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Adviser Profile: Lisa Hardman of Investing Ethically

Adviser Profile: Lisa Hardman of Investing Ethically

Lisa Hardman is not afraid to jump in at the deep end at Investing Ethically, offering clients social impact investments that match both their ethical requirements and attitude to risk.

Still waters run deep. What a perfect summary of Lisa Hardman, director of Norwich-based Investing Ethically. While for all intents a calm character there is a passion to make the world a better place that is roaring beneath the surface.

Hardman says she and fellow directors Phil Cockrell and Andy Hockaday are only in financial services to make a difference and are not afraid to advise on niche or risky investments, if they fit a client’s ethical views.

LISA HARDMAN CV

  • 2003-present Investing Ethically, director/IFA
  • 1994-2002 Norfolk Education and Action for Development, education officer

PROFESSIONAL MEMBERSHIPS/QUALIFICATIONS

  • DipFFS
  • CF8 Long-term Care
  • R08 Pensions Update

Murky waters

Unafraid they might be, but some clients’ investments have been hit by liquidity problems in recent years.

A Brazilian forestry investment, the Quadris Environmental fund, has been suspended due to liquidity issues since 2011. Hardman says the advisers made sure such investments only ever filled a small percentage of portfolios, so any amounts lost or suspended would be minor.

She adds that clients have never complained over any investments, risky or otherwise, because the advisers always highlight the risks clearly in advance.

‘We do a lot of social impact investments that other advisers aren’t willing to do,’ says Hardman. ‘Structures can be complex and untested. But such investments have to start somewhere to become mainstream. So we explain to clients that they must be able to write the money off.

‘If they are prepared to lose money because they believe in it, it doesn’t make it a bad idea. We have to help them invest in it. Things will never change if we don’t try.’

Delving deeper

Scuba diving enthusiast Hardman says the success of Investing Ethically, which has £110 million in funds under advice, comes from deep-dive research into client needs and motivations, and into products that can match those needs.

Alan Kirkham founded the company in 2000 and based it on the business principles of honesty, transparency and integrity drawn from his Quaker religious views. ‘Quakers also make decisions by consensus,’ says Hardman. ‘The idea is to keep talking until you reach agreement. It means we are all responsible because we all agree on what we’re doing.

‘That also means listening to the client rather than just presenting what they need. We encourage them to keep asking questions until they are satisfied that they understand what they need to.’

Kirkham retired in 2012 and, while 10% of clients are still practising Quakers, none of the staff are now. Hardman was brought up according to Lutheran Church values in Denmark, where she lived until coming to the UK to study and decided to stay.

‘My background has taught me much of our work is about custodianship – making the world sustainable for future generations – and caring for our neighbours,’ she says. ‘We like the philosophy that Alan started. Quakers are interesting people and engaged with the world.’

FEES

In 2013, Investing Ethically updated its service proposition and segmented its client base to tailor service and fees more accurately.

The firm also raised its charges in 2013 to bolster its own financial sustainability and introduced a tiered structure for fairness.

Ongoing fees rose from 0.5% to 0.75% for clients with assets up to £150,000; 0.65% for £150,000 to £350,000; and are 0.5% above that.

Initial charges are £175 an hour plus a 1% implementation fee. Alternatively they can come from the product at 3% on the first £100,000, 2% on the next £150,000, 1.5% on the next £250,000, and 0.5% above that.

Ongoing clients receive all the firm’s work on investment research and maintaining portfolios; one or two annual meetings; access to advisers in office hours; an in-house newsletter; and other communications such as news updates and tweets.

Given all the work involved in ethical screening, the average total expense ratio is 1.6%.

Breathing in new life

Kirkham recruited Hardman and Cockrell as trainee advisers in the early days, and Hockaday in 2006, with a view to taking over his clients. In 2012, the three advisers, and director and office manager Tracey Miles, bought the firm from Kirkham.

‘We have built on Alan’s philosophy of getting to know client needs as well as possible by developing the ongoing service with more regular reviews, and building professionalism through qualifications,’ says Hardman. All three advisers are set to become chartered this year.

‘Also, we developed it to offer a more holistic service, including long-term care, retirement planning, estate planning, equity release, and legal matters such as powers of attorney – so we started getting exams in these areas,’ she says. ‘Clients have more information at their fingertips now, so advisers need to be ahead of the game.’

Making waves

In 2013, Investing Ethically segmented its client base and updated its service proposition and fees (see box below).

Last year, it updated its website and launched a rebrand to make it more user-friendly and to make the graphics easier to reproduce. A major part of the firm’s marketing strategy involves affinity partnerships with charities. The charities deliver marketing cards to their donors on behalf of Investing Ethically.

‘Potential clients can return that card to us asking for a brochure or a contact,’ says Hardman. ‘In return, we offer 10% of any initial fees to the charity. That has worked well for all parties. It’s a good return on investment, with not much risk for either side, and we like the clients we get from it.’

The firm also gets involved with the charities in other ways, sponsoring the Freedom from Torture Doctors’ Orchestra Concert at the Albert Hall, and has around 20 charities as clients.

Advertising in Quaker magazine The Friend has been one of the firm’s best sources of new clients. The firm is also a member of the Ethical Investment Association and UK Sustainable Investment and Finance Association. Hardman says it would like to be more involved with those organisations in future.

Colour-coded bespoke model offers ethical for everyone

Investing Ethically offers bespoke portfolios and screens funds in-house. It uses the Dynamic Planner risk profiler and asset allocation model as a guide.

Two years ago, it also launched six in-house model portfolios. Three are so-called dark green, which take a stricter ethical approach, and three are light green, which take a softer view.

‘Dark green portfolios have no commercial property because you don’t know who the tenants in the properties are,’ says Hardman. ‘They also have more renewables, wind power and water-related investments, which can be more volatile. However, the light and dark have performed similarly.’

Most clients are still in bespoke portfolios because they need to match specific views. But it offers models appropriate for anyone who does not want their money to do any harm generally; and for those for whom bespoke is too expensive.

‘Issues come and go,’ says Hardman. ‘Genetically modified crops used to be a big one but now some clients think it might be a solution to world food shortages. Given that Quakers also tend to be pacifists, they often don’t invest in the arms trade. Some clients even say they can’t invest in government gilts because of Ministry of Defence spending. Others are more pragmatic.

‘The Quaker national body decided to get out of fossil fuels and encouraged individual investors to do that. But again, others are more pragmatic. So we have discussed that a lot recently.’

You could use software to choose some of your own ethical funds, she adds. But that would not reflect the many complex decisions advisers help clients make, such as how to assess the benefits of positive action.

The firm’s low-to-medium risk portfolio has outperformed the FTSE All Share index in each of the last five calendar years, except 2016 when it suffered from having no exposure to oil companies while the commodities market rebounded (see graph below).

Hardman says this five-year outperformance busts the myth that ethical funds deliver below par returns. She believes firmly that part of this success is due to invested companies’ sustainability criteria and the fact that they ‘care for their people and supply chains, which makes them more likely to be more profitable in the long run.’

In January, Investing Ethically reduced its allocation to UK equities by 2% and replaced it with global equities. ‘After Brexit and subsequent rises in the UK stock market, we felt there was more potential in global rather than UK,’ says Hardman.

She is concerned about US president Donald Trump’s pledge to take the US out of the Paris Agreement (an agreement in the United Nations Framework Convention on Climate Change to cut greenhouse gas emissions, starting in the year 2020).

‘It is not good for the environment,’ says Hardman. ‘But on the positive side, large companies are bypassing him on that. They have already signed up to the agreement and are fulfilling their environmental targets already.’

Steady ascent

The firm has experienced steady, organic growth over the past five years and increased profitability due to rising markets, lots of new client referrals and lower costs after Kirkham’s retirement, says Hardman.

Directors are remunerated via salary and dividends. Staff receive a salary, profit-related bonuses, training and exam fees. Three years ago, the firm took on an apprentice, Charlotte Bailey, who is training towards becoming a paraplanner. ‘We wanted to take on a second but struggled to find the right candidate,’ says Hardman.

The firm does not set numerical targets but aims to grow in a controlled, organic fashion, and it moved into a more spacious office in February to accommodate that.

‘We don’t plan to sell because we fear client relationships would not be looked after,’ says Hardman. ‘We want to stay for the opportunities, subject matter, flexibility, control and freedom. We may develop our own advisers for succession.’

Driven diver

Hardman offers her pearls of wisdom on BBC Radio Norfolk, which is good for local brand awareness, she says. ‘Part of doing radio is about financial education, which the country needs more of and advisers could be good at providing,’ she says.

She is also passionate about the need for more women in financial planning. ‘Professional bodies need to do more to encourage that,’ says Hardman. ‘I don’t understand why we have so many female paraplanners who have all the technical ability but don’t go on to advise. They are good at talking to people. I can only think it’s a confidence issue. So women must push for it to happen too. Even now, you still see too many young male planners compared to female planners. New Model Adviser® should feature more women.’

All three advisers are studying for exams, but normally the work/life balance is better, says Hardman, and only two of the firm’s seven staff work full time.

‘We will have corporate chartered status soon; and we have good staff and flexible working,’ she says. ‘We just need a few more support staff. It feels as if we have moved forward and are in a good place to grow further.’

FIVE TOP TIPS

  1. Put your client at the heart of the business.
  2. Keep your promises.
  3. Invest in yourself, your business and your staff.
  4. Be open to change and new ideas.
  5. Believe in what you do.

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