Natural Investments became the first financial firm in the U.S. to be owned by a perpetual purpose trust in 2023. For nearly 40 years, the owners were individuals. Our founder, Jack Brill, started as a socially responsible investment advisor in 1985. He and his son Hal ran a thriving father-son business until Michael Kramer joined in 2000, and Natural Investments was formed. Christopher Peck joined in 2004, and the firm was owned equally by Hal, Michael, and Christopher from 2007 to 2017. During that time, the firm became one of the first B Corps in the world, a certification proving how we walked our talk as a green and responsible business.
Nevertheless, we were a company of white men for many years, so in 2009 we started adding women and people of color to the team, and our ownership remained all male until Wealth Advisor Malaika Maphalala became one of the six partners in 2017.
Since then, Natural Investments has grown to a firm of 23 financial advisors and successfully achieved a female majority with 24% advisors of color. Our plan had always been to gradually sell ownership stakes to younger advisors, but our unanticipated growth in assets under management brought a much higher company valuation, so buying shares of the firm became prohibitively expensive.
An alternative ownership model for us emerged when we hired consultants to explore various forms of ownership. Having settled on the perpetual purpose trust in 2022, we spent all of 2023 making the transition, so the company is no longer owned by six individuals but by the Natural Investments Purpose Trust. We also became a Public Benefit LLC simultaneously, which means we are legally able to consider social and environmental considerations without violating our fiduciary duty to act in the best interests of the company.
The transition from decades of individual ownership to a trust accomplished our longstanding goals:
- Establish a democratically elected governance structure and a pathway for anyone in the firm to be a strategic decision-maker, decoupling governance from economic rights while including more women and people of color in leadership roles without their having to incur debt to lead the company;
- Enable partners to sell their ownership stake gradually and at a price that would not cause financial hardship to the firm and assure our advisors can continue to assume fiduciary responsibility for client assets;
- Formalize sharing economic rewards equitably among all advisors and assuring that profits serve our purpose; and
- Assure the firm would not face financial pressure to change, merge, or sell itself, thereby preserving our unique company purpose and culture and our role as an innovator in the industry while maintaining a decentralized, self-governing cooperative business model that provides advisors with freedom and interdependence.
The stated objectives of the Natural Investments Purpose Trust are:
- Sustain our fiduciary duty to clients
- Ensure advisor autonomy and encourage collaboration for the good of the whole firm
- Aim for a budget that reasonably balances the importance of the firm’s operational reserves, expenditures that preserve and enhance the firm’s organizational viability, pool of profit distribution, and expenditures that bring value to advisors collectively, as well as to clients, communities, society at large and the environment
- Provide infrastructure and ongoing regulatory, legal, and administrative services that bring value to advisors
- Promote an inclusive sharing of power in firmwide decision-making
- Share economic rewards equitably among all advisors, regardless of tenure or the size of assets under management
- Operate responsibly and equitably for the benefit of advisors, staff, clients, communities, society, and the environment
How does the Natural Investments Purpose Trust operate?
Through the sale of the company to a trust that its advisors designed and established, the Natural Investments Purpose Trust codified its long-held practices, priorities and internalized style for how it operates in a Trust Agreement. This assures that when the founders and current leaders shift out of these roles, the company’s purpose and values will be maintained in perpetuity, creating a vital sense of stability and security for all.
An advisor-elected Trust Stewardship Committee, where each Trust Steward serves a 3-year term and has an equal vote, has democratized firm governance and reduced the power long-held by partners. The composition of the first Trust Stewardship Committee is 43% female and 29% people of color.
Bringing in new people as leaders also serves to mentor newer people who can take over the firm’s direction as veteran former partners transition out. This slow, deliberate succession process has been intentionally designed to be smooth and to assure that people who are steeped in the company’s values and management style will oversee the company similarly for years to come. To those who’ve led the firm for decades, this graceful transition was far more important than maximizing personal profit, and we opted for an approach that would preserve our autonomy and identity while maintaining internal financial control.
Natural Investments borrowed a small percentage of money as a down payment on the sale from RSF Social Finance, an experienced impact community development financial institution. But the former owners are largely financing the transaction over time through both promissory notes and earnout, assuming the possible downside risk in so doing. This type of transaction may be unusual within the financial industry, but it reflects our long-held belief in doing what’s best for the company.
Trust Stewards meet monthly and largely provide an oversight role, delegating day-to-day operations to Managers. Trust Stewards are responsible for budgeting and all matters of company finances, policy development and enforcement, strategic planning, professional development, culture-building, profit-sharing determination, and public leadership initiatives.
A Trust Enforcer and an Administrative Trustee complement the Trust Stewardship Committee. The Trust Enforcer, in our case a retired Natural Investments financial advisor, acts independently to preserve the purpose and can hold the Trust Stewardship Committee legally accountable for failure to do so. The Administrative Trustee is essentially a Delaware trust company that legally holds the trust and its assets and assures its legal standing in its state of incorporation.
Environmental, social, and governance (ESG) criteria have long been how socially responsible and impact investors evaluate their investments. While the “E” and the “S” receive much of the focus both within companies and among investors, the “G” is an essential aspect of corporate responsibility, for it is the realm where the rights, influence, power, wages, management, profit-sharing, and ownership intersect.
People may ask what diversity in ownership and management has to do with making money. Aside from the questionable underlying presumption that a company exists solely for the purpose of making money, the simple truth is that diversity is a strategy for making more of it.
As McKinsey put it in its December 2023 report, “Diversity Matters Even More: The Case for Holistic Impact”:
“Companies with greater diversity on their boards of directors are more likely to outperform financially. This correlation is statistically significant for both gender and ethnicity. Companies in the top quartile for board-gender diversity are 27 percent more likely to outperform financially than those in the bottom quartile.”
It’s been 40 years since Jack started us on this journey, and we know he’s smiling upon us from above for carrying his heartfelt intent into our new business structure. We have drawn caring, conscientious, competent, and committed people to Natural Investments, and they are now actively guiding us forward with different backgrounds, new ideas, enthusiasm, and a desire to maintain our firm’s unique identity and culture. In being owned by a purpose, Natural Investments is well-positioned for its future and continues to pioneer ways that capitalism can be based on an ethic of care for people and the planet.
