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Nov. 21, 2022

Lead with Your Values with Johann Klaassen

Lead with Your Values with Johann Klaassen

This week Charlie talks with Johann Klaassen, the CIO at Horizons SFS.

Johann has had a unique journey to the role of RIA. He was originally in higher education at Washington University in St. Louis where he earned his Phd. in 1998. From there he entered the financial industry as an advisor and worked for nearly a decade in various captive advisor environments. However, Johann found that many of the investments pushed by the firms ran counter to his strong ethical and moral code. That realization spurred his move to independence in 2013. Johann has since built Horizons SFS, an RIA that prioritizes the moral and ethical values of its clients in every investment decision they advise.

Johann Klaassen
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Transcript


00:10
Charlie Van Derven
Thank you for joining me for another episode of RIA Collective. I'm your host, Charlie Van der Van. I got a great guest for you today. In fact, gosh, I've been working this industry quite a while, and I've gotten to meet a lot of people. Johann is one of the most interesting people I've met. He's in an industry that, frankly, I think most of is probably third, maybe fourth on the least trusted industries in the US. That's not cool. Johan, right? Absolutely. Johan's got a I think I can name legal automobile dealers and financial services falls in there near the bottom. Johan's got a PhD in ethics, so he brings a whole different perspective to our industry. We're going to have a really fun conversation, and you're going to learn something about Johann's journey in this industry. Johann Klassen, thank you so much for joining me today on RIA Collective. 


01:01
Charlie Van Derven
I'm excited to tap into that mind of yours because I'll tell you, it's different than most of the advisors I get to work with. 


01:06
Johann Klassen
Well, I'm happy to be here today, Charlie. It's a lovely opportunity. Thanks. 


01:11
Charlie Van Derven
Yeah. Thank you, Johanne. Our mission at RIA Collective, of course, is to demonstrate all the different paths that people can take in this industry. I've met too many advisers over the years that they got their degree in financial planning or finance or whatever that was. I took a job at one of the big wirehouses and found out that they were in an environment that they didn't expect to be in. I think that leads to a lot of the migration independence that we've seen, that I've seen in a couple of decades. That's really just kind of speeding up. Our goal at RIA Collective is to tap into your knowledge and your experience, to really bring advice to that younger crop of advisors. Maybe it's a second career advisor. Who knows? They want to be on the independent side because they can serve their clients in a more fiduciary way in that position in the industry. 


02:04
Charlie Van Derven
Before we get into that type of advice, you started, like, before you became an advisor, you were an educator, right? 


02:13
Johann Klassen
Yeah, that's right. Yeah. I certainly have an unusual path. That's true. I came out of well, I did my undergraduate degree here at St. John's College in Santa Fe. Great books, no gym was the unofficial motto at the time. 400 students. I mean, we just start with Homer and Plato and Aristotle and you work your way forward. I came out of that very much. The liberal arts graduate, didn't know quite what to do next. Went to graduate school in philosophy, ethics, and social philosophy. Wrote my dissertation on moral emotions, guilt and shame, and regret. Well, so much fun to write about because every time I turned around, I found something else I ought to feel bad about. My daughter was born while I was working on that. I got to be an at-home dad for a couple of years. That was excellent, wonderful. 


03:18
Johann Klassen
We did the gypsy faculty thing for a couple of years waiting to see if a tenure-track position might come up. It's just we found ourselves, my wife and our daughter, we found ourselves in Arkansas and the only other positions that were available at the time were also in the southeast. My wife grew up in Colorado. She said, you know what? No we're done. We moved back to Colorado Springs where she had family. While I was a graduate student, I had done of work in how markets impact the organization of societies. Right. Or how societies impact the organization of markets. I guess it goes both directions. Consequently, there were a few positions available in Colorado Springs in the financial services industry, broadly understood. I found an entry to working for Taro Price mutual fund company. They have an inbound call center there. I got training in how the markets work directly, how to make the markets work. 


04:42
Johann Klassen
I spent my days for a few months talking to people who would call in to say, oh, I want to move from FunDex to fund, y. I can click, there you go, it's all done. This was during late 2000, early 2001, when the.com funds were dropping in their value, more or less. Part of my job was to talk the little old ladies out of taking their money out of the.com of. 


05:17
Charlie Van Derven
Course I was going to say, how does that sit with a guy who philosophy and ethics? 


05:24
Johann Klassen
Well, on the one hand, some of the least ethical people I know are moral philosophers. They know all the excuses, right? We contacted probably know all the excuses, all the ways we can argue for ourselves as unique cases. 


05:38
Charlie Van Derven
Sure. 


05:40
Johann Klassen
But it bothered me immensely. That wasn't what I wanted to be doing. When the company would send portfolio managers in to talk with us about what's going on in their particular fund that they manage and to spend a couple of days skiing up in the mountains in Colorado, sure. I would ask questions about why do we have this stock in the portfolio, whichever one doesn't matter. Don't we know that they have a horrible human rights record in Honduras? Or don't we know that they are listed in the top three polluters in the United States? They would tell me not to ask those questions. 


06:21
Charlie Van Derven
Right. 


06:21
Johann Klassen
It's not my job. You can't really tell a philosopher not to ask questions. That's kind of our whole thing. So I started looking around. I knew that I had heard about social investing or ethical investing or whatever we wanted to call it during these courses I had taken as a graduate student. I thought, well, okay, maybe I can find something in that. I started looking around and I found the folks at First Affirmative Financial Network based in Colorado Springs. There also And I started talking with them. It took a couple of months to figure out quite how we might work together, but I started working for them in July of 2001 and worked for them for, shoot, twelve years almost. 


07:18
Charlie Van Derven
Actually, I chatted with our mutual friend. I'll call him Acquaintance because I can't call him a friend of mine yet, but I chatted with George Gay earlier today. I'm excited for George to be on the podcast in the coming months here. We've got some time carved off of that. Of course the conference, the ESG conference is there. What, next week, two weeks from now? 


07:38
Johann Klassen
Two weeks? Yeah. 


07:39
Charlie Van Derven
Okay. Pretty much we're recording today just because this isn't going to air even for six weeks or so, but October 13. 


07:49
Johann Klassen
George is still an excellent friend, and he made it possible, right? He hired me out of that untenable position at zero price. 


08:03
Charlie Van Derven
Good. 


08:03
Johann Klassen
We found ways for us to be mutually beneficial, let's say. I did help First Affirmative grow substantially during the twelve years I was there. I went from, again, being just somebody who was trying to figure out all the buttons to push to being a member of the investment committee, and again the guy who figured out which buttons to push in order to make the decisions that we made as an investment committee to make those things happen. Toward the end of that, my friend Kimberly Grego Kyle, my business partner, who had been operating an RIA here in Santa Fe for a long time and had been an advisor with First Affirmative. She and I were talking about some small institutional potential clients, small nonprofits and such that she didn't know quite how to approach and wanted some help. I had done some nonprofit work while I was a graduate student in St. 


09:08
Johann Klassen
Louis. We started talking together about how we might work on those kinds of cases, how we might share the profits, share the proceeds. The more we talk, the more we realized that really what we ought to do is have the two joint forces, just the two of us, combine our knowledge, combine our assets, our client assets, and improve the fees to the client, and then prove the fees to the US. By taking middlemen out. So we started doing that in 2013. Afterwards. For the next couple of years, we got so many people came up to us at conferences, the SRA conference, or ESG for impact, I'm sorry, used to be known as SRA and Iraqis. A lot of people would come out to us at that conference or at one of the Social Investment forum conferences or there's a handful of others, they would say, oh, it's so brave of you to make this big jump and to set yourselves up as an independent RIA. 


10:16
Johann Klassen
We didn't really see it that way. At the end of 2012, we had gone through so many different scenarios, so many possible plans of how could things what would happen if the scenario plan out? Well, if the market dropped by this much, could we still manage planning all these different things that might happen? The longer we looked at it, the more it just made sense for us to be partners rather than dependent on anyone else. 


10:54
Charlie Van Derven
One of the unique things about you I've met so many great people in this industry over the years, right? People with a very pure mission. I don't know that yours is any pure than anybody else's, but you express that's the foundation of your business. We all want to make a fine living and sustain ourselves. Right? But you're doing it helping. Listen, I'm not trying to bring anybody else down, but you've got such a pure approach to your investments, to the people you served, to the mission in working with nonprofits and people who might not otherwise have the type of representation they have in you and Kimberly. 


11:41
Johann Klassen
Yeah, well, right at the front of our website, horizons Plural SFS for Sustainablefinancialservices.com, right on the front page, it says at the top, Invest like you give a d***. And that really is how we operate. Yes, of course we want to be able to support ourselves and support our families and participate in our communities by giving through our donations and so on. We also want to be able to serve our community by providing financial planning to folks who can't get it otherwise, providing investment advice to folks who fall far below the minimums that most of our colleagues charge. That is an important part of our approach is just to say that we'll take clients who other advisers won't and we'll help them to figure out exactly how we can put their financial criteria, their investment needs, and their risk and return criteria. Put that together with their social criteria, their ethical values, their religious values, if that's where they're coming from. 


13:06
Johann Klassen
It's definitely it's a much better fit, let's say, for me, as an ethicist, as somebody who's worked on that, it just is a much better fit for us to be able to offer that kind of service to folks who need it. 


13:26
Charlie Van Derven
That's awesome. We've got an audience of people that listen, that there's a variety of people, but really the core of our listeners are, let's say that advisor who's seven years out of college, joined one of the big firms maybe didn't fall into an environment that they expected. 


13:44
Johann Klassen
Right? 


13:45
Charlie Van Derven
I think that when you serve the firm first, your clients naturally come second. People who might maybe walk out and they feel they have this altruistic purpose in financial services who, again, landed in an environment that isn't necessarily what they expected or what they want for their future. Ideally we've got listeners who are trying to figure out how do I make that change? Where are the firms that embody my ideals as a human and as a cooperative human? Probably a better way to say it. Where are you in Kimberly taking the RIA? Johan? Are you looking at just in case there's somebody listening who says, wait a second, I resonate with what yohan saying. Are you growing? Are you adding advisors? That something that's part of the mission? 


14:36
Johann Klassen
Yeah, I was going to ask you the philosopher's question and it depends on what you mean by that and ask you to elaborate, but yeah, you did. I didn't even have to ask. 


14:48
Charlie Van Derven
I've got a minor in philosophy. I've got a minor in philosophy, johan from northern Arizona, not too far down the road from you. 


14:54
Johann Klassen
There we go. No, I actually at one point had an interview with them to join their faculty, but that would have been in like the mid 90s anyway, I was. 


15:06
Charlie Van Derven
There at the time. 


15:07
Johann Klassen
Okay, well I missed you by that much, so yeah, horizons. Let's see, in 2020 we picked up three advisors from elsewhere. There was a flurry of consolidation and spinoffs and various things like that resulted in a handful of advisors who specialize in sustainable investment kind of being at loose ends. We ended up with three of those folks joining us late in 2020 as I ars. Prior to that it had just been Kimberly and me, which that was fine, that was wonderful. We knew that we had my expertise in portfolio construction and my experience with the funds and managers in this space. We knew that we could put something together that would be able to serve other advisors. We picked those folks up and a couple of other RIAs. We have peer to peer arrangements with small RIAs. That for folks who want to spend their time working with their clients, not working on the investments in their clients accounts. 


16:29
Johann Klassen
They can outsource that to us. Reasonable. I actually was talking with somebody recently who's considering moving from an existing RIA to work with us instead and we are actually the payout is better for him. We have a reasonable override, I guess is one way to talk about it that we take for our clients or for our affiliates. We're always looking we're interested in talking with folks who have that as their mission, who have sustainable clients or if they have one or two clients who are really interested in sustainable investment and really don't know how to build those kind of portfolio as well. I've been doing it for 20 years more. 


17:23
Charlie Van Derven
Awesome. What a great resource. 


17:26
Johann Klassen
Yeah, 22 years, something like that. The track records are there and so on, so it's terrific. Yeah, we're happy to talk with folks who especially if they're aligned with our values. Cool. Happy to talk with folks, help them. 


17:44
Charlie Van Derven
I think that's why this interview will resonate with people. Right. Because we've got, again, you learned it at Hero, right? Certainly, there's some dirty things with some of the investments in mixes anyway, so yeah, if it aligns, I'm happy that you're open to talk to people. And. 


18:06
Johann Klassen
Two other things. One is that George Gay you mentioned earlier, my first boss in the industry, really, when he hired me, he said that it's in some respects relatively easy to teach somebody the financial services stuff, what a mutual fund is and how they operate and who they are. It's hard to find somebody who is smart and educated and ethical, just fundamentally a good person to work with. So, yes, as much as we want to be available to talk to folks, we can't work with everybody. 


18:45
Charlie Van Derven
Sure. 


18:46
Johann Klassen
We'd love to find like minded folks. The other thing is that we also are happy to help folks on the other end of their careers, too. I don't know if you have much of the late career folks in your listenership, but we're working with our attorneys to figure out exactly how to structure a retirement. Kind of a concept where folks could join our firm, be with us for a couple of years, help get their clients used to the idea of being part of Horizons, and then ease them out while paying them. 


19:23
Charlie Van Derven
Yeah, I love it. 


19:26
Johann Klassen
There's a retirement option as well as an early career option. 


19:30
Charlie Van Derven
Well, and I think that impacts I mean, the number I heard we did a joint webinar with Coach Joe Lukacs on Tuesday, so two days ago, and the number he brought up, and I don't know how accurate this is, but it paints the picture is like, in the next seven years, we're going to lose 200,000 advisors. Now, that was his number. The same face you just made, if you're watching on YouTube, it was wow, we got about almost 700,000 Riaas and licensed and registered reps in the country right now. So, I mean, that's a huge percentage of that. That's 25% of the industry, if you will. 


20:11
Johann Klassen
There may only be a few thousand, maybe a few tens of thousands who have Sri or ESG focus right. Who really have that as part of what they do. Even I'd be happy to talk with a handful of folks. 


20:27
Charlie Van Derven
Yeah. There's just going to be so much transition that having a nice soft landing spot for their clients that they care about and the ability to help with the transition and be able to get compensated on the back end of it. That's pretty cool if you guys yeah. I want to ask about listeners thinking about starting their own raining an RIA or whatever that is as you and Kimberly embark upon a journey outside of First Affirmative, what's the most difficult. We can speak to some of the most difficult things that you guys encountered in setting up the RIA and transitioning clients. What are things that you look back on right now and you go, what, that was tough. Maybe that helps our listeners a little. 


21:16
Johann Klassen
Yeah, I think there were two difficult phases. The first was trying to get the RIA firms established correctly and properly in the first place. We hired a consultant who was able to get an awful lot of it done for us with us. It was a lot of work and because we had never done it before, it was brand new to us. So that was difficult. If we had that to do over again, we might very well spend a little more time, spend a little more money to make sure that we got as much of that done well and properly as we could. It was a little harder than it should have been from that standpoint. The other thing was that we ended up duly registered at the time. We had an RIA firm and were advisors of a broker-dealer, small broker dealer. There was of friction in there. 


22:36
Johann Klassen
As we had to move our clients from where they were through the broker dealer and because the state of New Mexico, the land of Manhattan, took a little while to get our paperwork through, so we had to do a two step process. Repay for everything twice. 


22:57
Charlie Van Derven
Oh wow. 


23:00
Johann Klassen
I think we lost a couple of clients, not very many, but losing clients is no fun ever. We did lose a couple of clients along the way. We were just like, what, no, I don't want to do this twice. Most folks were willing, were happy for us. We're excited about the independence of it and pleased that were making the changes and so they were happy to sign things. I think that part of it is one of the things that people dread a lot. Oh, I have to repaper all of my clients. What if I have to redo that again? Everybody is going to know that's not how it turned out for us. Folks were glad to be working with us. God, to be able to continue to work with us and consequently we're okay with the idea of doing multiple rounds of paperwork. 


24:06
Charlie Van Derven
I will tell you. Not that I've had to do it, but that process is easier today with electronic signature and all those things. Simpler process. You mentioned that the clients, you lost a few and that is difficult because you've got personal relationships there. Not to mention that of course that has an impact on your sustainability too. You said something in that process I want to repeat, and I'll paraphrase it because I won't get your quote right, but people are happy for you, right? Your clients, you develop this personal relationship. I think that's the big fear for a lot of people who are ready to make that jump. Oh, my gosh, what? If I can only retain 60% of the assets, then I can't afford to do that. If I'm leaving a warehouse and I've got the nonsolicit and the noncommunication and they're going to pounce all over my clients the moment I do anything I have found in your sentiment is something that others have echoed. 


25:10
Charlie Van Derven
They're thrilled to go with you. In fact, super supportive of the step that you're making. I would add a caveat to that. Long as you're doing a good job on those personal relationships. 


25:23
Johann Klassen
Right. 


25:25
Charlie Van Derven
Certainly those advisers who feel like if you're going to make a move in the next 612, 18 months here, relationship is going to be everything now, so that when you make that move, you're going to retain those assets to whatever degree you can. 


25:39
Johann Klassen
Yeah. Given what the market is doing right now, the relationship is everything anyway. Right now. Right. When we get into these kinds of time frames. Yeah. Our clients were very happy with us. I know that some folks who are moving from bigger firms, let's say, or houses or something like that, have a sense that the brand that they have been working with has been an important part of what the clients are buying. And I don't know that's the case. I mean, maybe it is for some clients, but I don't know for how many. I think that if we as advisers are doing a good job of actually meeting our clients where they are and learning who they are and serving them, that makes it more likely that the relationship is with us, not with us as a representative of Company X. Yeah. 


26:39
Charlie Van Derven
I think when you put the big brands out there, I think there's certainly some brand loyalty there in some cases. I interviewed someone yesterday for the podcast and that will come out in November who has a crazy story and you and I chatted about it before I hit the record button, but without bringing brands and name of the person in or anything at this point, actually had built an independent book through an RIA. The RIA was acquired by a big firm and lost that independent relationship with the clients. All of a sudden, the clients belong to that big firm. Two or three years of the big firm has now made a split, which is why I can't say too much just yet, but 90% of those assets ended up coming with her. 


27:23
Johann Klassen
Right. Cool. 


27:24
Charlie Van Derven
Right. I think that speaks to all of it. Right. Where if you do a good job with that personal relationship, those assets belong to you, though the paperwork might say they belong to somebody else, people are going to follow you. 


27:35
Johann Klassen
Yeah. The clients are ours. Right. Another thing about the part of the business that we're in is that so few advisers do talk with their clients about their values and how we might be able to represent those in their portfolios. That when difficult times like this happen, where lots of other advisors are seeing turnover, we don't see much turnover at all. We lose a few clients here and there, but not very many because there are so few. I mean, there are very few other people to go and work with that do the kind of deep dive into their social and personal and political values before starting the investment process. 


28:27
Charlie Van Derven
Yeah, that's a huge differentiator I think. 


28:30
Johann Klassen
That's really cool, very sticky client. Not personally, but. 


28:39
Charlie Van Derven
I want to chat about and I don't know how much we need to I don't know if it's a statement or a conversation, but one of the reasons that we started the podcast was that I really think that in that environment where you serve a firm, clients come second. Right. If you can speak to the importance of fiduciary responsibility and I don't know that you can accomplish that in a warehouse type setting. What are your thoughts on that? 


29:12
Johann Klassen
I'm not sure. Fiduciary obligations are something I actually have published a couple of philosophical articles on fiduciary stuff and, both Kimberly and I have the AIF certification and we periodically talked about gathering up a few of the others. There are a handful of other fiduciary sorts of certifications. The number on my AIS certificate I'm putting back there because it's over on the wall is number 70. How many thousands now? I wasn't really adopted on that one. Fiduciary obligations, can they be met in the context of a wirehouse or some other large firm? Maybe. It would be very difficult, though. Independence solves that problem for me. There are a couple of portfolios that I manage directly for folks, but not very many. I don't take another bite at the fee apple for that. Right. We do pay a lot of money out to sub advisors of various sorts through mutual funds or through manage portfolios. 


30:36
Johann Klassen
If my options were limited by my employer to things, to portfolios funds or separate or whatever that were run by them, for them, and I didn't have any way to really show the client that there are other options, there are other portfolios we might use that would be less expensive, that might have a better track record, whatever. Yeah. It would at best be difficult. Right? 


31:12
Charlie Van Derven
Yeah, I echo that completely at best. 


31:19
Johann Klassen
I know that the folks who have CFP certification, our fellow planning practitioners, that we are now officially being held to fiduciary standards in pretty much every client interaction. But it's hard to get there again. How do those big firms handle the conflict? Isn't it Michael Kisses who says that the disclosure of conflicts is not a reason to trust you it's a reason to be concerned and maybe to fire you. Right. That doesn't deal with the problem. It just says here's a problem that we're not going to deal with. 


32:13
Charlie Van Derven
I coached some folks at the large firms. I had a conversation, obviously, we'll leave all the details out of this but at a conversation where a particular coaching client of mine brought on a couple of households, told me about in our coaching call but those households were well below the average of his book, well below what he had stated as his minimum. I questioned that and why would you do that? Well I got a 2% incentive for number of households and I flat out said doesn't that seem like you don't want to service these people? They're way too small. You're not making what you're, you know? Yeah. Can you see how that has a negative impact on that client relationship? It was really well I had the incentive out there and it's so hard for me to hear right. As much as I really respect the guy that I coach, as much as he does a wonderful job with his clients, the firm dangled the carrot and every one of their advisors went after that carrot much to the I don't know, it didn't balance with that CFP designation. 


33:36
Charlie Van Derven
That's just one example and it's tough for me to listen to, frankly. I'm not afraid of expressing it, which hasn't gotten me in trouble yet. Johann but you never know. 


33:48
Johann Klassen
Only a matter of time probably. 


33:50
Charlie Van Derven
Yeah, probably so I'll keep beating that drum though until someone tells me I got to shut up. 


33:57
Johann Klassen
Well I've taught those CFP ethics ce hours. Every CFP has to get those ethics hours every two years. Yeah. And it was funny. When I first became a CFP, I went to the CFP Board and said, hey, can I get officially approved to go ahead and teach these CFP ethics things? Because ethics professor, now I'm a CFP, it doesn't that make sense? They said, no, you still have to wait the five years or whatever it is. Okay, I waited the five years and then started teaching them. A couple of years ago they changed the format to where now the CFP Board provides almost all of the content for those sessions and it's not flexible enough for me. I want to be able to have the conversation wander around the ethical landscape that we work in. I want to be able to talk about the difference between the minimum standards of behavior that the CFP Board's rules establish and the idea of what a virtuous financial planner might look like. 


35:12
Johann Klassen
They didn't like that idea so I stopped. 


35:17
Charlie Van Derven
Are you aware of a gentleman north of the border in Canada named Rob Burrillo? 


35:23
Johann Klassen
Yes. 


35:26
Charlie Van Derven
Again, like I said earlier george exactly. He's not a friend of mine but we have spent some time together and we've had. A very similar conversation, what you and I are having now. He was speaking at an event he was force it was an insurance event in Canada. Gosh, I don't know, five, six years ago. I've read his wealthy Buddhist book and a couple of others, and that's interesting character. You guys have some similarities. He mentioned to me, he's like, Charlie, really? You want to make a difference in your industry? Go get qualified to teach ethics. I haven't taken that step yet. Johanne well, I can recommend some books. 


36:09
Johann Klassen
Yeah, that's cool. I have my Plato and my Aristotle right down here next to the desk. Oh, david Humor is down there, too. 


36:18
Charlie Van Derven
Let's have some fun. We're talking about RIAs, and you're bringing great advice. You wrote a paper on the Lorax or a book on the tell me about that paper. 


36:30
Johann Klassen
Yeah, so I wrote actually, while my daughter was in my oldest daughter, she's 26 now. When she was in middle school, she and I worked together on a couple of papers that we presented at philosophy conferences and that then we got published. The first one was about the sneaches. The starbillied sneaches had bellies with stars. The plain belly sneeches had none upon ours. So stars weren't so big. They were really anyway, but we did that one that was published in a conference proceedings volume. The other one we did on the Lorax was published in several series of philosophy and other things. So there's philosophy and Harry Potter. There's philosophy and chess. There's philosophy, and I have philosophy and Johnny Cash on my bookshelf. Somebody came to me saying, hey, you and Greta did this paper about the speeches. How would you like to do another one for one of these for a philosophy and Dr. 


37:41
Johann Klassen
Seuss volume? And so we said, what the heck? We picked the Lorax as the story we wanted to work on. Yeah, the basic idea that we came up with is that where a lot of folks understand the Lorax as an environmental story. We thought it was actually a business ethics story. Cool. That the once-ler who is the character who's telling the story, he finds the truffula trees and he realizes that he can make a product with them, and he lets his greed essentially overrun the ability of the truffula trees to regenerate. He destroys the truffula tree species, I guess, or almost. And so it's a business ethics thing. It's about maintaining the sources you need and treating your supply chain with some kind of respect and understanding that your business is not and the product that you're trying to make is not the only value that you have to have space for other stuff, for other considerations, stakeholders. 


39:05
Johann Klassen
The brown bar balutes, for example. You can't forget the brown bar baluts in your pursuit of profits from making needs. It was amazing. It was a lot of fun to work with my daughter on those two projects. That's cool. She's the only kid it was the only kid in the middle school who had published academic articles. 


39:32
Charlie Van Derven
That's pretty cool, man. That's pretty cool. Very cool. I read something about bioengineered foods. You and I got to know each other a few weeks ago, right? I found you on LinkedIn. You had an interesting background. I thought maybe it'd be a great story for the listeners. As we started to chat a couple of weeks ago, I knew you were an interesting person. I had no idea how interesting you are. We started to dig in and get the research done. Getting ready for our conversation today. Laurax, business ethics, bioengineered foods. How does this stuff weigh into even things with Horizons? 


40:16
Johann Klassen
Yeah, I think it's important to ask questions, right? That's what a philosopher has to say. That I think I lose my Blazer badge if I don't say that. I did a pair of articles, actually on genetically modified foods, and one was about the business ethic side of it, and the other was about other ethical factors. I oddly enough, I guess, for somebody who's in the industry, I came down in favor of continuing to work on at least bioengineering genetic modification. I think that some of the concerns are overblown and some of the others can be managed. That does put me in the minority in the sustainable investment industry. Most folks in the industry are staunchly opposed to genetic modification of especially food organisms and other things like nuclear power. That tends to be a touch point too. Most of our clients presume that we won't have nuclear power or genetically modified food organisms in their portfolios. 


41:41
Johann Klassen
Consequently, we don't, because it's not my values that drive our decisions. Well, for the most part, but it's the clients values that really drive what we put in their portfolios now because we are pretty upfront about who we are and what our values are, that tends to be relatively easy. We haven't had to turn away a potential client in a while because our values just didn't shed. One thing that I do want to always have to mention this is that the case, the lawsuit there we go. The lawsuit that established the right for the right to marriage regardless of gender, in New Mexico was Griego v. Oliver and my partner, Kimberly Griego kyle, was that Griego? She and her wife, Rose Griego, they were one of, I think, four couples that sued a county clerk and one and so we don't hide that fact. 


43:02
Johann Klassen
We're proud of that. It's probably the case that somebody who is not comfortable with lesbian, gay and so on sure is going to see that on our website, is going to see that on our materials, and it's going to go find somebody else to work with. There is a self-selection that happens there, but once folks get in the door, once they do have start having that conversation with us, there are some things that most of our clients expect that we make a point of excluding from portfolios. Beyond that, it can be very fine grained. We can get down, way down into the nitty gritty with some of our clients on precisely. I'm fine with this industry as a whole, but this particular company in that industry has got to keep them out. We can do that for some of our clients. 


44:08
Charlie Van Derven
At least we can. Yeah. Listen, I love the alternative that you and Kimberly create for people because I think too often they don't know what's in the fund. You guys with full transparency and a very pure mission. Johan, I'm a better guy for knowing you. I think a lot of people listening better people. Or maybe you create a path, you've carved a path with help with people like George and others on that side of the industry. That opens up opportunity for people who have the, I don't know, ethics, but beliefs and values that you share with us today. So I love that. 


44:56
Johann Klassen
Yeah. Absolutely. 


44:57
Charlie Van Derven
Anybody who's listening or you're good with having a conversation and pardon your wisdom on them. 


45:05
Johann Klassen
What wisdom I have? 


45:07
Charlie Van Derven
You have some wisdom, my friend. 


45:09
Johann Klassen
Well, Socrates said, actually, I'm the wisest man in Greece because I know that I know nothing. Right. 


45:18
Charlie Van Derven
There you go. 


45:19
Johann Klassen
There you go. I was saying something. I was making a joke to my wife the other night, and I said, as Socrates said oh, never mind. He didn't say that anywhere near enough. 


45:32
Charlie Van Derven
How long have you guys been married? 


45:36
Johann Klassen
31 years this winter. Yeah, we've been together for 34. Awesome. We met in the first semester of our freshman year at St. John's College here in Santa Fe, and we've been together ever since. So now you know precisely how old. 


45:56
Charlie Van Derven
I'll do the math after we're done, otherwise I'll lose track of the conversation. Yes, now I can understand why she would exchange that sentiment. Right? 


46:05
Johann Klassen
Yeah, exactly. 


46:07
Charlie Van Derven
Not often enough. I'm 15 years in a marriage. My wife has been saving it for probably half of that. At least half of that. So, Johann, easiest way to get a hold of you if someone wants to chat, maybe about a soft landing spot. I don't know about that, but certainly it sounds like there's that option and just tapping into your values and how you created a business around that. 


46:31
Johann Klassen
Oh, yeah, we hope to be we've been doing this for a while, each of us. Kim has a couple of years more experience than me, even. So, since the late 90s, we've been doing this work for a long time. We know that we can be a resource for folks, especially folks who are just starting out or for folks who are that much further ahead of us and who need, again, a soft landing spot. The easiest and best way. Take a peek at our website, as I said, Horizonsffsustainablefinancialservices.com, or just search for Horizonsustainable and we should be the first thing that pops up. Send me an email. There's a bunch of different phone numbers for me on our website. It's easy to get in touch with me. I do have a bit of a Protestant work ethic problem, so I'm here in the office an awful lot, so it's relatively easy to get through to me. 


47:27
Charlie Van Derven
Yeah. Of course, I know you're responsive on LinkedIn as well. That's how we got connected in the first case. It's J-O-H-A-N. Johann Klassen. RIA K-L-A-A-S-S-E-N. That's right. 


47:39
Johann Klassen
Yeah. Like the goose said, double it went in doubt, double it. Right. 


47:43
Charlie Van Derven
All right. 


47:52
Johann Klassen
So difference again. 


47:54
Charlie Van Derven
Listen, our conversation has been enlightening, right. Because I don't think, I don't know that a lot of people know that they've got this kind of values based option available to them. Really? 


48:06
Johann Klassen
Yeah. It's amazing. One of the biggest problems that we have as professionals is convincing other professionals that it's okay to do this, that it's not simply a way to lose money compared to other indexes or whatever, that it's not automatically a violation of your fiduciary duties to take values into consideration. Many investment advisors believe that and it's not the case. I've argued that in print and in person. 


48:47
Charlie Van Derven
You're in Kimberly's credit leading with that. Right. That people, to your point, will self select. Right. If this isn't what you want to do, that's cool, go do what you want to do. Also, as I think advisors have a problem with differentiation, we are in an industry that the regulators want to homogenize as much as possible. This is a great differentiator and not the majority of the population has the same value system, but enough of the population does that it's sustainable for them and for you. 


49:20
Johann Klassen
Right, well, and there are periodically, I think I saw the headline go by not that long ago that something like two thirds of investors would like to take their values into account when they're investing. Now, not all those are going to be green, not all of them are going to be concerned with environmental sustainability and social justice the way our clients tend to be. But enough of them would be. Even of those who would take the opposite side, who are going to take the other end of the trade, that's fine. They should be able to do that too. Many investment advisors just think that it can't be done or shouldn't be done that we have there is a difficulty in getting purchase. Right? 


50:12
Charlie Van Derven
Yeah. Johann yeah. And that's awesome, given that alternative. Johann Clauson, Horizon, sustainable Financial Services. I'm a better person for knowing you and I think our listeners are too. Thank you so much. For joining me on RIA Collective today. It's my pleasure to know you better, and I look forward to continuing a relationship with you. 


50:39
Johann Klassen
You bet. Thanks. 


50:41
Charlie Van Derven
Thank you to our listeners for tuning into another episode of RIA Collective. I'm your host, Charlie Van Derven. My guest, Johan Clawson. Horizon Sustainable Financial Services. If you like what you heard today, please turn us on to your friends. We don't have any big corporate backing or anything like that. You sharing the podcast helps us get the word out and do something to impact somebody in a really positive way today, if you will. That'd be awesome. Thank you again for tuning into Riacollective. 

Johann KlaassenProfile Photo

Johann Klaassen

Chief Investment Officer

Johann A. Klaassen, PhD, is Executive Vice President and Chief Investment Officer for Horizons Sustainable Financial Services, where he develops asset allocation strategies and oversees investment policy for Horizons’ individual and institutional clients.

Johann is a Certified Financial Planner™. He was among the first in the nation to embrace the now-standard certification of Accredited Investment Fiduciary™ and holds the 70th such accreditation ever issued. He holds a B.A. from St. John’s College, Annapolis/Santa Fe, and Masters and PhD degrees from the Philosophy Department of Washington University, St. Louis, where he specialized in Ethics and Social Philosophy. He served on the faculties of Washington University, Webster University, Millikin University, the University of Colorado at Colorado Springs, the University of Central Arkansas, and the University of Idaho. He has published and lectured on many topics, including areas of environmental ethics, business ethics, and social bias in finance.

Johann spent his youth in Western Washington, Hawaii, and Japan. He enjoys baseball, chess, and outdoor activities across the Rocky Mountains. He continues to write and publish, for both academic and popular press outlets. He is a frequent guest lecturer in philosophy departments and business schools, and at business and social justice conferences.