Do you want a wealthy retirement without worrying about money? Welcome to “Retire in Texas”, where you will discover how to enjoy your faith, your family, and your freedom in the State of Texas—and, now, here's your host financial advisor, author, and all-around good Texan, Darryl Lyons.
Darryl: Hey, this is Darryl Lyons, CEO and CEO and co-founder of PAX Financial Group, and you're listening to Retire in Texas. Thanks for tuning in.
Let me give you the disclosure. This information is general in nature only. It's not intended to provide specific investment, tax or legal advice. Visit PAXFinancialGroup.com for more information, and if you need to meet with an advisor for 15 minutes over the phone, you just text the word “Texas” to the number 74868. That's “Texas” to 74868. [01:00.7]
Today's show, we're going to go through a top-five list, much like what I did to start out this whole podcasting program, and I'm going to do the same thing in a top-five format. There'll be no guests today, and this is a response for a demand for me to go back to some top-five list and so I wanted to do that, and I'm going to start out with an area that I’ve been spending a lot of time researching and that's in the biblically-responsible investing space. This or the title of this show is the “Top-Five Reasons You Should Consider Biblically-Responsible Investing as Part of Your Portfolio”, and I'm going to give you those top-five reasons in a top-five countdown format.
I want to move relatively quickly to cover a lot of content in a short amount of time, so Number 5, the Number 5 reason that you should consider biblically-responsible investing within your overall portfolio is you get to cheer on companies that you believe in. I think the idea about investing is kind of lost on us. You actually own a company. You own a company that's making a product or service. [02:00.8]
I know we know that, but we don't think about it that much, and when you own a company and you have ownership of a company, you want to be able to cheer that company's success on. It makes it very hard to cheer on a company that's doing something you don't believe in. For example, suppose that you look inside of your portfolio of stocks, bonds, mutual funds, and your 401(k), and you find that you own a lot of tobacco companies.
Now, you might have been very pleased with returns over the last 12 years, but maybe you sit there and you look at that and you go, “Okay, maybe I’ve made,” I'm going to make up a number, “12% last year, but should I be happy with that knowing that I profited from tobacco?” Maybe you're fine, maybe you don't have any issues with tobacco. But for those that do have issues with tobacco, you've got to have to deal with this conflict in your head. We call this cognitive dissonance, two competing conflicting thoughts, and tobacco in and of itself may not have a moral issue to you, but if you dig deeper, which is kind of what I do and many of us in the business do, you might find some of those tobacco companies are exploiting other people. [03:02.8]
It happened years ago. We know in America that tobacco was being promoted to a lot of teens and, as a result, many adults today are addicted because of that promotion, those promotional efforts by a camel with a cigarette, and that's happening today as well, but maybe not so much in the U.S. because we've kind of curtailed that. But if we look into India, for example, there's still some of that abusive marketing to children to smoke.
I mean, for example, 90% of the displays in one study of tobacco were right next to candy. They were right next to sweets and they were right next to toys. Now, there's some intentionality behind that, to get children addicted to tobacco, and from a biblical perspective, if you're addicted to something, you don't really have freedom.
So, I think that we take inventory of the companies that we are working with, and we're all busy, we can't do that, but biblically-responsible investing, a part of what you're doing when you do biblically-responsible investing is you're hiring firms to exclude companies that behave that way. [04:13.8]
If we were to look at an investment firm in your portfolio, we would partner with other firms to exclude companies that exploit children with tobacco or with alcohol, and it's mainly the exploitation where it robs people of their freedom.
I mean, let's take another example. Most Christians don't believe in abortion. The companies that recently adopted very robust travel programs for people to get an abortion across state lines, I would contest that Christians wouldn't want the profits of companies that they own as shareholders to be going towards those types of initiatives, and so how do you reconcile this? [04:59.7]
Again, that's where the biblically-responsible vesting universe has-- They have managers that remove companies that behave that way, though the biblically-responsible management universe will also screen out companies that mistreat people throughout the entire supply chain, including employees. Including employees. There's a great resource called Glassdoor and Glassdoor is a tool anyone can use that will identify if a company is mistreating or treating well their employees, if they're paying them well. It's an anonymous, well-done resource available to the public that employees use to discuss the quality of life when working with an employer.
Again, thinking about a biblically-responsible investing platform, a manager, advisor that adopts that mandate, a biblically-responsible investing, if a company is mistreating their employees, this is antithetical to a biblical worldview and they would be screened out. They would not be allowed. [06:16.8]
Disney would be screened out of a portfolio of investments for obvious reasons. You can Google that if you don't know. But it's just a matter of just aligning your values with your faith. It's aligning your values with your investments and it's hard to do, and that's why this idea of biblically-responsible investing is gaining so much traction.
I mean, can imagine if Dave Ramsey looked in his portfolio and he owned Visa, that was his Number 1 holding? I would think that Dave Ramsey would say, “This is a real conflict. I cannot make money off Visa. I refuse to.” That's the same thing Christians are doing across the country. They're looking at their portfolios and saying, “I refuse to invest in companies that are behaving antithetical to the biblical worldview.” [07:07.6]
Number 4, it's just good business. I think that the Number 4 reason why you should consider biblically-responsible investing in your portfolio, I think when people own companies that are managed in a way that's aligned with a biblical worldview, I think you're going to find that those businesses are pretty successful overall.
If we look at it, the idea of just delighting your customers and just loving your neighbor and loving your customers, it’s really going to result in higher retention. It's going to result in repeat business. If you invest in your local community because you sincerely care about widows and orphans, that's going to improve your brand as a company. If you take care of your employees, like we talked about just a minute ago with Glassdoor, they're going to stay around and reduce employee turnover. [08:01.2]
There was one company in 2013, Family Dollar— and they might have cleaned up their act, but this is the kind of stuff that we don't want to own if we're looking at biblically-responsible investing. All their managers sued the company, because what they did was they slapped a new title on these employees’ business cards and called them managers so that they could move them from an hourly rate where they were getting overtime to a salary. Now they're going to work 60 hours a week and you're going to have to mop the floors and stack shelves. No pay increase, just change you from hourly and stop paying overtime. Salary, and we'll get more productivity. That mistreatment is not what we're looking for in biblically-responsible investing—or Sears.
Sears has been known, again, they could have cleaned this up because I don't have the latest information on Sears, but at a time, it was public that they mistreated people in their supply chain, including in Bangladesh, a factory that killed 112 people when it went up in flames. This factory was really a sweatshop. [09:14.3]
In my opinion … actually, it's more than my opinion. Let me share this with you. There's research coming out that says, and it's not as robust of research that I would because the sample size isn't that big, but I’ve seen it with my own eyes, that CEOs that are Christians have a better track record of performance than non-Christians.
Now, that's a pretty big claim, but it makes sense. If they're honoring and adhering to the Christian principles of loving your neighbor and, most importantly, humility, it makes sense that their business is going to thrive. Their employees are going to be happy, less turnover. Customers are going to repeat. [10:01.0]
I’ve seen this anecdotally as being involved with a group called C12, which is not the publicly traded businesses, but rather small businesses where there has been a robust and profound return on investment from these companies that are led by Christian CEOs and business leaders, and they're doing massive, massive things in the marketplace. You can look that group up. There's not a way to invest in the C12 companies, but we are seeing an incredible return and growth from these groups of business owners.
Okay, Number 3. The Number 5 reason to invest in biblically-responsible investing, you get to root for what you own. Number 4, it's just good business, and Number 3, there's no loss in performance. For years, I was concerned about investing in the biblically-responsible investing space because I considered there was some type of a drop off in performance. [10:59.4]
In other words, if you wanted to own biblically-responsible investing, you had to exclude companies that were profitable. Let's say, alcohol companies, tobacco companies—we referenced those—you'd have to take them out of your portfolio and you'd be left with companies that just weren't making money.
So, I had a real conflict of interest here, because, as a fiduciary, I could not put my client's money in something that was underperforming, even if it aligned with my convictions or their convictions, because, as a fiduciary, I had a responsibility, what we would consider optimizing somebody's returns. What that means is, really, maximizing the returns with the right amount of risk, and so anything that I did to reduce returns would be a violation of my fiduciary responsibility. [11:57.2]
That has a lot of gray in it from a legal perspective, but the standard that I held myself to was I did not want to do biblically-responsible investing for about 10 years because I felt there was a drop off in performance, and then I did some research and a lot of research.
Although the evidence is not a hundred percent conclusive, there has been some wonderful research that's come out from the Christian Investment Forum, and I’ll put a link in the show notes, that shows in the specific large cap space, which are large U.S. companies, that in the sample that they provide, there has been actually not a drop off in performance, but actually outperformance—actually outperformance—by investing in biblically-responsible type of funds versus secular. There's been an outperformance. [12:57.2]
Now, I just mentioned that investing in companies is just a good idea, in general, because people who are leading with integrity should, theoretically, do well, but here in point Number 3, what I'm making is that we've actually seen some evidence of outperformance in the large cap investment space. Of course, I can be promissory. I can't say that'll happen in the future, of course, not, but there's been enough studies, and I’ll put another study in the show notes, to show that, in the general social investing space, there's not a drop off in performance.
In fact, I would say that most research reports can conclude that there's not a material drop off in performance across the board, and if anything, there's a reduction in risk. Okay, that's a little nerdy, but the main point I want you to know is that so far in my experience and the research shows that there's not a drop off in performance.
Okay, Number 2, the second reason why you should consider biblically-responsible investing—because costs have come down. The costs, over the years, have come down considerably. If I were to look back 10 or 15 years ago, there was nearly 2% embedded, and you didn't see it as a consumer, but I saw it as financial advisor I'd actually read those prospectuses. [14:14.3]
If you looked in the prospectuses, you saw operating cost and sub-advisory fees and trading fees, and all this stuff, and I could do the math real quick and say 2%, and that's a big hurdle to overcome, especially in a marketplace where you're getting 6% or 7%, and so for clients netting 4%, this is just not going to work, so I could not consider, in good conscience, biblically-responsible investing.
Then, in recent years, there's been a growing trend of reducing internal cost across the industry. It's been wonderful for the consumer. I don't think the consumer really appreciates this. I don't think any of us really appreciate this, but we're seeing really, really low-cost access to biblically-responsible investing. [14:58.5]
Even … so you have a mutual fund, which is a basket of stocks with thousands of people, and then you have its cousin called an exchange-traded fund, very similar. Beyond the scope of this show. Maybe in the next show I can explain the difference. But the exchange traded funds have a really low cost and you can actually get a biblically-responsible investing ETF, exchange-traded funds, so you can considerably reduce the cost and that makes me feel good. That makes me, like my friend said, happy like a peacock. I don't know why he says that, but anyways.
Look, we always want to look for net performance. I'm okay if I pay a little bit more costs or even my clients pay more in costs, if the expectation in the history shows there's been outperformance, but, overall, it's trending in the right direction, so that that's the Number 2 reason to own biblically-responsible investing, because the costs have come down. [15:51.9]
The Number 1 reason to consider biblically-responsible investing in your overall portfolio is advocacy. Advocacy. We are seeing an incredible trend in advocacy for biblically-responsible investing. It is insane and it is something that you've got to be aware of. Right now, there's about 22 trillion in the hands of BlackRock, State Street and Vanguard. They are the most influential in corporate America. What they do is they take your money and invest it, and we've done it for years with these companies, and because they have your money, they have a legal right to be your representative to corporate America.
For example, let's say BlackRock owns your fund. You own Apple with hundreds of millions of people. I say hundreds of millions. Millions of people. Hundreds of millions of dollars. They can go to Apple and dictate, really, whatever they want. “I want you to change the logo to an orange,” right? I mean, they could say whatever they want and it's mostly what they're saying, and BlackRock has been very clear about this—Larry Fink, the CEO, has been very clear about this—it's mostly in the climate change agenda. A biblically-responsible mandate believes that we're stewards of the Earth. The problem is the agenda is going beyond practicality. [17:12.0]
BlackRock is using their agenda to influence corporate America and this has really become a problem over several years. There's legislation now that's trying to remove that influence because there's three investment firms across the world that are influencing corporate America. But that's changing now, and it's changing because you and many of us have decided to put our money with biblically-responsible investing managers who are now using their voice to get in front of Apple, Google.
I just got off the phone about 10 minutes ago with a manager and he said that they wrote a paper to ExxonMobil and they've got a response back from the CEO within 24 hours, because they disagreed with something that they were doing. The idea for Christians is we've kind of sat on our hands in that advocacy space and we haven't really done much, and I think it's time to start having our voice heard. [18:10.8]
The main thing that we want to do is make sure corporate America understands that when they make decisions, there's a group of people out there that will be impacted and they have influence and, frankly, 55% of the world's wealth. The Christians have that, and so our voice is going to be heard in corporate America, the more we do biblically-responsible investing.
Those are our top-five reasons to do biblically-responsible investing.
Number 5: you get to root on companies you believe in.
Number 4: it's just good business treating people well.
Number 3: there's no drop off in performance.
Number 2: the costs have come down over the years.
Number 1: your voice is heard in corporate America.
So, there you have it, the top-five reasons you should consider biblically-responsible investing in your portfolio. If you want to speak to an advisor to talk about that further, text the word “Texas” to the number 74868. That's “Texas” to 74868. [19:14.5]
I appreciate you listening to the entire show, and I want to remind you, you think different when you think long term. Have a great day.
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