#FASuccess Ep 419: Attracting Clients Who Want To Align Their Investments With Their Values With A Sustainable Investing Approach, With Peter Krull

Nerd's Eye View | Kitces.com

Welcome everyone! Welcome to the 419th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Peter Krull. Pete is the Director of Sustainable Investing of Earth Equity Advisors, an RIA based in Asheville, North Carolina, that oversees approximately $200 million in assets under management for 250 client households.

What's unique about Pete, though, is how he has grown his firm by exploring with clients how they can align their portfolios with their own personal values, effectively allowing their investments to become an expression of the types of businesses they want their capital to support… while still ensuring their overall portfolio is still well-diversified, tracks to broad market indices, and is prudently allocated to sound businesses.

In this episode, we talk in-depth about how Pete frames the differences between socially responsible investing (which is focused on excluding certain industries or companies from portfolios), ESG investing (which measures the risk to companies from environmental, social, and governance factors), and Pete's sustainable investing approach (which he views as a more bottom-up process designed to identify the sectors and companies that will be successful in the economy of the future), how Pete uses everything from industry newsfeeds to quantitative data to identify a broad universe of potential companies to invest in, and Pete's process for then narrowing down the pool of potential investment targets (which includes the use of fundamental quantitative metrics of company health, ESG evaluations from third-party analytics platforms, and Wall Street analyst ratings).

We also talk about why Pete views his investing style as a core holding in client portfolios (rather than a thematic addition) in part because he still seeks to at least roughly track the sector composition of broader market indices with investments that meet his sustainability criteria, why Pete uses a combination of individual stocks, ETFs, and mutual funds in client portfolios to maximize the universe of potential available investments (instead of using direct indexing, which he finds is too limiting when it's by definition constrained to only the companies available within the chosen index), and how Pete builds client portfolios with a combination of both equity and fixed income investments that meet his sustainability filters to ensure he can allocate with a stock/bond mix that meet clients' risk tolerance and desired portfolio characteristics.

And be certain to listen to the end, where Pete shares how his sustainable investing approach has been able to attract clients who want to feel like they are part of the solution in being able to direct their capital to support the companies building towards future they want to see, why Pete thinks that serving a well-defined niche has actually expanded his business opportunities because he doesn't face competition from other firms (that don't have his expertise) for the ideal clients he wants to serve, and why Pete decided to merge his firm into a larger one in order to create scale for his sustainable investment offerings and ultimately reach even more clients looking to align their investments with their values.

So, whether you're interested in learning about the differences between ESG, SRI, and sustainability investing, strategies for incorporating sustainable investing values when constructing client portfolios, or how specializing in a niche investment approach can be an effective way to attract new clients, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Peter Krull.

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