With the increasing interest and focus from consumers on sustainable and socially responsible investing, more and more financial advisors have started to offer SRI portfolios designed to more effectively align a client’s investment dollars with their stated values. However, the next frontier in these values-based investment approaches is not merely to allocate client dollars to SRI portfolios, but to operate the financial advisory business itself in a manner that effectively considers its environmental, social, and community impacts.
In this guest post, Georgia Lee Hussey and Liliya Jones of Modernist Financial provide a guide to making values-based commitments as a financial advisory firm through becoming B Corp Certified. The B Corp certification is not an alternative to other corporate structures like an S or C corp, but a process that entails making a legal commitment (through the business’ bylaws or operating agreement) that affirms the existing S or C corp (or partnership or LLC) business entity’s commitment to consider its impact on all stakeholders (rather than just maximizing shareholder value). After recently going through the process of getting their RIA to become B Corp Certified themselves, Georgia and Liliya outline what a B Corp is, why financial advisors should consider getting their firms B Corp Certified, and how to go about the process.
When a financial advisory firm wishes to become B Corp Certified, the advisory firm owner must first take an assessment which evaluates their practices in the areas of governance, workers, community, environment, and customers. After completing this assessment, firms will be required to provide some documentation of select items, and possibly create a specific action plan for bringing their firm up to required standards. Once a firm meets the criteria required by B Labs – which grants the B Corp certification – they are then required to make the necessary changes to their corporate documents in order to make their commitment to ethical practices legally binding.
Financial advisors interested in earning B Corporation® certification have many ways to ensure they are considering all stakeholders in their decision making, from implementing ESG portfolios and promoting diversity and inclusion in the industry, to investing in their employees and considering the environmental impact of their firm. Ultimately, being a B Corporation® can be a way to truly apply a values-based perspective beyond the portfolio itself. Which can result in a new way to build trust with prospective clients – especially those who already have a strong values-focused oriented to where they invest and who they do business with – as well as connect with a broader community of like-minded socially-conscious entrepreneurs, and provide an environment that is more attractive to next generation advisors!