December 16, 2022

AdviceTech Podcast #17 – Ethos ESG – Transcripts

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Peita Diamantidis
Hello and welcome to the XY AdviceTech Podcast. I’m Peita Diamandtidis and the guest joining me here today to deep dive into the Ethos ESG software actually worked in a bank in a past life is a macro counter. And if you know you know what that means, fair is a founding member and chair of the XY advisor ethics committee and like me is a fan of the intellect and humor of the Mr. Tim Minchin, thank you so much for joining me on the show. Nathan Fradley.

Nathan Fradley
Thanks. I love it.

Peita Diamantidis
Look, we we are used to your dulcet tones on the XY advisor podcast. You’ve been interviewed by a few of the different hosts seven years over the time,

Nathan Fradley
I think are very well maybe the most x y podcast podcast person,

Peita Diamantidis
most valuable player perhaps just the most attended. Most number of minutes. Perfect. All right, well, we need to add some more minutes to that. I’m keen to dive into to the ethos. But first, let’s get to know you through your technology use. What’s your most used emoji? Do you use emojis?

Nathan Fradley
I’m a big emoji person. Really? The laughy face that has the like, droplet of water like yeah, that that gets like burnt out on my phone. Like I’m pretty sure there’s a dent on my keyboard for how often I use that one. Or the one that just has like No, no mouse at all. Yeah, probably alternating between those two emojis. That’s

Peita Diamantidis
a nice, nice, and they are different to the others we hear on so I’m liking it that should your unique Panetta personality shining through. All right, I did my far more difficult question. If you had to delete all but three apps on your smartphone, what would you keep?

Nathan Fradley
That’s funny. You mentioned the macro, the macro Kana before so Chrono meter is my new favorite app nice. And it kind of replaced my fitness power because they got bought and then jacked up their prices and they jumped on this and it it tracks I track all my macros, which is the macronutrients protein, carbs, yep, and fats. It does a really good job of micronutrients. And then it has like custom biometrics. So I check sleep, like mental health for the day. A few other things like water drank, and meditation minutes. And then over time, it creates grasp all of those so you can like customize your own bits and pieces and method out. So that’s probably that’s my most used app on the phone practical through the day. Notes is the other one like standard Samsung notes. I’m all about that. There’s so many notes in my phone. It’s ridiculous. And none of them make any sense. And then and I’m embarrassed to say tick tock ah no, I’m a I’m a tragic tragic on Tik Tok. It’s how I keep up with the with the kids with the kids,

Peita Diamantidis
I’m I will be at some point diving into tick tock but I know myself well enough to know that the minute I do all hell will break loose. So

Nathan Fradley
the algorithm is it’s horrifying. And an occasion that goes off track and you know, when it’s off track, because it takes a test shoot and then just pulls it straight back. But yeah, it’s it’s a it’s a bad place. But also, I learned enormous amount on there. Particularly around different areas of like, gender and sexuality things. Put me in the shoes guys in these category, apparently. So Ryan Yeah, in that quarter. And I’ve learned a huge amounts, which is really, really cool as well. So it has a lot of education. There’s a lot of dopamine button pressing. Yeah.

Peita Diamantidis
And that’s, that’s what’s holding me back. I’ll get there. But I’m just Yeah, no, no, maybe at the end of the year, maybe when I’m on holiday. So I’ll dive into it. So let’s start talking ethos ESG. Let’s go up a bit and just sort of go a bit broad in terms of where it fits in the advice, tech space, you know, what category does that generally fall under? Who you lined up against that sort of thing?

Nathan Fradley
I think only when it came out. There was nothing that did what it did. Yep. So it’s against, I suppose, checklists, right? Non digital checklists. And then a couple of research houses, like responsible returns and that sort of stuff. So it has sort of these two phases. There’s a client facing aspect, and then it has the research and reporting aspect in the backend. Right. Now, ethic advisor is another symbol of a different product. So it’s probably only competitor in Australia. Yeah, in the US. There’s a number of different competitors that are doing similar but different things, but none of them have launched over here.

Peita Diamantidis
Okay, I didn’t I wasn’t aware of that. So they sort of gone a bit further, like further ahead in that sense.

Nathan Fradley
Yeah, they’ve tended to lean into investment management though, which is weird different structures over there. Yeah. Open invests which is a different open investor, the one in Australia. They launched and then JP Morgan ripped them off the shelf and use them internally only so yeah, there’s there’s been a A few that have popped up along the way, but nothing really similar to ours.

Peita Diamantidis
Yeah. Okay. And so broadly, we’re talking like you say there’s so research investment research, even if it’s a very specific type, but then also the client engagement on that sort of values element, which we’ll get to in a second. So when How old is ethos? When When did you kick this off?

Nathan Fradley
We officially launched on the first of July last year. Really? Yeah, feels like longer than that. It started in 2019. that Iran was started. Right. So it was founded by a friend of mine, Luke Wilcox, in the United States background in McKinsey, and impact consulting, I used to do a lot of manual research and data work. Yeah. Built it to work with retail clients. Yep. and discovered that it was supposed to be like a measure your employer’s ratings, measure your own banks, your own investments, all that kind of stuff. Yeah. But realized the financial argument for the app fell more with providers and investment consultants and financial advisors started going down that path. And I got involved in January last year. And we launched in July.

Unknown Speaker
Wow. Okay.

Peita Diamantidis
So very young in that sense. And I guess that sort of makes sense, though, because in terms of the conversation around these things, that’s really young to maybe disappointingly young. But, you know, it hasn’t been around for all that long. So that means that your primary user sort of has evolved over time. So now, I guess we’re talking, you know, advisor paraplanner, those sort of bodies that are the primary user of the tool, is that right?

Nathan Fradley
Yeah, interestingly, so advisors were the original target, demographic, and it’s still a really important part of the business. But we do a lot of work, actually, with investment consulting in SMA providers. Okay. So we’ve actually jumped up the chain a little bit. And so we work with the likes of invest cents, Evergreen, and a few others, like a nova, they will use us at the back end, to help their ethical research along the journey. So, and obviously, still working with advisors. And, you know, the conversations with larger companies as well. larger investment companies have started, they started nine months ago, but, you know, you’ve made eight people that are really happy, and you’ve still got eight more people to make before someone signs off on it. So they’re always a long time to get something worked out. And that’s, you know, we’re talking about platforms and platform as in rap platforms. Yeah, we’re talking about our fund managers. So that level as well, but fundamentally, the app is designed for financial advisors, the reason the others are all taking part is to be where the advice is,

Peita Diamantidis
right? Which makes a lot of sense. And they’ve got to be getting inundated with questions that are all centered around to this, like, it’s, they’ve got to be, because, as advisors, we all are, you know, even in businesses that don’t have this as a particular focus. I am for constantly surprised at who that person is asked not that. It bothers me that they do. But um, it’s never who you expect, know anything. And they know, we don’t want this, but we do want that, you know, wow, you know, this is starting to permeate more. This is becoming not just I mean, everybody talks about millennials and in their focus, it’s, it’s far broader than that. Now, there are many age groups that that want to make sure their money reflects them.

Nathan Fradley
I’d say in my by dollar value, my pre retirees, retirees are, obviously large dollar value, so, but also by customer number, I’d say they’re just as prevalent as millennials.

Peita Diamantidis
And I think that’s an interest that it’s important, we sort of think that because we make so many assumptions about this stuff, and we think it’s all about the next gen. And it just simply isn’t just like we all have 47 recycling bins outside our homes for all the different things we do now, this has all become part of the vernacular. And the way we all do it, you know, so I see this is that’s where this is going to head, I believe this will just be a part of the process, you know, using the sort of lens. So in terms of then advisors, have you interacted much at the licensee level? Or is it really by practice? How’s that going?

Nathan Fradley
A bit of both. So the number of licensees have looked at it and go and yet we’re happy with that. The we’ve gotten to practice levels. So practices that have come on board and said, Yep, this is we’re looking at a solution that both enables us to have the conversation, but then gives us an easy pathway to to answer the conversation. So a lot more practices tend to be getting on board, but some of the larger licensee groups have absolutely already signed off on it maybe for their advices

Peita Diamantidis
Yeah, okay. And I guess that’s always been the challenge with this hasn’t it is we can start a conversation with our clients and we can ask them what they’re interested in or what they want to avoid. But there’s then that barrier of what do I do with that? How do I actually reflect that for them? Particularly without carte blanche just moving money? I think that’s something that it’s not really stick in the long term that we all just shifted in one place, what’s better, is if we can give them insight into where they are now and improve it, you know, like, let’s just tweak it, let’s improve it for you. So that better matches you. So I can see how that is valuable, and probably more sustainable for the whole industry as opposed to all everybody’s needs to be, you know, in that fund or in that, it’s that’s not going to work.

Nathan Fradley
You know, especially I think, as fast as this industry is growing, because the every fund manager under the sun is coming out with some form of, you know, green shirt wearing fund, depending on how green they are, what approach they take, and some of them are doing exactly as they’ve stated, and they’re not trying to be in a super duper, ethical, hardcore impact funds. Yeah, I think there’s so many of them, if you jump, if all your dollars into one thing quickly, and then you’re writing another SOA in 18 months to move your clients and you’re writing on this or that can be quite intense because of that product development. And sometimes just looking and understanding current products and making those little changes. And that’s what we aim to do, you know, be able to see the current product and its its alignment to the clients values, which is done through a questionnaire and then compare that to the other options and go okay, well, by moving this, what is the improvement and the measurable, implied impact? And then from there, do we make this move now? Or do we wait? Or do we move a little bit off it? Is there certain parts that we move now? And parts that we leave behind, depending on the cost and performance as well?

Peita Diamantidis
Yeah, okay. So let’s talk through that. So there’s the client can do this questionnaire. And so that’s really I mean, it’s, it’s another personality questionnaire to the others were already do. And this is about their values, which is great. And that has certain then filters or lens, I guess it then gives the system are you finding, so what layers are you finding people using it? So there’s the data values, and then take a look at what their current portfolio measures against that? Then there’s the end, let’s go and find something that better fits as your next layer. Is that right?

Nathan Fradley
I think that the, I suppose the first part of it is the questionnaire which tries to simplify it down into 10 areas. But then within that, you’ve got different parts of it. So within the gender equality lens, you’ve got things like LGBT, LGBTQ rights, you’ve got things like violence against women, that kind of thing. So there’s a variety of different internal metrics, we’ve got an entire screening process. So we have 70 screens that can be applied. So I know d’alene who runs her own practice, the photo could the AFA, she recently had a case for a couple who wanted to ensure that they’re there they’re in Islamic humble want to make sure that their portfolio aligned with the Sharia. So she was able to use that we have a quick Sherea filter, put that straight over the top of the of the of the current products. And then it has a research tool. So you can either align it to a particular product, you can build your own models, or you can just put the client in and sort by the most aligned, diversified, the most aligned Australian equities, and most of them whatever that might be and built. Right, perfect. And then reporting on that, I think is the most valuable part of this. And what it takes from there is to say, Okay, well, here’s where you currently are. And here’s what you’ve gained, or what you’ve lost. So your clients perspective, that’s great. But then also from a client, it’s simple, it’s visual, it’s colorful, and they can very quickly understand it’s better. For most clients, that’s what they’re looking for. They’re not looking for perfect, they’re looking for better.

Peita Diamantidis
Yeah, and I think that’s probably where advisors probably have gone wrong with this historically, is we’ve all viewed it as a one by 100% or 0%. Game, like it’s either you’re all in, and it’s all going to be wonderful across all possible lenses, or I just don’t do it, which it just is. It’s also not how anything improves anyway. So I love the idea of even, you know, the first step, just letting the clients work out what they care about, let’s just start just do the questionnaire to find out your priorities, because some people never have thought about these things that way. You know, once they once you ask, they’d like, Yeah, I do care about gender equality, I really don’t you know, so I think helping them enunciate that, in in itself is a bit of a gift.

Nathan Fradley
And I think if you’re looking at it, there’s nothing in that list of 10 causes that someone doesn’t care about, right. It’s healthcare, it’s education. It’s life on Earth and biodiversity as you know, there could be a climate change denier and still find value within the ethos tool. Yeah, you know, we’ve got different customer bases in the United States that use it with a tailored version that specifically tailored for you know, certain Christian faith values or, or other aspects as well so that it can be tailored and tailored to what a practices philosophy is as well. And so it’s more than just ethical investment advice. It’s values based advice and that are aligning values and giving you a measurable tool to say, a fee is $1 value, or performance over seven years is a percentage value. This says a score on a bell curve for alignment. So it gives you that extra piece of information to make that comparison.

Peita Diamantidis
And what I like about that, too is like you say you could you can get them to do the to do the assessment, measure where they’re at, and you may not act immediately, because you may not be able to act, who knows where they are, the platform, they can’t move, whatever the reason might be, however, to say then at the next review, and you know what, there’s now an option that actually is going to benefit now we can act like I love that being something that’s just constantly measured against over time and constantly tweaked.

Nathan Fradley
I think what’s interesting, too, and finding a bit of feedback from advisors, the surprised that how decent a number of the industry super funds are. Yeah, because they have fun, you know, since in 2019, breasts were sued, and this move ABS case, and they’ve been under an enormous amount of pressure to improve this across all of their investments, not just the socially responsible option. But funds like Australian super, their voting record on environmental social governance matters is between 70 and 80%. That’s better than some specialist funds. Yeah. So you know, if the client is concerned about progress, but they’re not necessarily considered specific holdings, right, that could be something that, you know, we because we the scores are based on the holdings themselves. Yep. And then the engagement record of a company, how much of a fund how often they actually go out and, and talk to different companies on what they’re doing, and then voting in line with ESG values. So you can have great holdings. And so some of the index funds really, really good screens, rubbish engagement, right, versus some of the other funds, great engagement, but they might have a couple of companies you might get if you’ve got one of the banks or the bhp, but actually, overall, for that client, that actually aligns better. Yeah. Okay. So it’s not a one size fits all. That’s the whole the whole premise of the of the questionnaire is to personalize the rating, the things that you care about the diverse things that I care about, we could look at the same investment, we can play different schools.

Peita Diamantidis
Yeah, yeah. Okay. So if somebody’s you know, considering starting down this path, is there anything you feel they should be doing prior to, you know, sort of wheeling in a tool like this? Is there some prep work? Is there, like, what can they be doing, that will really mean when they roll this out to clients, they sort of just pick it up and run with it.

Nathan Fradley
I think before you use any tool, the tool fits within a process. So you know, when you’re, when you’re presenting a tool like this, when you’re presenting a risk profile, when you’re, when you’re gonna go through, you know, a goal setting exercise, whatever it is, you’ve got to be able to position it. Yep. And I think a lot of the time advisors who get excited about the software, and they come to me guys started using it, but I kind of fumble, right? It’s like, Well, okay, why are we fumbling because we haven’t practiced? Yeah, you know, when we first started in this industry, we practiced our view of lions and our ways we describe how super works and what it was so many times, and it comes natural to us now. I think you need to be able to, I suppose, firstly, understand your internal organization or your personal value? Where do you sit on this line? Yeah, for a client, not for you. It could be, you know, super ethical. You could be I don’t really care more about index or I could be preferred preferencing. Since stocks, like whatever, yeah. But for your clients, Are you positive? And you want to encourage? And in which case, that’s a bias and it needs to be disclosed? Yeah. Are you negative, and you want to discourage which case it’s a bias that needs to be disclosed? Or are you neutral, and you want to make sure they understand the opportunity? And then if you’ve decided where you sit, then how did you explain what ethical responsible or whatever word you want to use investment is to? Yeah, instead of just being like, Oh, do you want Ethical Investments? No. Okay. No, right. Like they had no idea. A client doesn’t understand what that means. Half the industry doesn’t understand. So, you know, how do you explain that? And why do you want me to consider whether or not this portfolio or your portfolios align with some of your values? Yeah, well, what does that mean? Well, when we look at the companies that they invest in, there might be some things that make you uncomfortable, yeah. Or do you want to focus purely on fees and performance? So I think that’s a really important thing. Understanding that’s probably a basic step, and then practicing a little bit using things like the checklists of real websites and things like that. You don’t need to jump straight to tech. Yep. This question like our questionnaire, you can send to a client, get them to fill out and they can set it back. And you can do it that way. Or you can do it with the client, and you can get a much better understanding of it because you’re working with her with a lack of risk profile. The value comes from the conversation and the intimacy, understanding of what’s said not what’s clicked on. Yeah, okay. But, you know, for people starting out and just having that as a basis can be really helpful as well, depending on how you operate in your process. So I think identifying where it fits and the process and how you explain it. Before you look at any tech, you’ve got to be able to do that, especially client facing Tech.

Peita Diamantidis
And I’d argue like, you know, if you’re within a business, then what like yourself and the team need to go through this process, like, experience it yourselves where the like you said, whether it’s using tech or not go through it yourselves. Because if you can be really self aware, as you’re doing that, you’ll work out where how you know what I think we need something that explains that really well they can revisit or I think we need it, you know, like, you’ll be able to define that journey a lot clearer, which is where this stuff I believe can really have impact is when the bouncy ball is clear for them, it just in terms of what the journey is,

Nathan Fradley
they’re stuck in the world, Miss explained is useless. Because if a client doesn’t engage with the advisors, when engaged with advice and engagement, it’s a waste of money, you use an online fax line tool, and you say to a client, are we just going to email the salary don’t even say anything, you just send it to them, chances are, they’re not going to engage on it. If that fact fan tool has connecting bank accounts and bit level of technology, which makes everyone’s world easier, and you just send it to them, they’re not going to do that. If you say, I’m going to send this through to you. And it’s really important for us that you give us as much information as you can don’t get bogged down too much detail. But be really helpful if you can connect the bank accounts because it will help for these reasons. They can’t do it. Yeah, if you don’t say any of that, just send it to him that they’re not and then that fall that Domino’s the entire process that goes with any tech, I

Peita Diamantidis
think, yeah, absolutely, it does. And I mean, the word experience is so important in that, you know, technology is just another, you know, tool on your belt and frictionally to define and create and really put energy into that experience. And I think that’s where something like this is different, because it’s it’s far more about them and how they feel right about things. And I think that is something that we’re not necessarily leaning towards when we’re engaged. I mean, we will, we will might endeavor to do that as good advisors. But I think to have this where it’s specifically talking about how they feel about things, I think is powerful, because you’re right, that’s going to spin off into all sorts of other conversations about their kids when I want to raise that, like all sorts of things can start from this. So I think even though what you’ve built is is, you know, analytic, analytical, clearly, you know, research and all that sort of quantifiable, I think it will spin off into a whole lot more of warm and fuzzies than we might expect. Yeah, because I think it can be the sort of root of that conversation. So then, okay, so a practice might decide to embark all of this, they’ve really thought about how to one try it, and then they’re engaging with the client on that, what are you seeing in terms of, you know, how much are people showing or sharing, you know, are some just utilizing the questionnaire? And then, and then the output is just some advice or like, what are you seeing in terms of how people are using the tool,

Nathan Fradley
I think what we expected to happen. So the puck, several parts of the UX are designed. And so when we first launched it, I designed this UX, I did it on paint and sent it to the developers, because that’s not my game. But we just had this awesome thing that you could search by all the asset classes, and you could load in your clients values and screens and really narrow down and build a portfolio that aligns to them. Yep. And what I’ve discovered is most advisors go straight to either an SMA, or multi manager. That’s what they want to know. So we added to that screen. And that’s the most common way it’s used. They have the conversation, they jump into the solution tool, they put it in the clients lead the client into that tool, and they just pick diversified and growth assets to this percentage, and bang, there’s their list. Okay, and then they have a quick look at a couple of them, compare them put it on file, and then they use that to present. So which I found really interesting, I thought it’d be a lot more portfolio construction. Yeah. But that’s intended to be the case. It’s been very much that and some great feedback we’ve had is where we’ve had people who say inherited clients come in, I’ve just inherited $300,000 of shares from Nan, clean, we have a look at them. And they’ve been able to load those individual stocks into the system, right? And look at the ones that align versus didn’t, and then put that with the tax implications to determine what to keep and what not to keep. Yeah, okay. Okay, perfect. So those are the two big use cases I’ve seen for it. Yep. But then behind the scenes, we have seen them the SMA providers start using it to build the portfolios to go because of the demand we’re seeing on the other side. So and then I suppose from a UX perspective, when we first launched it, it was pretty open ended was bit of sandbox. And we found ourselves spending a lot more time talking people and teaching people how to use it. Right. So I went over to the state summit, the team that we sat down, and we spent four days of whiteboarding and redesigning the UX. And we did what’s called taking an opinion on the software, this is how we think you should use it, right? So you can use it any way you want. And we’ve got our menu at the side, which we call the Black Diamond run. So that’s anyone who’s advanced can jump into that, right but if you just follow the bouncing ball, you create the client, add the assets, you select the options, you load them in and you run a report that’s done and it’s more seamless activity. And we found it enormous amount more engagement from simplifying the process, which is hilarious because that’s what we’re looking for as advisors with their clients and their devices at the back end also want to have that seamless UX experience as well. So always tweaking it. But yeah, I think that’s been a big increase engagement, too.

Peita Diamantidis
Yeah. And I think it’s really hard when you’re deep in something. And as advisors were like this, and you in terms of this topic, it’s very hard to remember what it was what it was like when you weren’t, it’s very hard to do that. And that’s what UX is, because it was asked at the beginning. Yes, but I don’t know enough yet. You know, so it’s, it’s, it always evolves over time, that sort of stuff. So it’s, it’s great to hear that you guys are sort of re looking at that. Because this path feels like a long one that’s going to see a lot of change and improvement and buy in, I think, from advisors generally. And so, you know, to make it easy for people who maybe even themselves aren’t down this path as individuals, but see the value for their clients, you know, the more we can make that easy for them, the better we’ll all be.

Nathan Fradley
And I think if I’m spending less time teaching you how to use this software, then I can spend more time teaching you how to do the first part how to have a better process to put a client through it. Yeah, yeah. So far teaches you how to use itself. And then my values. It’s like, they’re in advice, I could just do your super or I could determine the impact of that on your border situation. There’s so much more value in that broader stuff. Yeah, definitely for for me, but also for our users.

Peita Diamantidis
Yeah, I completely agree. So let’s talk integrations. Where are you at with integrating with other things out

Nathan Fradley
there. So we’re completely open API, which means that we can plug it into anything and everything. And so we’ve got a few things floating around. So we’ve had discussions with, I can’t really name names. Now, that’s good. But we’ve had discussions with another similar research house, so we’re currently building that out. So we’ll actually be able to pull their research and their top down and bottom up. So we’ll be able to pull theirs into ours, we’re working with the same people with a completely different approach to this. So it doubles up. And then platforms, we’ve had having a number of conversations with the majors around the initial process to merge in, and then a more advanced one down the track. You know, and I think in an ideal world, we’d love to have a limited version of the software available on all platforms, with a more advanced a comprehensive version, you know, off to the side, so that everyone can jump in, and maybe search through the platform’s investment menu to see what’s in there instead of just typing in Word ethical or sustainable. Yeah, and speaking to platforms, and they’re having the same issue. They’re like, we don’t know what to put on this. But from the ethical perspective, yeah. So we can use your software to identify what the best options are. And then, so it all kind of molds in together into this big amalgamation of everyone’s trying to figure out what is it good, and what is not a good ethical investment option for clients.

Peita Diamantidis
And, and I remember, actually, it was, I think, when you this all sort of first started, and you were talking about all this, and, um, and you know, I was chatting to a platform, who was sort of asking for feedback on what they should do. And I said, You guys need to have this, you know, in a smaller fashion, and one of the reasons is, when they’ve got that tool, and even if it’s a pared back version, and just for their platform, they’re gonna see what and let’s say, it’s only targeting even advisors, it’s not even a client’s yet, they’re gonna see what we’re trying to get. So it’s like a, it’s an early indicator for what they need to be hunting for, to put on the platform. Like, guys, you don’t need to ask us all the time, or do a survey or anything, we’re going to be searching for it, and they won’t be an answer yet. So, you know, add those up, when the figure gets big enough, go and find you know, the fund manager who whoever can provide that solution.

Nathan Fradley
In the spirit of what we do, you know, everything we do is transparent. So, our data, you can see exactly where we get our data points. So we collect data from about 260 different sources. It’s all our own data, we don’t just purchase someone else’s data and repackage it. And that every data point, you can view exactly where it’s coming from, and what the normalized point of that is right for the institutional investors, they can get the raw data. But from that perspective, in the same way we’ve released, what clients are looking for. So you know, we’ve had, I think, our first report on this without over 1000, unique completions that weren’t like cats. And that enabled us to sack at the top three causes our climate change, sustainable resource use and gender equality. That climate change. Most funds focus on. Yep, sustainable resource UCS gender equality, not so much. No. So immediately, we had a number of funds contact us and go, hey, we’d love to learn more about this because this starts to show where the demand sits. What are investors caring about? We have that data from the coalface. Yeah, hi, Chuck. And I think that’s really really powerful. To be able to, you know, use data but use it for for good not just to hold it.

Peita Diamantidis
Yeah. Because this will be a process right because, you know, we you raising awareness by having conversations with clients And then interest, you know, like, it’s okay, let me understand what I’ve got a bit now I want to be more like away from this or towards this. And that you know, so to be have both parts, it’s going to take time, but I think there is going to be lots of early indicator data, that’s going to mean that all I’ve got to do is be aware of it, and start to develop options that feed into that rather than responding to noise. And I think that’s the problem. And it’s, I think it’s part of what feeds into greenwashing, all this sort of stuff that goes on out there, is there just responding at this marketing sort of volume level instead of actually understanding what people want? And just meeting that need? Would you please? Yeah. So is there any features on it that you think people don’t sort of take advantage of as much as you think they could, that it may be under underplayed or underused?

Nathan Fradley
Um, in the portfolio construction portion? I think it is underused a bit. But I think what we’re not seeing is we’re not seeing people who run it with every single client, right. And I think that’s something we will see more and more of, the more that people use it, the more comfortable they get, the more they’ll be able to pull that, pull it up with their clients and put it on file. And it’s it comes back to the what I call the trifecta, a product used to be price and performance and as price performance and ethics. Yeah, it reinforces the values behind this. And I think it also changes for you. So you know, I had a client recently, in the advice practice side of things. And so as a couple, and they were both in index based products, and we took them through, they wanted to see what it was all about and make the decision make an informed decision. And she ended up going down the ethical route here decided not to. Yep. Because when she saw that the index was sitting at a 52 average score. Yep. And, and hanging over there was 270 fossil fuel companies in it, she was uncomfortable with that, she opted to make that change. And I think we’ll start seeing that piece of engagement come more and more, the datum reporting can do the work for you. The whole idea is it’s ESG. Daisy, what I think were the feedback we’re getting as advisors just need a little bit more confidence in those conversations. Yep. To build and to build. And it’s like any software, the more you use it, the better it gets.

Peita Diamantidis
Yeah, look. And I think that’s probably I mean, in terms of us, and our practice, where I’ve been getting us to is where it would be sort of right alongside the rest, like it would just be an automatic part of the process. For us, that’s all wanted to bid to be that rather than a reaction to a query a person makes. So I sort of wanted to, just as part of the process,

Nathan Fradley
which added to a few licensees about that exact thing. And if there’s enough demand, because of the software, we can build the risk profile into the hands well, right. Yeah. And it could still with the client, it’s all there. It’s the same seamless process. And there’s a few aspects to that, you know, the likes of you know, and we’ve had conversations, like I say, with product wrecks, which is a great app and being able to push the recommendations to there and then you can slap that in your Soi. Yeah. So there’s things that we can be doing, because we’re light and agile, that we are seamless. So I think that’s the next stage I’d love to go to was hit a saturation point where integrations make sense. Yeah, bam, now you’ve got efficiencies. Yeah.

Peita Diamantidis
Yeah, exactly. Because I think, you know, that was sort of one of the things I was going to ask about is, you know, what’s down the path, and I agree, you guys are gonna be able to do more when more of us are using it more like, in terms of through the practice, rather than exceptions. I’m betting that this is more Well, sorry, generally, you know, ethical approach is more exception based for people, aside from maybe yourself, where it’s literally a pitching point, like it’s something that people that you attract people towards you as an advisor by, you know, for the for those of us who maybe don’t do that, then we’re using it as exception and I’m having an having played like I have with the tool, I think it’s getting us all to the point where it’s just a given, we just do this and some people go, now I’m cool with it, what you know, you’ve, you’ve filtered it, and I don’t feel a need to change in a good tick on file. Like I think that’s fantastic. And informed choices. Aside from being you know, better from a phaser perspective, are just better for the consumer.

Nathan Fradley
You know, that’s definitely the more use and more integration makes more use. That’s definitely the the other thing we’d really like we’re pushing down the path of is, I think, as a platform, we will have more holding started than anyone else in Australia, right? Which we’ve discovered because we’ve looked at purchasing or subscribing to holdings data, and most that the amount of holdings with percentages of weightings is actually quite low. Okay. They usually top 10s disclosed we require four or five prop for a proper assessment we regretful holdings, we don’t disclose it, but we have it and so that’s an interesting thing so we can start looking at the Amanda information we will have on what’s out there in Australia and With the we can set during trends between and rule based kinds of things. Yeah, yeah. Oh, very, very exciting.

Peita Diamantidis
Yeah, perfect. So now I’ve got a look, it’s it’s somewhat cheeky this question about the future. But one of the things that, and I don’t believe that tool does this yet, but maybe you’re intending it to ease. So we’ve been looking at where a fund manager invests, okay, and the way they’re investing in therefore, you’re assessing all of that based on the client’s measure of values. What intention or hope do you have for doing the same to the fund manager themselves, to the platform to the insurer, so measuring the full spectrum of the vertical experience for the client, to those values, you know, so really getting to the point where it’s across the board where we can sort of reflect that full and because you, you know, we would all know that there’d be money that’s invested the way somebody might like to but the business then might have a different measure, depending on what your value focus is. You know, maybe gender equality is one, you know, so I’m curious how, you know, do you have any intention of going down that path? Or do you see that happening in the future?

Nathan Fradley
We have started looking at that, actually, from a bank account perspective. So we don’t have cash accounts rated. And we’re in the process of the moment of of whiteboarding, like to come up with solution very soon, of how we rate bank accounts interest and the use use of cash and term deposits within the institution. So it’d be a we’re either going to apply the full company screening. So if you had HSBC bank accounts, that’s a screen. But I think we will report differently on it. Yeah. So there’ll be certain reporting aspects that will come out, but it’ll be more related to if you’re holding deposits in HSBC, then he’s the percentage fossil fuel financing, or don’t total dollar fossil fuel financing that’s coming off that and things like that. Yeah. So that’s definitely the first stage of that process. And then, you know, when when it’s listed, it’s easy. When it’s unlisted. It’s a bit trickier. But we do have a lot of unlisted assets, as well. So the up that up and down the line would definitely be something at some stage, we’d like to have that full picture. That, yeah, but I think bank accounts are definitely the first step. Yes. Okay. natural,

Peita Diamantidis
natural isn’t really, truly investment still. So it’s just, you know, one step further along, and what you’re right, once you’ve done that, from a bank perspective, then rolling that out for other corporates, essentially,

Nathan Fradley
that we do have 1000 listed companies. So if you are curious about, you know, you say If so, McQuarrie rap, or whatever it might be, you can look up the parent company and get them directly. Yeah, yeah. And that can help you decision. Yeah. And, you know, as mentioned, with things like gender equality, and that kind of stuff, you can jump into that bank, and you can go to data, and you can click the gender equality score, and it will tell you, all of those gender equality data points, you know, what is their percentage of women on board? What is the percentage of women in management? What’s the gender pay gap, all that stuff is there, but it’s just not automatically applied from a platform level? From a fund operations level? That’s where this partnership with another this other research house will come in? Yes, they assess how the funds does not what the fund does. So okay, because we are the funds holdings, and engagement with theirs is more process orientated, they’ll actually have that come the other way. So that’s a different skill set that we’re not outsourcing, we’re partnering, so

Peita Diamantidis
exciting. Because I think, you know, you, you can change the things you measure. So once we start measuring it, all these different layers, then you can start changing things, because it’ll become more obvious what people want to want to see focused on. And there has been flagged already that that’s occurring, you know, it’s, it’s, you know, major institutions having shareholders say, No, you’re not promoting that person, because of that historical behavior, like things like that, that never used to happen. You know, like, that just was not how it worked. It’s clear that that is a rolling, you know, there’s a snowball effect here. So it’s exciting to, you know, imagine where that might go down the track. And it’s not, I think, um, perhaps for this sort of topic, people think this is about pitchforks and things. It’s anti, it’s not to me, it’s just transparency. And then you get to choose and some things you’re just not going to care about. That doesn’t mean you don’t care as a person, generally, it’s just what’s your filter? What’s your value lens? And then you can make an informed choice. I think that’s exciting.

Nathan Fradley
Yeah, it’s definitely in terms of what you choose to measure point. So we’ve built out an entire framework for measuring the purpose of green, green, blue and social and sustainable linked bonds. So at the moment, we measure the parent company, but if you’ve got a company like BNP Paribas they are or at least they were two years ago, the greatest producer will release of green bonds. Yeah, and also one of the biggest fossil fuel lenders in the world. Right. So they kind of have both sides. Yeah, cuz their bank. Yeah. Now, one of the green bonds may be amazing. Yeah. But it was It’s being rated by the issuer. So, you know, we’ve built that framework out. And it just takes the demand for HIPAA to go, yep, that’s what we’re into. Right? We want to know more about that. And we can properly resource it and bang, we can roll that out. So it does come back to sometimes we wish we could do everything at once we launched 12 months ago, we probably shouldn’t do that. We should stage things out. But yeah, that being being able to better tailor and personalize the reporting experience more and more and more is is obviously the end goal.

Peita Diamantidis
Yeah, fantastic. And like, Yeah, I mean, these things will evolve, just like the experience of what you know, or what clients want, and hence, what you’re responding to with the tool and what advisors will need to do. I mean, you and I could have been an event five years ago, and this would have been a topic that wouldn’t even have hit the main stage of it, you know, it’s just, you know, this is this is evolving, quickly. And so I think it’s actually exciting that you guys have got this far this fast, to be honest. Because without tools like this, we would all be trying to do digging, that would be tough. You know, it would, it would actually be tough to get your head around it.

Nathan Fradley
I can speak from experience from someone who used to jump the troll radiuses. Look at holdings and Ctrl F Paris Accord, inverting records and do all of that manually. It wasn’t it wasn’t really worth it. No, it the amount of time involved. But not being able to rely on the external the existing ratings assets, because they were just so inconsistent and completely untransparent. Yeah. Which is fundamentally where we were founded, the principle of transparency was we want to be tested. If we’re wrong. Tell us show us your case. And if we’re wrong, we’ll we’ll fix it. Yeah. So that becomes a really important part of what we do, instead of saying, No, this is our writing full stop closed.

Peita Diamantidis
Yeah, yep. And I think it’s an interesting, it is an interesting language, isn’t it, like the whole ratings thing? Is, is, you know, a winner loser sort of approach when this is this is just measuring based on your own metrics, and then shifting forward, you know, from where you are now to where you want to be. So I think it’s an interesting, even though I know that writing is what we’ll talk about it’s language use. But I think maybe over time, we’ve got to change that dynamic and mindset a bit more. So that it’s just what it’s we’re looking for improvement, whatever that means to you. And it’s going to be different for you, you know, if you’re, you know, than to me, Peter to like, let’s just improve it all for you. Rather than good, bad, you know, five star three star like all that stuff. Probably isn’t dynamic enough. It’s not three dimensional enough, I think, really, for where we’re going to need to go.

Nathan Fradley
We saw that with the with the Tesla being dropped from the s&p 500 Sustainability Index. Yep. And Tesla, despite what, you know, my opinions of Elon Musk might be the company itself has attributed an enormous amount to progression in the electric vehicle and capacitor technology right. Now. If that’s your thing, if you’re really into climate change, then that company is a great company for you. If you’re really into workers rights, maybe not so much, maybe not yet. So that those two comparisons when that whole debate was happening, is this an ESG? Company? Blah, blah, blah, blah, blah, what who’s right who’s wrong? We loved it. We thought it was great, because we were like, no one’s right. No one’s wrong. Depends what you care about.

Peita Diamantidis
There is no thumbs up or thumbs down anymore. It just doesn’t work that way anymore.

Nathan Fradley
I mean, there may be like the deep thumbs down, there might be the thumbs down, but it does diversion. But

Peita Diamantidis
but perhaps it’s all about nuance and change. Now, have we missed any other elements? Key elements of the tool? Of how advisors should utilize it? Do you think but

Nathan Fradley
I think not. Because I try and keep it simple. Fundamentally, you put a questionnaire either in front of or with a client, it takes two minutes, you take that back, look at that in comparison to their current investments, and some options and you take that at them and you show them those options, you can mute the names of those, so they don’t know what exact products they are. And then you could talk to things like performance and phase and alignment with that and come up with a solution that is in their best interest with a number that instead of just saying, Oh, this says ethical in the title, and this doesn’t. Yeah, therefore one is better than the other. I think it fundamentally underpins in our product replacement responsibilities, but reported in a way that’s really valuable to a client. And they can they can look at the report, you don’t have to say much it the report does all the talking. It makes it real. And and that’s pretty much it. It’s the questionnaire. It’s the research, it’s the recommendations. And if we keep it as simple as that the advanced users go bananas on it, but I think every advisor can get around that. There is a there’s a free trial, but there’s a free account as well. You can also just jump on the website and look at a fund. Yep. Again, going back to that transparency. As we want this information available, we want to be useful. We also need to have a viable business model. We’re finding a balance there. But fundamentally, we want people to use this to drive change. And it that’s all it is. It’s a tool to enable advisors to have better conversations.

Peita Diamantidis
Yeah. All right, advice explorers. If you’d like to find out more about ethos ESG, then the website link is in the episode show notes along with Nathan’s LinkedIn details. So I’m sure he’ll point you towards somebody potentially, who can help but you can always reach out to him. Thank you so much for joining us, Nathan. I mean, I’ve learned a lot, I feel far more informed than I was before with my own little tinkering. I really love that sort of ethos is giving this as this way to start these conversations with clients, even if we just inform, before we transform, you know, even if it’s just giving them more information and insight. It’s not just into their investments potentially into themselves, that sort of really fascinating to me, and I think could make this a whole lot more fun for advisors, and maybe they thought it would be so thank you for delivering that to us.

Nathan Fradley
Thank you so much for having me.

Peita Diamantidis
Ooh, so listener, are you currently using ethos, maybe you’ve looked at it, you consider it, or maybe like, like myself, you sort of early days in that journey of how you’re going to involve ethical investing in your practice. No matter where you’re at, I’d encourage you to share your insights on the XY community platform, I’d love to hear how you’re going. I know others would, too, because this is something that’s relatively new to this industry. So any tips, insight or questions you have, then please, let’s get them all on that xy community platform. And as for sort of my take, then, look, whenever I’m considering a new tool for something I wasn’t doing before, right. So rather than it being in the situation, where it’s just replacing what I already have, instead, you know, it might be one where I’m going to essentially add to the list of of tech that I use, then I always get a bit worried because I just don’t want to add another app into the tech stack. You know, at some point, the tech stacks just going to topple over due to its sheer weight. So given we’re sort of coming up to the end of the year, you know, it’s going to be a new year, not so long, then I think it makes sense for us to do a tech audit. This just involves writing down every piece of technology you use, and every piece of technology you pay for and perhaps technology you don’t use and pay for right, they should have a huge list here, make sure you include the email tool, you use productivity tools like Office 365, or G Suite, every little app software tool and website you pay to get access to. And remember, it’s not just software, or apps, it’s also all of those websites we pay to get access to as well. And just see, is there something you just don’t use anymore? You know, maybe you gave it a try for a while, but it just didn’t take. That’s okay. You know, this is the flip side of being curious. It’s perfectly normal, you try something out. But the key thing is, we need to make sure we don’t keep on paying for things we’re just not using. Now. All it means that we do once we’ve done our tech order, and you sort of clean house a little, all you then need to do is every time you consider a new app or piece of tech, we just see if there’s one we can turn off. Right? One, one. So why to keep things streamlined. And we’ll probably ensure you don’t accidentally end up with a few $100 a month of unused technology, which I can very honestly say I have done in the past. So please listen to an old hand at this stuff. And make sure you just keep on top of that and keep on cleaning house of that technology you’re using. Now given we were just talking to Nathan about sustainability and looking after Mother Earth, then today’s curiosity corner app kicks up with that theme. The app is called forest now you can find it at Forest app.cc. So that’s f o r e s t a pp.cc. This is actually a phone game, but it’s a phone game that gives you time rather than taking it away. Who thought it when you’re ready to really focus on something right you’ve got something you want coming up you really want to focus on it could be a piece of work could be some study, or even you just want to chill out and you want to do it properly. Right. Then in the app, you just plant a tree. Now your tree will grow while you focus on that task. But should you leave the task halfway, your tree will die. So basically, by staying focused daily, you can turn your hard work or your focus into a land of lush forest. And as if that wasn’t cool enough. Forest has partnered with a real tree planting organization called trees for the future to plant real trees out in the world. So when the app users choose to spend their virtual coins they own in forest that on planting real trees the forest team actually donate trees for the future and creates planting orders in the real world. Now, I know this is an unusual one for me to suggest, but I really love how it’s sort of combining a better world with helping us get more personal focus and productivity. Well, that’s all we’ve got for this week, be sure to subscribe to the podcast so you’ll get your advice tech fix automatically sent to you each Friday. And if you’re keen to build a niche that loves what you do, and will pay for it, and then have a plan to scale up your business so that you really love looking after them. Then be sure to register your interest in our niche down and scale up masterclass. The first will be in Sydney in early 2023. But we’re getting loads of interest in all sorts of other locations. So please keep reaching out as as soon as we get you know that right number then we’ll absolutely start adding some locations to add to you can reach out to me via direct message on LinkedIn to Peita M D. That’s PEITAM D. Otherwise, I hope you have a wonderful holiday break and come back. ready. You’re ready to go and firing in January. And super excited to get your bionic advisor muscles flexing. Oh, look forward to turning up in your earbuds next year. And remember advice explorers Stay curious.

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