The young, rich, anti-capitalist capitalists

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Andrea Pien is a 35-year-old millionaire. A wealth manager warned her once she had managed her money carefully, saying that inherited wealth was often wasted in a few generations. “But my partner and I have no plans to have children,” Pien said. “Why do we run out of money? Especially when the world is literally burning. “

Thus, in March 2020, Pien hired Phuong Luong, founder of the financial planning firm Just Wealth, to help her redistribute some of her wealth to society. That means taking part of Wall Street and investing it in companies that promote human well-being and economic equity above profits.

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

Space professionals say they have seen a growing interest in this type of investment strategy in recent years, and attribute some of the interest in making social justice a higher priority after the bill. 2020 racial justice and a deeply uneven pandemic. which killed so many black and brown working class people.

Another factor that fuels this small change: a lot of money is changing hands in the US right now. Over the next 25 years, American baby boomers will spend about $ 68 trillion on their children. It will be the largest wealth transfer in U.S. history, but the money will not be evenly distributed. Even more wealth will be concentrated at the top.

Kate Barron-Alicante, financial advisor and impact director of wealth management firm Abacus Wealth Partners, which helps some clients with transformative investments, told Recode: “What I’m seeing are more people who are on the other side. “They want to do it differently,” he said.

“Sometimes I joke that there are many more socialists who need a financial advisor than socialist financial advisers,” said Zach Teutsch, a financial advisor and founder of Values ​​Added Financial, a financial advisory firm for progressives. “People are really wanting this. They want an advisor to share their contempt for an American economy that is dominated by obscenely rich billionaires.”

The desire is there, but an important question to ask early on is what impact anti-capitalist or transformative investment will have.

Attempts to invest ethically are not exactly new. The concept of socially responsible investment dates back centuries, and today there are a variety of approaches under this umbrella. In recent years, they have attracted growing skepticism about its effectiveness and ethics. The positive impact of socially responsible investment strategies is often difficult to measure, and there is no single, rigorous definition of what it means to be “socially responsible”: what is ethical for a person may be unforgivable for another.

“There’s been a lot of interest, but also a lot of competition and marketing dollars spent by the biggest investment companies that are basically looking to make money fast,” said Sonia Kowal, president of Zevin Asset Management. an investment management company. which focuses on socially responsible investment. “There’s a lot of impact washing.”

Because it is a relatively new idea, anti-capitalist investment does not yet have a clear definition. Investments and anti-capitalist efforts fall into a whole spectrum, and not everyone would use the term “anti-capitalist” to refer to it. As Pien told Recode: “I would not describe myself as an anti-capitalist because I am still involved in this economy. “But I would like a different world from the current capitalist system we have.”

Part of this spectrum is “transformative investment”, the goal of which is to transform the “extractive economy” – that is, the system we have now, where finite resources are extracted and only a few people are rewarded. with benefits – in a “regenerative economy”. ”Where capital is distributed more equitably and controlled more democratically. It is a concept popularized by Resource Generation, a social justice organization whose members are wealthy young Americans who have pledged to redistribute all or most of their money.

At the far end of the anti-capitalist investment spectrum is a company like Chordata Capital, which offers an explicitly anti-capitalist approach to wealth management. Some Chordata customers do not want any return on their investment and can work on a plan to spend their wealth over a period of 20 years.

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

Poole advises clients to make investments in workers’ cooperatives, which are employee-owned companies whose profits are shared among themselves, or community-controlled loan funds, such as the Boston Ujima Project, which gives members a vote. of the working class. in which participating companies in their community should receive funding.

However, the financial services industry is not currently created 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 is more difficult to maintain asset diversity when avoiding all listed stocks. Financial advisers are also required by law to manage their clients’ investments through custodians, who are often large banks, who keep their assets. “Many of these companies do not guard investments outside of Wall Street,” Luong said. This means that investing in a small community-based business requires investment advisors to do more research and paperwork than when investing in traditional investment vehicles that include many listed companies.

It can also be a challenge to find worthy non-Wall Street options that align with the transition to a regenerative and more egalitarian economy. Kelly Cahill, a 34-year-old Resource Generation member, told Recode, “I liked the idea of ​​transferring my money to community-based investments instead of the stock market, but … where do I put it?” While a growing number of retirement funds, which are the most common way most Americans have stocks, offer socially responsible investment options, unless you can hire a financial advisor, you are unlikely to have the knowledge and access to do so based on the community. investing.

Cahill, who received a major settlement due to an accident, initially followed common financial advice and put half of his money in the stock market. “I ignored it for a year,” he recalled. “And then when I finally looked at it, I was blown away by how much it grew at that time.” She realized she didn’t need it all, so she joined Resource Generation and found a financial advisor who could help her redistribute a third of it to community investments.

Resource Generation offers a database of qualified financial professionals and companies to help people with transformative investments. For now, the list is still small, with less than 30 investment firms able to offer at least some off-street investment options and transformative investment support. But Nadav David, a Resource Generation organizer who helped create the database, told Recode that there has been an increase in interest.

“Over the last few years, I’ve definitely seen a lot more conversations about the total divestment of Wall Street and public markets, and more in the communities,” he said. Meanwhile, the number of Resource Generation members has grown. According to the organization, at the end of 2019 it had 702 members; at the end of 2021, it had 1,155.

“We’re interested in ending the legacy as we know it and being the last generation of people who can accumulate wealth that way,” David said.

As transformative investment grows, although it remains a niche part of the financial market, emphasizing how it differs from other types of ethical investment will be even more important, especially if you want to avoid the fog surrounding the socially responsible investment. From now on, the latter is much more popular. By 2020, almost 36% of professionally managed assets globally were classified as socially responsible investments. Within this category, environmental, social and corporate governance (ESG) integration was the most popular strategy: just over $ 25 trillion in assets used ESG integration in 2020. This includes taking into account the a company’s carbon footprint or good dealings with employees when calculating. the risk or return on an investment, because these factors could affect the financial performance of the business. The ESG does not necessarily prioritize social values ​​over financial performance.

In comparison, only $ 352 billion was earmarked for impact or community investments. Still, that $ 352 billion is up 42 percent since 2016. This speaks to the growing appetite for alternative investment strategies beyond the surface-level impact wash that is often associated with ESG investment.

While no one seems to have the illusion that radical investment will only solve the problem of wealth inequality, the emergence of this trend suggests that the coming decades may be transformative for the financial services sector. For a small number of wealthy young Americans who inherit, it is not enough to give some charitable causes: one of the strongest criticisms of big philanthropy is that it lacks transparency and is undemocratic. They have recognized the need to go beyond feeling guilty about their own privilege and the deep inequality that exists in the world. They try to alter the imbalance of power in their relationship with others and feel like they are part of a community that is not only connected by wealth.

Pien remembers her late father’s advice on how to manage money. “He said, ‘Listen, Andrea, I know you like to redistribute money, but you know you need at least $ 13 million to be absolutely safe,’ which seemed absurd to me,” he said. “Part of the reason I want to be involved in this redistribution movement is that my dad worked very, very 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 asserted in their identity and feel connected to their communities around them, not isolated.”

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