Wealth management is built on the concept of putting clients’ money to work, but one firm is taking this adage a step further and putting clients’ money to work in the world as well as in their portfolios.
‘You can vote every single day with your money,’ says Tribe Impact Capital co-founder Amy Clarke, who describes herself as an ‘impact bunny’, having worked in the sector for most of her career.
‘There is a very inconvenient misconception in the marketplace with consumers, with us all, that we think the only power we have comes once every four years when there is a general election and then we have a piece of paper and that’s our voice.
‘It is about moving away from the singular notion of wealth being financial. Philanthropy is your wealth in the same way that your mainstream investments are. What you need to do is knit the two together and create a really compelling story where your values run throughout every single asset.’
Eighteen months ago Clarke, managing partner at LGT Vestra David Scott, and fellow Tribe co-founder James Lawson, met to discuss how wealth management was failing. They believe the industry has not kept pace with a growing demand to use capital to leverage positive change.
‘We talked about the rise of the impact investor and how wealth management as a mainstream industry wasn’t responding to that and embracing it, as something that potentially would become the new norm,’ says Clarke.
The three decided to use the United Nations’ (UN) Sustainable Development Goals (SDGs) – which promote sustainable development through a set of 17 aspirational targets – as the ethical underpinning of a new breed of wealth manager.
Clarke says: ‘At that stage, we knew we were going to do it using the UN Sustainable Development Goals – given at that stage they had not yet been formally adopted but we knew they were coming – with all the knowledge of how inclusive and comprehensive they were. It gave us an opportunity to say we can use these as a window through which we can look at the investment universe.
‘We used the SDGs as a tool through which we could engage clients to help them really understand what it is all about and very swiftly got to a position of knowing what Tribe’s investment thesis would be, at which stage we went in to see the FCA.’
The three were apparently not alone in seeing the potential of the idea with the Financial Conduct Authority (FCA) offering to hot-house the business in its programme for mould-breaking ventures.
‘We had a conversation with the FCA, where we were made aware of the Innovation Hub, and that we were an incredibly interesting story from their point of view,’ says Clarke.
‘Given what we were doing, they suggested it would not be inconceivable to consider that when we go through authorisation that we should be put in the Innovation Hub to start with – because, by our very nature, we would be disruptive.’
One of the blessings of being included in the FCA’s hub – which is one of a number of the regulator’s projects to foster risk-taking within the framework of its rules – was a fast-tracked authorisation, allowing the firm to reach market in just eight weeks.
During this period Tribe attracted its two other co-founders, Harry Catchpole and Lizzie Scott.
‘Harry Catchpole comes from the blue-ribbon wealth world of HSBC private bank and JP Morgan Private banking, with a client base of young, informed individuals who are often quizzing him about impact, and so he recognised the potential in that kind of audience,’ says Lawson.
Scott previously worked as a marketing manager for LGT Vestra prior to the acquisition of a majority stake in the business by international private bank LGT Group. Lawson explains that LGT Vestra is a partner in the firm, and provides Tribe Impact with its custody and execution platform.
He added that LGT Vestra supplies macro investment views and strategic asset allocation.
‘So all of the partners come from slightly different backgrounds all with a wealth and impact thread that runs through us’ he says.
He adds: ‘I had spent 15 to 20 years listening to high net worth individuals talking about their wealth management and what they wanted. I realised there is a gap between what they want and what they were getting and what motivated them as investors.’
‘We start from the client’s point of view. What is important to you as an individual and how do we reflect what you think is important and good in your portfolio.’
Having a portfolio that is linked directly to the values of the investor is a way of sidestepping the wealth/philanthropy divide described by Clarke.
She highlights that many investors who are interested in stopping cancer, eradicating poverty or limiting climate change have portfolios that are unintentionally undercutting their philanthropic work by funding companies that are exacerbating the problem.
‘You are effectively negating any impact you are having with your philanthropy,’ she points out.
Lawson sees this client-embedded approach as something of a departure from traditional ethical investing. ‘Historically, a lot of ethical investing has been about excluding a list of bad things – which has served a purpose, and does still serve a purpose.
‘But we are taking a slightly different view, which is rather than excluding bad things, why don’t we start from first principles and look at what are the values you want to see reflected in your portfolio.
‘Start off with the good bits: the first good things from a client’s perspective in terms of their personal values, but also what is good from an investment point of view. Where are the sensible businesses that are attractive investment opportunities? We can fuse the two together to create these portfolios for our clients.’
Lawson is unsurprisingly looking to a younger generation of the wealthy as potential clients.
‘The younger generation of wealth that are coming through are challenging preconceived notion of what wealth means and what is possible to do with it,’ says Lawson.
Another group the fledgling business has been seeing a large level of interest from is the tech sector.
‘If you ask technology entrepreneurs why they set up their business in the first place it tends to be because they wanted to solve a problem. Once they have been successful and have monetised that business there is then the question of now I’ve got this wealth what shall I do? Can I use that wealth to solve things too?’
Lawson says Tribe Impact Capital’s early groups of clients fit into one or more of those categories.