Ron Cordes tells about his Next Big Thing after selling AssetMark
The Genworth exec headed to Africa to dig wells after cashing out of AssetMark but realized he could do more with impact funds.
Ron Cordes has been ahead of the curve his whole career. His advisory firm became fee-based in the late 1980s – years ahead of the industry. He formed AssetMark – one of the industry’s first TAMPs – in 1996 and then sold it to Genworth when it had $8 billion of assets In 2006. See: RIA hybrids help Genworth’s wealth management business to stunning growth
Now, at age 51, instead of leaving the industry and making a beeline to the golf course, the co-chairman of Genworth Financial Wealth Management has created an online portal to help connect investors and financial advisors with some of the top-impact funds. Impact funds aim to solve social, economic and environmental problems in the U.S. and abroad while generating financial profit on the investments.
White House meetings
As part of his efforts with ImpactAssets, Cordes is gaining national attention for his efforts. Last September, Cordes spoke at the Clinton Global Initiative explaining his efforts. On June 22, Cordes met at the White House with Chief of Staff William Daley and Melody Barnes, director of the Domestic Policy Council to discuss impact financing.
“Ron Cordes was an early leader in the movement of financial advisors from being product salesmen to fee-based financial advisors,” says Charles “Chip” Roame, managing principal of Tiburon [Calif.] Strategic Advisors. “He’s now taken a lead in another area that of impact investing.”
Cordes says U.S. investors own some $37 trillion of investment capital and believes that if just 1% – $370 billion – were invested in impact funds it could be a “new source of capital that can solve the really big problems.”
RIABiz recently talked to Cordes about his long career, his new venture and the changes he’s seen in the industry.
Q. It seems you’ve always been an early adopter – making changes in the industry before others. What’s your secret?
A. We’ve been lucky. We caught the wave from commissions to fees in the late 1980s. It was really early but we saw where we thought the industry was going. The issue was there was no support for advisors moving from commission to fees. None of those firms existed at the time. In 1991, we launched the first TAMP in the industry. We were first to reach $1 billion in 1995. Then, we founded AssetMark in 1996 and we were the first multi-strategy TAMP where we had seen money managers available.
Q. How did you get involved in impact investing?
A. When we sold the firm to Genworth we created a family foundation. We realized giving money is fairly easy to do, but I was challenged by how you give it away effectively. How do you really have an impact? In a foundation you give away 5% per year, but then everything else is dormant and being invested in traditional stuff. We challenged ourselves to invest 20% in impact investments. Right now, we’re up to 30% – $3 million of the $10 million in assets of the foundation is invested in impact investing.
Q. What was it like when you started to select funds for impact investing?
A. There was no infrastructure to help me find the best funds. There are no data bases available. It was really like the Wild West. I realized this newly emerging space of impact investing was very similar to the fee-based space 20 years ago.
*Q. Why not just invest in Socially Responsible Investing? *
A. Those are important and valuable. But that’s about investing in public companies – good ones and bad ones. That’s more of a shot gun approach. We wanted more of a rifle gun approach. With SRIs the money’s not going directly into a particular issue. Here, the money is going to target a specific problem such as poverty, building charter schools. I want to figure out how to solve the problem. We’re investing directly in these projects which are mostly private debt and equity funds.
Q. Why should advisors care about this?
A. I tell them they should care about it because it’s an emerging industry and those advisors who are early adopters will be able to differentiate themselves in the same ways advisors who moved to fees 20 years ago did. Here’s a cool way to deploy new capital to solve the biggest problems in the world. This gives advisors a chance to differentiate themselves.
Q. But how can advisors push this issue if their clients don’t care?
A. All the surveys we’ve done show individual investors are interested in this. They want to put in at least 3% to 5% and some even want to put in more. These family foundations want to invest a lot of money in these types of projects. Affluent investors like to be able to invest money that aren’t just grants but will be real investments to solve a real problem. Everyone looks at financial advisors as the gatekeepers to this industry. But advisors didn’t have any tools to help them get connected.
Q. Do you think you can convince advisors that these funds can help their do-gooder clients but also produce returns?
A. There’s solid evidence especially in micro-finance that you can produce returns. But it’s not the robust track record we need. The next five years is proving that case. The worse thing we could do is have investors put money in this space and have disappointing returns.
Q. Why is this issue so important to you?
A. When I stepped down from my CEO role at Genworth in 2009 it coincided with my 50th birthday. I didn’t need to do something with financial rewards, but I wanted to have an impact on solving the world’s problems. The fact is if you’re Habitat for Humanity, you don’t want me building houses. I did dig wells in Africa. But I’m hard wired to build financial projects and evangelize where I think the financial industry is going. For me, it’s fun to be able to use all of those skills that can be game changers for the world.
Q. So, what other changes do you see happening in the financial services arena?
A. I do see young people coming in the industry and forming more professional ensemble firms that may not have happened 30 years ago. What’s clearly happening is solo practitioners are aging. One would think that will cause a large ground swell of M&A activity but it’s not happening to the extent [that] people have predicted.
Q. But these older advisors will need to retire soon, right?
A. The older solo advisors… just haven’t gone away. The advisors I talk to are in their 50s and 60s and they realize they can stay in this industry until their 70s – some even into their 80s.They have figured out a way to monetize their business. These people want to stay mentally and physically engaged. This is a business that values and rewards gray hair.
Q. What about the death of the solo advisor that industry leaders have predicted?
A. I think in 10 or 15 years the independent advisor will still be alive and well. I think it’ll be just like 10 years ago when people predicted the death of the advisor – it just won’t happen. The independent solo practitioner will be doing well.
Original post at RIABiz