Moving to 100% Impact: The Cordes Family Story

Ron D. Cordes has enjoyed a 30+ year career in the investment industry. He was co-founder and CEO of a $ 74 bb AUM U.S. wealth management firm, AssetMark(NYSE: AMK), and in 2006 co-founded the Cordes Foundation, which has a global mission to drive market-based capital to address the world’s most important problems. 

Ron speaks extensively on impact investing and achieving meaning and purpose in an “encore” career, and has been profiled in multiple publications including the Wall Street Journal, Barron’s,  FastCompany, Forbes, Financial Advisor, Financial Planning, Private Wealth Management and The New York Times. 

He was a co-founder of ImpactAssets, a leading U.S. Donor Advised Fund platform focused on impact investing, and currently Chairs the Boards of MicroVest Capital Management and Align Impact Advisors.

Kirby Rosplock

Welcome to the Tamarind Learning Podcast. My name is Dr. Kirby Rosplock, and I am your host today. Today I'm very excited to welcome Ron Cordes to our podcast, and he is a veteran in the investment world, over 30 years. He was co-founder and CEO of an extremely large wealth management firm AssetMark. And in 2006, he co-founded the Cordis Foundation, which has a global mission to drive market-based capital to address the world's most important problems. Ron speaks a lot, so he will be a great guest today on impact investing, achieving meaning, purpose, and is just really one of the most luminaries in the, the whole impact space. So we're really lucky to have him here today. And he's been featured from the Wall Street Journal, Fast Company, Barron's, Forbes, I mean, and pretty much all the top wealth management, investment management, and news publications. So we're thrilled to have him here today and to talk more about his own story because Ron and his family were kind enough to share in the second edition of the Complete Family Office Handbook more about their family foundation, their impact family office, and what they're doing and the whole setup and story.

Kirby Rosplock

So Ron, thank you so much for being here today.

Ron Cordes

Well, Kirby, thank you. Thank you for the kind introduction.

Kirby Rosplock

So, you know, Ron, not everybody starts out with a mission and a vision and a drive to allocate towards impact investing. And I think one of the things I'd love to hear from you today was what inspired you? I mean, what made you go from a financial services firm to the mission and vision that you had for the Cordes Foundation and family office?

Ron Cordes

Yeah, well, thank you. I, I'd actually say it was a bit of a circuitous journey in that, um, when I got into my early 40s, I had— I was fortunate enough with a couple of partners, we had some success in an investment business that was growing And yet I was kind of looking for something else. I was ready to have some more meaning and purpose in my life. And so I made a decision in my mid-40s that by the time I was 50, I wanted to be doing something else. And for— at the time, it was really focused on philanthropy and kind of organizing a lot of the philanthropic work that my wife and I were doing. And so that led to the decision in 2006 ultimately to sell our business. And that gave us a liquidity of our personal financial situation, which led to creating both the family office and our family foundation. And I began to devote all of my energies to our family foundation. I joke today that if you'd asked me 15 years ago what I'd be doing today, I would likely have told you that I would hope that I would have been an accomplished and effective philanthropist.

Ron Cordes

And while philanthropy has been super important to us in the foundation, It was over the first few years of starting to give money away that I kind of stumbled upon the concept of impact investing. And it came because as we looked at our foundation and the problems we were trying to solve, in our case income inequality, financial inclusion, and the kind of the problem of global poverty, we realized that one, we had a fairly modest pool of assets available to solve a huge problem.. And it began to grate on us that traditional foundations were only using 5% of their pool each year. So I kept asking, well, what about the other 95%? Why can't we invest in the same way and toward the same issue areas that we're giving? And interestingly, in '06 and '07, the initial advice that we got was that that just isn't done. We had folks tell us we'd lose our charitable exemption, that the IRS wouldn't look favorably on it. And it took 3 sets of lawyers before we finally found a team that said, no, this— it's not being done, but it's not being done because it can't, it's just not being done because people aren't.

Ron Cordes

And so at the end of '07, we made the decision in addition to continuing to grant more than 5% each year to take 20% of our corpus and invest it in what are now called impact investments. At the time, we called them social enterprise investments. Because the term impact investing hadn't even been coined. And that kind of got us started on the journey and we began to meet fund managers and kind of get into the ecosystem. And what I found was that in doing that, I had something to offer beyond just capital and that was 30 years of experience in investment management. And so here I found by 2008, I was deeply immersed in trying to help build the impact investing ecosystem. So I left the investment business to become a philanthropist only to find that I came up with a new door to re-enter the business again in a way that I could both satisfy the need that I had to really do something good in the world and leverage the experience and contacts and connections I had to do that through the world of investing. And so that's basically— that's the path that I've been on now for the last decade.

Kirby Rosplock

And, you know, you also did something maybe kind of risky in the sense that you did this not just with your wife, but you also onboarded your daughter several years ago. So, I mean, this is truly a family-driven leadership, and, you know, you work together as a family team. I think that's really inspiring. Do you want to tell us more about sort of how you get it done and what inspires you from each other to make a difference in this impact space.

Ron Cordes

Sure, sure. Our family even grew a bit beyond that. So my wife, Marty, and I created the foundation when I sold the business in 2006. And our daughter, Steph, was in high school at the time. So she was familiar with it and she'd sit in on board meetings, but she wasn't really engaged until after she graduated from college and she was in the working world in New York, working for Conde Nast at the time. And we host an event each year in Mexico called the Opportunity Collaboration, which we bring together leaders from all over the world. Steph came down and joined us in 2013, and it just kind of rocked her world. And she decided that— she came back to New York and decided that this is really what she wanted to do. So in 2014, she joined the foundation full-time, in addition to which we hired a young portfolio director from the investment world to really kind of take our impact investing portfolio to the next level. And so we became, we brought the next generation of the family in. He was a millennial as well. Fun story there is he and Steph ended up falling in love.

Ron Cordes

His name's Eric Stevenson, is our son-in-law now. And so it truly is, we've had 4 of us now in the family adventure. But it's kind of funny. So when Steph and Eric came aboard in 2014, Marnie and I were proud of the fact that we were about 40% invested for impact at the time, which then and probably now is about literally 40 times the average investment in a foundation to impact. And yet millennials have a different way sometimes of looking at things. So one of the things that Steph and Eric asked is, well, why aren't we 100%? And they began to introduce us to this community, which is now the 100% Impact Network. Part of the Tonic Group, of families that were committing to go 100% to impact. And candidly, Kirby, we didn't have a good reason why we weren't 100%. We just kind of hadn't gotten there yet. And so Steph and Eric committed that they wanted to take us there. And in 2015, they represented us at a White House convening where amongst 20 major foundations, we all committed to moving toward 100%. And we're able to complete that in 2016. And so what we love about, you know, kind of they brought the millennial approach of, you know, again, we were the baby boomers feeling like, hey, we're ahead of our peers, and they were kind of the old RFK quote, like, why not, right?

Ron Cordes

Why can't we go 100%? And also inspired us, they do a lot of work now with Nexus Global, to really kind of help other multigenerational families think through how they can also put their assets to work in the same way.

Kirby Rosplock

Yeah, I mean, it's, it's an incredible testament to, to the trust building, but also the connection that you have as a family, because I mean, that's a huge step. I, I don't know the statistic, but you probably do. I would venture that less than 10% of foundations are in your 100% tonic group. I mean, probably even less than that, maybe 5%. So it's a huge statement to go 100% impact. Tell us what that was like to package and think about the asset allocation and think about the overall risk. I mean, I also, at some point, want you to talk about returns because everyone loves to talk about, oh, you have to sacrifice returns in the impact space. I'm not a believer of that, but I love your perspective too about just moving into that direction of 100% allocation. What did that look like? How did you tackle that thesis?

Ron Cordes

So Kirby, we actually, it turns out, did it in about the reverse way that most people do. So we did the harder stuff first. Mm-hmm. So the early impact investing that Marty and I did in '07 and '08 was all private. Investments. So private debt, private equity, individual investments in companies and enterprises. And when Steph and Eric came aboard, our public investments, both equity and fixed income, were all still invested conventionally. They were actually invested with my prior firm because that was just a natural place, a family office, etc. I mean, you know, I had a lot of confidence in the investment ability of the folks that I'd hired and worked with. But my prior firm never really had an ESG or SRI focus. And candidly, even in 2014, '15, I was living in the old SRI world of— I really hadn't appreciated how far that public world had gone from kind of the old exclusion and accept a lower return SRI world to the ESG world of being able to have— to really demonstrate that you can deliver a commercial market return and have impact. And so it was Steph and Eric kind of bringing Marty and I the data and saying, well, here's all the studies, right?

Ron Cordes

It's not just our word for it. And they did a very nice job of compiling it. And so we moved our public equities. Ironically, the very final thing we moved was cash. And, um, that was really, you know, again, them coming back to us and sharing CDFI opportunities and some other ways in which we could make sure that the cash we kept available for grants and other things was at least doing no harm and also, you know, positioned where it could be helpful in communities that were underserved. So it took us about a year and a half to get fully invested, and I would say that, you know, our returns have been certainly on the public markets consistent with where they were before. And actually, ESG has been a great place to be over the last 12 months. I mean, a lot of the ESG managers that we have have performed very well. A lot of the thematic areas in which ESG has been strong have been outperforming in the market. So we haven't seen— I mean, I'm a firm believer like you that you don't have to give up performance. And I think the best example we had was early on You know, we were proud of the fact that we started impact investing in December of '07, when Marty and I convinced our board at the time that let's do it, let's allocate 20%.

Ron Cordes

I remember saying at the time, you know, this is new, we've got the legal ability to do it, but there's not a great track record of other foundations doing it. But if we lose some money at this, which we're going to try not to do, let's at least do it as a field builder so that we can help inform the field. And so we became fully invested in that 20% in August of 2008. And then the world as we knew it financially kind of ended in September. And as we went through the fourth quarter of 2008, I was super concerned about how that 20% was gonna perform versus the 80% that was invested still conventionally. And wouldn't you know, when all was marked to market at the end of the year, 'cause they were all private deals, that 20% was not only not the worst performing, it was the best performing. It was uncorrelated to the market. Things like microfinance, small business loans, working capital, trade finance. So that gave— part of that gave us the confidence having lived through that kind of stress test that if this portfolio can perform well in 2008, we went back to the board at the end of 2008 with those results and said, let's take 20% and move it to 40%.

Ron Cordes

Then it was a relatively easy decision to keep going from there.

Kirby Rosplock

Talk about toes to the fire early as you're getting fully allocated and then really seeing it prove out. It must have been so rewarding, though, to know that you're putting a big foot in the deep end with breaking into a space that was relatively the Wild West. Some still think it is the Wild West, but I mean, you are a living case study, right? You are truly— your family and what you've blazed is a huge contribution to the field because I think it actually gives so many other families the ability to say, hey, we can do this. You know, we have the opportunity to not only do well, do good, but really make a difference with how we invest. I mean, what are you most excited about now when you look forward?

Ron Cordes

Well, what I'm really excited about, Kirby, is trying to inspire and create avenues for other families to do what we've done. And I, when I say to do what we've done, it's about deploying capital to the issue areas that are important to them, right? So, um, you know, one of my favorite people in the space is Jen Kenning at Align Impact. We're a client of Align, and Jen talks a lot about where do you want to move the needle as a family? And, you know, every family has got their own areas that are important to them, whether it's geographies or issue areas. And what I'm really all about is saying to those families, I can't tell you what's important to you, but whatever you're passionate about, you have more resources probably to devote to that than you think. Because you're only really looking today from your philanthropic pocket. And you can also look at the much larger pocket that you have across your family office or other vehicles certainly philanthropic vehicles, which to my way of looking should be the low-hanging fruit, right? Because you've already committed those assets to serving a mission, so why not deploy them all?

Ron Cordes

Um, one of the things I'm most proud of is that in 2011 I was one of the founders of something called Impact Assets, which is the first donor-advised fund that not only allows impact investing but is actually created to empower it. So If you're not in a position to set up a family foundation, you can set up a donor-advised fund and invest 100% of those assets. And so that's been really— it's been gratifying to speak to families, to engage with them, and to just kind of let them know that, you know, to your Wild Wild West analogy, that it's okay to put a foot in the pool, right? That, uh, you know, and, and I think now in 2021 So many families have done this that there's finally more of a track record now developing. The most difficult thing has been to get the advisor community kind of behind us. I think that families actually gravitated to this in many cases before their advisors did, uh, but most of the major firms now are developing impact investing initiatives. Um, most advisors are now recognizing that this is an area that they have to get smart in because their clients are starting to demand professional advice, which is terrific.

Ron Cordes

And there's a lot of bespoke firms like Align Impact and others that are being created to specifically help clients along the journey. So I'm, I'm really kind of proud of the fact that we were early and have helped in our own little way shape the ecosystem that makes it easier for a family to start in 2021 than it was for us in 2008.

Kirby Rosplock

Absolutely. Well, I mean, we certainly lived through unprecedented times, right, in the last 2 years and, you know, for perhaps even longer, you know, as we look out to what's ahead and we're dealing with sort of the ongoing, I mean, the long hauler syndrome for those who had COVID and had negative effects from it, but even our economy kind of has a long hauler sort of symptom, right, from all the COVID malaise. And I mean, I don't know if you wanna speak to it, but I would imagine that this has maybe lit a fire under a lot of families who say, wow, there is so much need and there's so much important work that needs to be done. And, you know, we were happy to invest through XYZ firm and they're great and they're traditional and they're, you know, tried and true, but it's time for a change. I mean, we can't not take recognition of all the, you know, tragedy that's on our news every single day. And I just wonder, as you see and look out at the landscape, I mean, I, I know a little bit about your investment thesis, but where do you see individuals, families, and even institutions starting to shift and say, wow, we're going to do this differently now, or we need to take a deeper lens?

Ron Cordes

Yeah. So amidst all of the disruption and tragedy of COVID over the past year, and incredibly gratifying— so we have a connection with this community of families now that are part of Align Impact. We're up to about 52. We added more families in 2020 than we had in any prior year, which at first might be counterintuitive, right, with folks. I mean, this is a big decision for people, but what we found was families kind of saying, if not now, when, right? When you combine the, all of the issues around COVID and kind of the deep income inequality that surfaced out of what was happening with COVID plus all of the racial justice issues that surfaced mid-year, you know, we just, we had families saying, if I'm not, you know, if not now, then when would I look to deploy more assets to the things that I care about? And so there was this feeling that folks were stepping up and saying, I want to put my resources to better work. So that's just been really gratifying. What I have found that's interesting, because I work with a lot of foundations, is there does today still seem to be a difference between kind of founder-driven and founder-run foundations and foundations that may be a few generations removed from the founder.

Ron Cordes

I found that the more institutional the foundation is, the more it's run by, you know, really talented qualified people, but not necessarily the folks that put the assets in, the harder it is sometimes to make big decisions. So it's interesting that we have 45 families as part of this— it probably has grown now, that's the last number that I heard— a part of this 100% Impact Group, Tonic, around the world. And gosh, I would say nearly all of those families represent first-generation wealth. And so it's folks that were kind of entrepreneurial, most of them, in their nature, right, which generated the wealth to begin with. And what's really cool now is they're taking that same entrepreneurial approach to say, you know, I built a business doing this and I was on the cutting edge and that led to success here. And I wanna be on a similar cutting edge, right? Whether it be venture philanthropy or now impact investing.

Kirby Rosplock

Yeah. Well, it sounds a lot like what some grantors will do writing a letter of wishes, right? Alongside the trust. And give more color and guidance on what the spirit of the gift or spirit of the intent of what they set up. I mean, maybe that's where we're moving to. Maybe there has to be deeper guidance so that as the founding generation or family members disengage, the trustees keep alive and well the ethos and the ideas and the spirit of why was this money put in this foundation in the first place. Um, because I hear you. I think a lot of times trustees and are very afraid to, you know, deviate beyond what maybe the charter says. And, and that can actually be really limiting to the opportunity with the spirit of what that foundation was all about. So I love that you bring that up, and I love that you can share your story with us today, because we really hope it will inspire others to get on the bandwagon and think big. I mean, think big of how they can impact change and, and see the the benefits, not just personally, but to their communities and to the world at large.

Ron Cordes

Well, I know it's a pleasure to be part of this, and I commend you for the work that you're doing to spread awareness. I'll just say maybe in closing that we've gotten an enormous amount of satisfaction out of our grants budget and all of the amazing nonprofit organizations we've supported over the years and some incredible people. I would say we've also though gotten an amazing amount of personal satisfaction out of supporting entrepreneurs from an investment side, right? So we feel like here we've got this double opportunity to deploy capital in ways, and on the investment side, you know, we're developing a track record that says we can earn market returns while at the same time really putting money out that addresses issues that are really important to us. So I try to share with people that, and in fact, We found in multigenerational families that impact investing is often the thing that brings that next generation in. They're not necessarily excited about sitting in on, you know, an investment meeting where they just simply talk about, you know, the very basic things about returns and standard deviation, etc. When you start to sprinkle in impact investments and they can start to make a connection to solving problems, that's also a really interesting way of kind of bringing the next gen in.

Kirby Rosplock

I think it's a brilliant way to close because I think it's hopefully going to be a call to action and an invitation to say this is how you can make meaning too and co-create, right? You've done that with Steph and Eric. You're co-creating this new generative path that's personally rewarding. You're, you're strengthening family ties, but you're also doing so much good. And I think that's another really compelling thesis for why, you know, putting your toe in the water and seeing how it works out, because if it does inspire, right, that rising generation, imagine how much more they'll care, how much more they can do, how much more change can be affected. So Ron Cordes, thank you so much for joining the Tamarind Learning podcast today. You were inspiring as always, and I am so grateful for your involvement today.

Ron Cordes

Well, my pleasure, Kirby. I very much appreciated joining.