A Conversation on Living God’s Story in Wealth Management with Loran Graham

Note to reader: This article was produced from an interview between Tim Weinhold and Loran Graham and was edited for time and clarity. You can listen to an extended audio cut of the interview on our podcast.

ECFI:

I’d love for you to tell us how you decided to get into the vocation of being a financial advisor.

Loran Graham:

It goes all the way back to my undergrad days. I was an undergrad at UCLA,  my alma mater, and I was on a path toward accounting. And so, I went through that process and actually started my career with one of the big five accounting firms.

Actually, it was with, at the time, what I thought was the premier firm, Arthur Anderson. And then, of course, they fell from grace—

ECFI:

Enron.

Loran Graham:

With Enron, right. So, I was in the Los Angeles office; I was far away from all that, but I watched the whole firm collapse. And so, I learned back in 2002 that there’s no such thing as too big to fail. 

I was randomly assigned to the financial audit division, so I was auditing commercial banks and real estate firms and hedge funds in the Los Angeles area. And so, my first introduction to wealth management was with my favorite client that I was an auditor assigned to, and they were a hedge fund in Los Angeles. They had the coolest office, with the ticker tape going across the wall and everything.

I went to Ernst & Young for a while when Anderson collapsed, and then I got a call from my favorite client, who said, “We need an accounting controller.” So, I jumped over there, and while I was there, I got all my securities licenses and saw that all the fun was in the securities area, not the accounting area. So, I thought it would be really neat to be in that side of the business. Most of their clients were institutional, corporate type clients. 

It wasn’t until I came to Spokane that I decided that with my CPA background and my securities licenses maybe I could actually help individual families. So, I hung my shingle as a Certified Financial Planner, certainly walking by faith as a Christian —but I was just offering traditional financial planning services.

It was maybe six months into my practice when I got introduced to this organization called Kingdom Advisors. And that was an “aha” moment for me. Wow, as I’m offering financial advice to clients, I could actually help teach biblical financial principles also. And that’s where the journey started, I would say. I started up shop just like everybody else, and then God kind of grabbed me about six months in.

ECFI:

I didn’t realize that the transformation happened that early for you. And was it just exposure to Kingdom Advisors generally, or were there one or two particular sort of “aha” moments for you?

Loran Graham:

When I first came to town, the church we were going to was offering a biblical financial class to all the members. And it was actually Howard Dayton’s class that was offered through Crown Financial Ministries at the time. The “aha” moment was really for the first time understanding a biblical worldview about money. Psalm 24 says, “Everything in the heavens and the earth is the Lord’s.” It’s this idea that God owns it all—not the 10%—he owns it all, and we are just managers or stewards of whatever he entrusts to us. He wants us to be good stewards with his money. And that was the “aha” moment. And certainly Kingdom Advisors embraces that also.

What is unique about Kingdom Advisors is that they’ve taken that good biblical wisdom, and they have developed a way to have advisors communicate effectively with their clients through Ron Blue and his methods. 

So, that was the bridge. But that was in terms of financial planning and the basic principles: spend less than you earn, give generously, avoid debt, think long term, all these things that have roots in the Psalms and Proverbs and other places in Scripture that seem like really good common sense. 

But the one thing that was new at Kingdom Advisors that I had not heard before was this idea of applying some of those principles to how you can invest. So, that was my second “aha” moment once I got a little further into it.

ECFI:

So, I want to explore that in particular. Given that this transformation was happening early in your career as an advisor, I’m not sure whether you faced the sort of challenge that I think faith-based investing represents for plenty of advisors. They look at it and say, “Wow, I’m going to have to change my practice in dramatic ways.” Did you face those same kinds of challenges as you were grappling with how to incorporate faithful investing into your approach as an advisor, or was it different for you?

Loran Graham:

I think yes and no. Certainly it was early on that I was adopting these principles. I was building the practice essentially from scratch. I had a small number of clients initially, but I also had a lot of free time; so I was out there marketing and growing the business. By the time I got to the point of learning about faith-based investing in more depth, I wanted to do my due diligence; so I decided to attend my first Kingdom Advisors conference.

So, in 2010, I flew over 2000 miles to Atlanta, and I got to meet some really great folks from the different companies that were involved. I remember calling one of my best friends who was a hedge fund manager in New York at the time, and I was just overjoyed with this idea that our investments could make an impact and actually reflect faith values. I’d never really heard anything like that. I just realized that was my calling and my passion. 

But then I came back to clients who I’ve been investing for in a more traditional way. So, I put my toe in the water and I said, “I’m going to start offering it as a menu of choices.” So, we had traditional investing, which I liked to refer to as “values neutral.” Clients who took this approach were not necessarily looking for unbiblical companies, but values were just not on their radar at all. And then, there were those who wanted to invest in companies that were faith-focused. And so, I would let clients decide. I even had a middle-of-the-road option, like socially responsible investing. So, I started building it that way. 

I was on the path to growing the practice but about 60% of our clients were investing from the faith-driven perspective and about 40% were not.

And what I found is that I had a new problem because I was trying to keep track of two completely separate investment strategies—sometimes it was a horse race, sometimes one strategy was doing better than the other, sometimes the other was doing better; it just wasn’t consistent across all of our clients. That was a problem just from a business leader perspective trying to manage a practice. I had to be focused. So, I really went into some soul searching about who we are as a firm and what we are offering to the marketplace. I came out of that process deciding to be 100% faith-based.

But now I had to come back around to those 40% of clients who were traditionally invested. The way I described it to them was how I just basically described it to you: the best of my research, ideas, and energy is flowing into this direction, and I feel it’s a disservice to you to try to be divided and try to be all things to all people. And so, I’m focusing here, and would you come with me? I had some really great mentors give me advice on how to conduct those conversations. 

I was shocked that we had 100% success with those conversations. Not a single client left, and some of them didn’t really agree with faith-based investing conceptually. They said, “Well, I don’t agree with this or that, but we trust you and we’re going to stay with you,” almost against their initial inclinations.

ECFI:

Let me ask if you can just give us a sort of summary description of how you broach faith-based or faithful investing to folks who are not believers.

Loran Graham:

Our method is to discuss it in the very first meeting. I think it’s really important because they’re trying to decide whether to hire us or not, and they need to know what we’re all about. So, the first three quarters of the meeting is just learning about the prospective client and what they’re all about and their needs and goals and everything. But I always reserve time toward the end just to share what we’re about so they know what they’re getting into if they choose us. The way I describe it is that they’re trying to decide if it’s a good fit to work with us. And so, they need to understand our mission statement. The mission of our company is simply this: we want to guide our clients in making wise choices that work toward financial freedom and spiritual growth by providing biblically-based wealth management services with excellence.

And after I say that I kind of pause for a minute, and I look at them—it’s a lot to process. And then I say, “I’d really like to just walk you through what some of those keywords mean.” When we talk about wisdom, it’s not my experiential wisdom or even Wall Street conventional wisdom, but what we do is we seek to integrate that timeless biblical wisdom into the financial decision-making process in pursuit of better outcomes. And then, I’ll walk them through what financial freedom means to us, answering the question, “How much is enough to meet their family’s needs?” 

I quote Psalm 24. I say, “Everything under the heavens is the Lord’s” and that what we believe is that God owns it all, and our responsibility is to be good stewards or managers of whatever’s entrusted to us. So, in the stewarding of the assets entrusted to you, we’re going to aim for the best returns that we can with the different categories of risk for each individual’s needs and objectives, but, at the same time, we will invest in such a way that reflects faith values and makes a positive impact in the world.

So, upfront, they know that all the advice that I give flows from a biblical worldview. And once I’ve gone into all those descriptions, at the very end, I say, “Does that sound like the type of company you’re looking for to help you steward this wealth?” And every time, even if they’re not believers per se, they’ll say, “Yeah, absolutely. That sounds great.” And I’m not asking them to sign up with me in that moment. I’m just checking in. Does this sound okay to you? Does that sound attractive to you? And I always get a yes. It’s interesting.

ECFI:

So, when you’ve got investment decisions, whether those are asset manager portfolio decisions or maybe, in some cases, even individual companies, how does all this play out in practice and sort of make your job as a faithful investing advisor different than it would be if you were just a conventional advisor?

Loran Graham:

So, in that initial meeting, we are not going to have a proposal or an investment solution presented in any way. That would be our follow-up meeting. If they’re feeling good about the first meeting, then we’ll start developing a proposal. But, in terms of how we do that, we work with model portfolios. So, there are about six different models from aggressive growth to ultra-conservative and everything in between. We try to make sure that in any new relationship, they go through our due diligence process, asking them questions and making sure we understand their situation thoroughly so that we match them up with the appropriate level of risk. But what that means is that we’re managing these models that are composed primarily of mutual fund managers that entirely, by prospectus, are screening the investments for these faith-based concepts.

So, that shrinks our universe of available funds. There are over 16,000 mutual funds on the exchanges and, within our universe, there’s a growing number certainly, but it is a smaller universe of funds. So, we’ll work within that universe to try to build a diversified portfolio in each of those risk categories, and then manage it that way.

The fund managers that we work with are looking for great investment ideas, certainly great companies to invest in, but also applying a form of quality control. Are the company’s products and services contributing to human flourishing? Are they making the world a better place by meeting solutions for humanity, or are they causing harm or preying on the weakness and addictions of others? So, we’re trusting the fund managers to do that company-level analysis and then just putting the funds together in a way that is meeting the current best practices for diversification.

ECFI:

Our investing can be in companies whose business models are aligned with and help further God’s purposes in the world, or they can be invested in companies whose business models are at odds with God’s purposes in the world. Put that if you would in your own words, in terms of how that shapes your own thinking about the investing that you and your clients need to do.

Loran Graham:

It starts with the motivations. I always like to point out that really the purpose of investing in alignment with these faith values is not out of a form of a legalistic obligation that would make someone feel guilty if they don’t invest this way. I think that had been some of the early messaging to try to attract people to faith-based investing. But the greatest commandment is to love God and love others. So, how we pursue our relationships and loving others, how we’re tithing and spending money, all that is really intended to honor God or follow His principles.

When it comes down to it, it’s a form of worship. We’re seeking to honor God with what he’s entrusted to us—our relationships, our finances—because of the work that He’s done on the cross. What Christ accomplished on the cross was securing our righteousness. So, when we pursue investing from that perspective, from a personal faith standpoint, we can apply that same heart of worship to how we approach our investments. We can, because we want to love others, invest in companies that are doing good toward others and not causing harm toward others. It’s actually, in a way, a love-your-neighbor approach to investing. So, that’s how it can be part of our personal faith. It’s a form of worship in the same way that we offer our tithes in the offering plate or make other life choices. 

But there’s also an opportunity to become part of something greater. There is a movement that is happening to try to shape and change the Wall Street culture and how large corporations operate. And that’s the other opportunity of faith-based investing, namely that as investors come together and pool capital that totals into the billions, and maybe one day the trillions, it actually has that opportunity to change Wall Street.

I know I’ve been quoting Ron Blue a lot. He’s one of my mentors through Kingdom Advisors. One of his statements that really struck me is “If you change Wall Street, you change the world,” because Wall Street is the center of civilization in our modern free market world. And so, if you change Wall Street, you really have an opportunity to impact the world. So, given what investors are doing, there’s kind of a twofold opportunity—one is to resonate with their personal faith, and the other is to be part of something bigger than themselves.