In a video interview with Asset TV | Meet the RIA titled “Pathstone: Adding Value in Era of Change,” Matt Fleissig discusses the firm’s comprehensive family office service capabilities as well as Pathstone’s approach to technology, innovation, ESG and impact investing and scoring, and culture.
What makes Pathstone a Modern Family Office?
Pathstone originated from a need for single-family offices to cost-effectively mix various family office needs (e.g., accounting, bill pay, third-party aggregate reporting, insurance, payroll, employee background checks). The idea was to create and staff a firm that can provide all of these services sought after by single-family offices while being able to serve multiple families.
What role does technology play, and how does Pathstone adapt to the changing environment?
The single-family office industry is in the “Dark Ages”; there isn’t a single set of software SFOs can use to meet all of their needs. Pathstone recognized and took on the challenge of finding several industry-leading tools needed by SFOs (e.g., accounting, tax, CRM, custodian, and reporting systems) and connecting them in a single data warehouse available to the firm’s clients. This technology environment that Pathstone created, which offers SFOs a true software solution that doesn’t exist in the industry, became another example of the firm’s innovation.
What trends is Pathstone watching right now?
The biggest trend the firm is seeing in the single-family office space is the lack of technology. With the older generations of family-office leadership, the Pathstone team often encounters them extensively relying on limited tools, such as Excel. These families are usually astounded when Pathstone demonstrates how its tools are capable of helping the SFOs better manage their unique family needs, such as complex trusts and partial ownership with multiple generations, to name a few.
What are your thought on ESG, and is it true that you have to give up returns?
Pathstone views the growth stages of the ESG and Impact investing space as “ESG 1.0”, “ESG 2.0”, and “ESG 3.0.” With ESG 1.0 –– Socially Responsible Investing phase –– one might exclude controversial investments and risk missing those returns. As the world of technology and investing changed, ESG 2.0 led to new ways of investing without giving up returns. Then ESG 3.0, where Pathstone sees the firm today, began to incorporate ESG factors in portfolios that go beyond an investor’s values and mission and work to maximize returns. Essentially, as opposed to the former classification of ESG investors and non-ESG investors, Pathstone now sees the combination of the two strategies leading to portfolios with enhanced performance.
What are some of the conversations Pathstone is seeing around ESG?
The market has evolved, and there are more assets, investments, and strategies available in the ESG and impact investing space. Pathstone saw clients invest in these strategies but wondering how they can keep score for these investments. This led Pathstone to go out and gather data to create an ESG scoring system for portfolios that can rate about 12,000 securities. As a result, clients can see their ESG score benchmarked against asset classes, asset styles, superclasses, and ESG score at the portfolio level.
What areas of growth do you see for Pathstone?
ESG and Impact investing is something Pathstone dedicates significant resources to and sees as a prominent area of growth. In addition, the solutions the firm can offer to single-family offices – the unbundled matrix of services – is an area where Pathstone expects to accelerate as a Modern Family Office. Finally, Pathstone looks forward to growing its footprint as a nationwide advisory firm through strategic partnerships while making sure to maintain the right culture and team.