child labor and cluster munitions [bombs releasing multiple submunitions] — basically land mines.

A lot of what we end up doing is helping clients understand that there's no just and unjust in any system. We're trying to get them from black-and-white thinking to the lightest shade of gray that's available right now.

But sometimes you want to own the bad actor [companies] because you can vote your proxies in the direction that you want the companies to go.

So you can divest, but investing [in bad actors] is also a practical method to move closer to the future we'd like to live in.

Can clients opt for specifics in their portfolio?

We do build custom-filtered portfolios for clients in the U.S. markets that can be oriented however they want.

They have to be at a certain level of assets. Usually we start tailoring at $3 million.

A lot of these folks are interested in big agriculture, oil and gas, and gender and racial equity.

You were a writer and sculptor focused on gender and labor before you became a financial advisor. Why did you change professions?

In 2005, I bought a house I couldn't afford. I quickly understood that I knew nothing about money or how homeownership worked.

I didn't come from money or have any tools to manage that huge financial choice. So I started learning everything I could and got excited about money. It's kind of fascinating.

I saw my friends getting book and record deals, but they didn't know anything about money either and were making bad decisions.

So I realized my community needed somebody to talk to them about systems and money and how to step into that with integrity, when we had been told our whole lives that money and business are evil and that people who are creative and make money are selling out.

What are the benefits of Modernist being a Certified B Corporation?

One of them is that it shows we're holding ourselves accountable to a third-party designation that ranks us on whether we're doing good [for others] in our business.

I knew the company I started would have to be oriented toward the good of all people, not just my financial benefit.

B Corp [certification] gives me a structure to lean into when we make strategic planning and HR decisions, vendor choices and how we're spending our money in the company.

What's Modernist University?

One of the goals I have in all the work we do with our high-net-worth clients is to funnel the tools [we use] back to the community.

So we make a lot of them available. For example, we're [now resuming] our pro bono workshops with local nonprofits, teaching them financial life planning and cash flow planning.

We also do "Modernist Money Stories," where, sitting in a circle, we have deep conversations about money and community.

We offer DIY guides to download so you can hold these conversations over dinner with your friends or family.

This is about how we do the laboratory work with clients and then spin it out to the public so folks can do it for themselves without having to pay us.

(Pictured: Georgia Hussey)

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