Faith Based Investing with Mike Skillman

Unknown Speaker 0:00
Come on

george grombacher 0:12
let’s go. This is George G. And the time is right. Welcome. Today’s guests drunk a powerful Mexico and Mike, are you ready to do this? A good morning, George. Absolutely. Let’s do it. Let’s do it. Mike is the CEO of faith Investor Services. He’s an accomplished leader with over 30 years in the investment management space. He’s a speaker, thought leader, Mike excited to have you on. Tell us a little about your personal lives more about your work and why you do what you do. Well, George, thanks for having me today. It’s great to be with you. I guess, you know, personal life. First of all, I’m a husband been blessed to be married my wife coming up on 34 years. Nice, proud father of three beautiful daughters. So first and foremost, that really is a big part of who I am. But I guess a little bit about me, I’m an active person. sitting still doesn’t do too well for me. So I love the outdoors. So, you know, I work out and in the winter ski golf, I’m actually a hunter.

Mike Skillman 1:10
I kind of laugh my latest, what we call our COVID obsession, like a lot of people was to find the game of pickleball. So now we’re a bit obsessed with with that as some of our sports activities. So I also, you know, now that we have traveled a lot, the last couple of years, I’m able to spend more time getting involved with my local church and various activities, and I volunteer there regularly. So,

Unknown Speaker 1:34
you know, professionally, what’s nice about what I’m doing now, George is I don’t have to compartmentalize my life quite like I did in the past. You know, I’ve always viewed my professional role was to help people achieve their financial goals. And what that looked like for a long time was helping fortune 500 companies manage their pension funds and achieve their goals for their retirees, which was a great part of my my background, but today at Faith Investor Services, while we’re doing part of that, what I like to say is we’re really about empowering people that make a difference in the world in how they invest their money.

Unknown Speaker 2:10
Nice. I appreciate that. 34 years of marriage. Congratulations. Thank you. And do play mixed doubles with pickleball or is that yeah, we do my wife’s on the injured reserve right now. She had some elbow surgery so

Unknown Speaker 2:24
little dead tennis elbow finally got to our So yes, we do like mixed doubles out yet I you know, play with with the guys as well. So we’re mix it up. Love it. All right. So faith Investor Services, LLC, you spent a great career I don’t know, if you call that with with huge companies that I’m sure that everybody’s aware of and managing pension funds. So big time finance. And now you mentioned you were sort of compartmentalizing things tell us what why faith Investor Services came to be. So as part of our background of my old firm, Cadence capital, not only did we manage, you know, large portfolios for for corporations and foundations, endowments, etc. But we also sub advise mutual funds and later exchange traded funds. And that is really where, where the the trends were going. We started at sub advising funds to really reach individual investors more broadly. And we launched the Pacific global ETF trust, where we were part of a larger insurance company called Pacific life. And that’s where I really gained a lot of experience with exchange traded funds. And part of the reason they’ve grown so much, and you know, this and some of your listeners probably do as well is they’re just a much more tax efficient vehicle for individual investors. So as I looked at what I wanted to do for kind of the last phase of my career, one I wanted to do something that I felt passionately about was making a difference, but how could I align that with something, which is where the is an overused term, I suppose, but where the puck was going, and my business partners, so we used to work together. At my previous firm, we looked at the landscape and said, you know, there’s really a growing

Unknown Speaker 4:14
interest in impact investing broadly. And specifically within Faith Based Investing, a growing area but but not an area that’s served by that many companies. So we saw a niche in a lane that we could drive in that was was going to be growing, where we thought we could make an impact. So our vision was to launch an ETF trust that we would partner with best in class, third party asset managers that would manage faith based portfolios, and we would provide the distribution all of the back office support all the things that investment managers don’t want to deal with having done that for a long time. You know, most portfolio managers just want to focus on managing the money. So, you know, we saw a real interesting opportunity to come into the space and the ETF business and so we launched the company

Unknown Speaker 5:00
Just over a year ago is April 1 last year? Well, you have two funds in the marketplace. So it’s exciting, you know, hopefully, making a big difference going forward from here. Nice. Well, that’s really make sense. And impact investing is

Unknown Speaker 5:15
I really don’t know how long it’s been around. But it does seem to be coming to the forefront as people become more aware of, you know, what I can actually make a difference in the greater world with how I’m choosing to invest my money. Exactly. I like to remind people that faith investing as part of the broader impact investing was actually, you know, the precursor of all things. You know, of course, the big

Unknown Speaker 5:41
label we put on everything now is ESG, environmental, social and governance. But faith investing, I mean, some people point back to, you know, about 270 years ago, John Wesley founded the mess Methodist Church, talked about, you know, how to invest your money. And so a lot of institutions, and the Catholic Church has done this for a long time. We’re really mindful of how they invested their money. So that was really the precursor, of course, we had South Africa free investing, to make an impact on South Africa, which did have a major impact. So I think there’s a lot of good evidence that how you invest your money can change the world. Now, a lot of people really push back on this, George, I know you’ve financial background is they say, Well, look, I’m not willing to sacrifice my financial goals. And I understand that people are fiduciaries for other people’s money, or they have to meet their own financial goals. And the nice thing about Faith Based Investing is we have enough evidence now to show it’s not necessary to sacrifice your financial returns, you really can have both, you know, some of the newer ESG investing, maybe there’s not as much data. But in the faith based arena, we really can say that with confidence, I wouldn’t want to go out on a limb and say you’re going to actually have greater returns than traditional forms of investing. But I think it’s important to know that you can have greater impact while not sacrificing your returns. I appreciate that. So how

Unknown Speaker 7:12
is it easier? And you can tell me that my question is, is is off base? Is it easier to exclude companies from the portfolio or make sure that you add them in?

Unknown Speaker 7:24
No, it’s a very good question, because you know, that

Unknown Speaker 7:28
exclusion is really sometimes viewed almost negatively, like that’s too simplistic of an approach, right. But part of what it means to be a good faith based investor is not profiting from companies that are doing activities or engaged in activities that don’t align with your values. So exclusionary screening is a is a critical part of the process. And so what I like to say is, it’s necessary but not sufficient, you have to start out by excluding companies. And, you know, the original versions have a lot of kind of impact investing, that was the beginning and the end, well, we’re just going to exclude a few companies and go our own way. But it’s also important to look for companies that are making a positive difference. And sometimes that comes down to, you know, when all things are equal to two fundamentally sound companies is going in a deeper dive qualitatively and looking for companies that are making a positive impact. And so that positive view really comes down to more qualitative factors. It’s also about engaging corporate management. I think that’s a big, a big tool that people often overlook. You know, voting proxies is one thing that’s very important. It’s part of the governance process. But also engaging with management and trying to change their behavior through shareholder engagement is really a growing force. You know, our first fund, we partnered with the Knights of Columbus. And for those that don’t know about the knights, they’re the largest fraternal Catholic organization, they’re 140 years old, and they have to nearly 2 million members around the globe. The thing that a lot of people don’t realize is they’re also $100 billion insurance company with a $30 billion dollar asset manager. And I mentioned that because with that kind of clout and credibility, shareholder engagement really means something, right. So they have been very active as an organization and through the efforts to manage portfolios, not only, you know, exclude companies, but this whole notion of engagement is really becoming a much bigger piece of the puzzle. Yeah, it’s, I think that that’s really interesting. I think it’s probably obviously super important to be saying, Okay, here’s the s&p 500 that we would normally be investing large sums of money in but a lot of these companies are not going to pass our screening, we’re going to need to exclude them. But oftentimes, you have a lot of maybe smaller companies that are doing really, really great things and there’s an opportunity

Unknown Speaker 10:00
to look at more of the qualitative things, and we are sort of, I don’t know what stage of the process we’re in, but in the infancy of really holding corporations to a higher level or a greater degree of accountability. So it’s an interesting time. Yeah, I think I think a lot of people viewed the shareholder engagement or governance is, is, is not that important. People voted their proxies, you know, through third party services and felt like they were just checking the box. And that, you know, mindset has really shifted, and it’s become a powerful tool to hold companies to account. And, you know, different folks have different values, there’s a number of ESG investors that really are focused on the E part of that equation. And that’s important. But I think when you look at Faith Based Investing, a lot of it is relative to, you know, the values held by the investors that are, you know, follow a lot on the social as well. So, I think, you know, it’s helpful for companies to, you know, hear from those kinds of investors in the marketplace.

Unknown Speaker 11:02
So the two funds that you have,

Unknown Speaker 11:04
I’m just curious how you mentioned sub managers. So if you could sort of break down, maybe pick one of them and say, okay, within this fund, here’s how it’s sort of broken out so people can better understand how it actually works. You bet. So our goal on the platform is to work with a variety of managers that so we’ll end up having an offering that have different focus by religious denomination as well as investment objectives. So the first two funds that we offered, I mentioned, the first was with the Knights of Columbus, it is a global equity fund with a Catholic values focus. So the Knights of Columbus are managing the portfolio, they have a lot of experience managing both domestic and international equity portfolios. So this is really a blending of those capabilities. And so, you know, the the part of the fund is to really adhere to the US Council of Catholic Bishops, which is the defining doctrine for how the Catholic Church implements their investment screening. So, respect for human life respect for human dignity, and the teachings on the Catholic teachings on war and peace are the three main pillars of that. So when you think of respect for human life, it’s not engaging in companies that are involved in embryonic stem cells research, abortion, respect for humanity, would cover things like adult entertainment, and on the teachings on war and peace, it really it avoids investing in companies that make things like nuclear weapons, it would be sort of indiscriminant you know, weapons of mass destruction. You know, the Catholic Church, right, is the need for defense. So it doesn’t exclude all weapons manufacturers, and coincidentally, a lot of you know, newer ESG approaches I think, really struggled with that last one because they would avoid all weapons manufacturers now they look what’s happening in Ukraine and recognize now people really do have the need to provide for their common defense. So that’s really the main focus of the of our first one, which is the FIS Knights of Columbus global belief ETF and so that the exclusionary screening is kind of what I mentioned initially, but the the knights in through their investment process also do engage with with management, they also do look for companies that are making a positive difference in the world. So it really does when both the, you know, the objective quantitative screening out of companies, but also the qualitative

Unknown Speaker 13:33
focus on companies that are doing good in the world. And our, in our second fund, I know you asked me to focus on one but just to contrast what we’re doing there. This fund is really targeted for the broader Christian community, the biblically responsible investing is a term that you may or may not have heard VRI so this fund is ticker symbol pray and it’s managed by capital insight partners out of Scottsdale, Arizona, and that fund is equity focused, but provides risk management so it does look for stocks from across the globe of all sizes, large, mid and small, but will also raise cash strategically when risk is high. So you know, there’s there’s a few more things that that fund will exclude in the in the alcohol and gaming department, but some of the, you know, things that I mentioned about our first fund with the Knights of Columbus, you know, have some overlap in terms of philosophy as you can imagine. Yeah, well, that’s really make sense.

Unknown Speaker 14:32
So, it’s going to kind of take you back to the idea that money managers are really interested in managing money it’s what they’re really really good at and your experience and the experience of faith Investor Services is on

Unknown Speaker 14:48
is on the I want to say the plumbing of it, how to actually make the thing work, right compliance in the admin just making the thing actually work and so it

Unknown Speaker 15:00
It’s it’s it’s a marriage of Knights of Columbus was already they were already in the asset manager business you mentioned so. So tell me a little bit more about the relationship there. So my partners and I have fortune to know the folks there for a long period of time, some of the key players I’ve known for over 25 years. And so part of it starts with relationship and trust. But on the business front, when you when you look at what they focus on insurance is the big part of their business asset management, a lot of it is for what you and I would call institutional clients, you know, different diocese, different orders, Catholic schools, universities, etc, they’ve been focusing more on investing for individuals when they launched their mutual funds over five years ago. And the idea with the exchange traded funds, and our partnership is that ETFs are really the most democratic vehicle out there, right? You know, it’s so easy for an individual to buy an ETF, they simply go to their brokerage account type in a, you know, four letter ticker symbol, or they can go through their financial advisor. And it’s, it’s, it’s a very tax efficient vehicle, but there’s, there’s nuances to ETFs around capital markets, how you have to manage the process, as well as the distribution that were significantly different that the Knights of Columbus, you know, believed that we could be additive to that. And that’s really our value proposition, other managers as well as we know, that space, and we can take care of the things that they’re either don’t have experience with, or they don’t want to focus on. And our distribution strategy is really digital first. You know, COVID, has brought a lot of people forward and financial services into focusing on digital distribution, but a lot of firms really haven’t gained the expertise yet, and are really pressing in on that. So as a new company, we were able to start there, we didn’t have to convert any, any strategies that we had previously.

Unknown Speaker 16:54
What a benefit right there not having the I don’t want to call it a burden, necessarily, but legacy systems and everything else, which I know are certainly hard for great big financial companies. So exactly. I appreciate that. It’s exciting. Do you have a, how many? How many funds do you see in the future? What what’s what is the future hold? Right? So we know that we can work with a limited number of partners, and there’s no magic answer that is, you know, is it eight strategic partners is it 10. So, we will have a limited number of strategic partners and with third party asset managers that we work with, but then the idea is to have a number of funds with each partner so that we have a broad array of funds by investment objective as well as by for lack of a better term denominational differences, right. So, you know, Baptist investors will we’ll identify more closely with, with a manager that focuses on that, you know, method, et cetera. We’re just

Unknown Speaker 17:53
nondenominational just broad Christian label, like we have with our with our fund pray.

Unknown Speaker 17:59
I love it, that makes all the sense in the world.

Unknown Speaker 18:03
makes all the sense in the world. What’s been what’s been most surprising for you, as you’ve as you’ve because your year and a half, two years in, yeah, just a year in so you know, like any new company, you know, there’s challenges and, and surprises daily. But those were sort of the, the expected unknowns, the the real, unexpected surprise here has just been the warmth, people have embraced what we’re doing, the community of Christian financial advisors is actually much more broad and robust. And a lot of people realize, we became partners with an organization called Kingdom advisors out of Atlanta, which was founded by Ron blue, who many listeners may have heard of being one of the early pioneers and Christian Based Investing. And that organization has nearly 4000 members that are advisors from all walks of firms from wirehouses, to regional firms to smaller RAS. And, you know, one of the most rewarding experience so far is we were down at the annual conference in Orlando in February, and it was, it was incredible one to be around 2000 people after, after COVID When we’re not used to be around that number of people. So that was that was uplifting in and of itself. But to see that many financial advisors from all different life and different firms gathered with sort of a common purpose was really uplifting. And I think, you know, part of what I said and it sounds like a tagline early on is we’re really empowering people to make a difference. And I think a lot of investors of all types, but particularly people of faith, look at what’s happening in the world on many different fronts and are frustrated and they want to make a positive difference. And in the past, they may have said look, I’m going to invest to make all the money I can and then later on, I’ll donate and, you know, do good works, but I think they really see now that investing is part of being a good steward with one

Unknown Speaker 20:00
But you’ve been given and making a difference by either depriving company of capital that with that you disagree with. But I think even more importantly, that issue we talked about a little while ago about that shareholder engagement that you know, how I invest is, is just another lever that I can pull, if you will to make that difference that, you know, perhaps people previously didn’t view that way. Love it?

Unknown Speaker 20:22
Well, Mike, people are ready for that difference making tip.

Unknown Speaker 20:26
So, you know, I’m going to reach back 270 years ago, which which may surprise people but you know, I mentioned John Wesley earlier, and he wrote a sermon called the use of money. And I think it had three plane rules that really apply to what we’re doing. And so I want to encourage people to look that way as well, which, you know, simply stated was gain all you can, and that doesn’t mean through ill gotten means but you know, work hard, you know, work hard, honestly, and, you know, be a be a good citizen and earn wages, but then save all you can and you know, saving and investing is really the piece that we’re focused on. And investing in a way that aligns with your faith is what we want to encourage people to really think about doing if they’re not. And then lastly, give all you can write with being part of part of being good stewards is that we give to others that don’t have so that’s that’s really my my three part piece, I’m going to rely on that reach back to the words of John Wesley and encourage people to look at safe Based Investing if they’re believers. I think it’s important. You know, I would encourage people if they’re not believers, you know, you don’t, I’m not here to tell people they have to believe in God, but believing, believing that they’re not God, and believing in something greater themselves, I think is something that everyone, especially with the way the world is today is important. So I really appreciate you having me on today. And hopefully we’ve given folks a something to think about with how they invest their money. I think that that is great stuff that definitely gets a Cup games gain all you can save all that you can and give all that you can that is 200. And how many years ago he wrote that about 270 years ago, so 70 years ago. Nice. Love it.

Unknown Speaker 22:11
Well, Mike, thank you so much for coming on. Where can people learn more about faith Investor Services?

Unknown Speaker 22:17
Give us the tickers all of it. Yeah, the best place to learn about our what we’re doing in our funds is at www dot faith investor services.com. There’s information on our two funds, ticker symbols, RKO CG, and pray pra y of course, and they can learn more information there. There’s a couple of informational videos, you can follow us on LinkedIn, or Twitter and that’s where you can learn more about us.

Unknown Speaker 22:48
If you enjoyed this as much as I did show like your appreciation and share today’s show with a friend who also appreciates good ideas go to faith investor services.com and you can type directly into your favorite brokerage account tickers Koc, G, and then the second which is pray, that’s a solid one for what y’all are working on.

Unknown Speaker 23:10
They get that thank you. And until next time, keep fighting the good fight. We’re all in this together.

Transcribed by https://otter.ai