Are making money and giving back mutually exclusive? A research company building cause-driven investment models doesn’t think so. Meet two local professionals turning the tide on philanthropy.
- Written byMarlene Stang
It all began three years ago. Liam Monaghan and Dave Fanger, two investment professionals with Pacific Life Insurance Company, were on a redeye flight from New York City to Los Angeles. En route, they began reflecting on what they both noticed that week: countless billboards, taxicab ads, commercials and airline magazines advertising for-profit companies … and their various causes.
As investment guys, their curiosity was piqued. Just how were those companies performing financially, they wondered? Did supporting a cause affect their share price? And if so, how?
Soon after, Dave and Liam embarked on a quest to find the answers to those questions. They began gathering data, building investment models and researching investment theory. In the process, they made an exciting discovery: It’s entirely possible to build simple, transparent investment models that aim to move with the U.S. equity market (the S&P 500) by including only companies publicly traded in the U.S. whose foundations are the top supporters of a cause. And through these models, investors can achieve a market-driven return while simultaneously making a difference in the world.
For Liam and Dave, the motivation to launch Swell Investing LLC was actually quite personal. Both men possess an easygoing amiability that belies the challenges they’ve witnessed and experienced.
Liam was born and raised in South Africa, at the point in history when Nelson Mandela was negotiating the end of apartheid. And it was there that he formed his deep respect for human rights and passionate support for ending poverty.
“My parents instilled a deep feeling in me of gratitude for all my blessings, and through their many philanthropic works they showed me the power and value of giving back in any way you can,” he says. “Whether it was teaching the poor to grow food gardens, working in homes for the elderly in the underserved poor townships of my hometown, or working for nonprofits like the Sithuthukile Trust for early childhood development, my parents proudly led by example.”
Liam also found role models in an aunt and an uncle whose personal commitments to fighting apartheid landed them in jail.
Dave lives with type 1 diabetes and hails from a family that has been directly touched by cancer. As a result, he has come to care very deeply about good health and supporting the fight against diseases.
He says, “At the age of 9 I had to accept a difficult truth when my pediatrician told me I was diabetic. I spent the next several weeks in the hospital learning how to manage the disease and transitioning to a new way of life. What I learned about myself then is that whatever comes my way I can adapt, take the initiative to overcome it and move forward. I view diabetes as another part of my existence that molded the discipline, responsibility and empathy in my character today.”
Even members of Swell’s supporting staff have very personal impetuses for joining this effort. Jeff Bradshaw, who brings his expertise in finance to the team, is an avid education advocate and is dedicated to participating in his children’s school experiences as well as supporting the efforts of his alma maters.
Leslie MacDonald, Swell’s legal counsel, is committed to cancer research. Her father continues to be in remission 20 years after participating in a clinical drug trial that was made possible by groundbreaking lymphoma research.
After years of testing and developing, Liam and Dave launched Swell earlier this year as a subsidiary of Pacific Life. With more than 145 years of experience and a history of financial strength and enduring stability, Pacific Life provides Swell with the resources and infrastructure necessary to bring Liam and Dave’s vision of giving back through investing to life.
Swell partnered with Motif Investing, Inc., an innovative bro- kerage platform and member of SIPC, to facilitate convenient in-vestment in Swell models that, at present, address four causes: ending poverty, fighting cancer, upholding human rights and im-proving education.
From the get-go, Dave and Liam found an “internal champion” in Pacific Life’s president, Khanh T. Tran. He saw in their initial concept a compelling alignment with Pacific Life’s commitment to finding new markets and building a culture of innovation. As Dave and Liam developed iterations of Swell’s business model in Pacific Life’s “lab,” Khahn provided his feedback and has served as a true partner in their work.
And like Dave and Liam, Khahn’s own life experience has instilled in him a personal connection with the causes that Swell supports … all four of them, in fact. As an 18-year-old Vietnamese college student in the United States, he watched Saigon fall to communism on television. Having lived and seen the difference between democracy and communism, he is a supporter of human rights.
“As a teenager without a country or home and no money, save a few hundred dollars, it was a memorable and life-changing event,” Khahn says. That early experience fueled a desire to help those less fortunate.
Because his parents taught him that an education is the key to opportunity, Khahn did whatever work he could find while earning his college and postgraduate degrees. A believer in the power of education, he champions that cause in own his children and other young people.
Khahn’s future wife, Debi, and her family were part of an early wave of boat people to leave Vietnam in 1979, also risking their lives to escape. He considers his experience a “cake walk” compared to his wife’s and finds in her a continual source of inspiration.
In January 2013, she was diagnosed with Stage I breast cancer. With early detection and advanced treatment, however, she has thus far won that battle. He has also lost several family members to cancer and hopes his investments will work toward finding a cure.
HOW SWELL WORKS … FOR INVESTORS AND THEIR CAUSES
It all sounds good on paper, but how does the company put your money to work and a great good? “Get an account. Choose a cause. Earn a return.” Swell begins the process with those three moves via their website.
As manager of your account, Motif Investing receives the money and lets you select the “motif” that supports your favorite cause. Motif is the term that Motif Investing uses to describe a carefully researched and balanced portfolio of stocks that reflect a specific idea or trend. You can also build your own motif from scratch, with up to 30 stocks or ETFs of your choice.
The minimum investment is $250, plus a total commission of $9.95. Each Swell model aims to move along with the S&P 500 Index, and investors can enjoy 100% of their return since there are no management fees. Swell is paid a royalty of at least $1 out of the $9.95 commission that an investor pays Motif Investing when they either invest or rebalance their motif. In turn, Swell gives $.20 of every $1 they earn to the charities that their investment models support.
Swell selects its charities on the basis of how effectively they resolve the issues they address, as well as the magnitude of their impact. Each charity that Swell selects has undergone a rigorous, proprietary process to assess their work.
This process includes a review of the opinions of third-party groups such as Charity Navigator, GiveWell and CharityWatch. Currently Swell’s roster of charities includes Jumpstart for Young Children, Inc., the Susan G. Komen Breast Cancer Foundation, Inc. and United Way Worldwide.
Of course there is never any guarantee that the foundation of a company publicly traded in the U.S. that supports a given cause one year will continue to support that cause the following year. Foundations of publicly traded companies are required by law to make annual tax filings that include information about their charitable giving activities.
And so the Swell team analyzes that information to identify the top donors to charities that pursue the causes Swell supports. For this reason, their roster of charities is a “living” being that is designed to remain fluid and respond to shifts in the philan-thropic climate.
Who are the people investing in Swell’s models? Dave and Liam are quick to point out that they come from all walks of life.
They share the story of one man who presented to his three sons a list of Swell’s causes (ending poverty, fighting cancer, upholding human rights and improving education) and then asked each son to select the one that mattered most to them. He did not tell his sons why he made this request but rather came back to Swell with his sons’ three choices. He then invested on each son’s behalf.
Dave and Liam agree that in this era of social media, it’s easier than ever before to ascertain where people’s values lie. Furthermore, any journey into social media’s various channels reveals that cause-based marketing—and the spending that ensues—is gaining ground.
“When people vote with their dollars,” Liam says, “they can make a difference.” And now, thanks to Swell, a vote in favor of one’s own financial future can help others too.