Shifting the Prism: Karyn Polak on Impact Investing and Doing Good with Your Money

Eric Brotman [00:00:01]:
Welcome to Don’t Retire, Graduate, the podcast that asks you what you wanna be when you grow up so you can graduate into retirement with purpose and a passion. I’m your host and valedictorian, Eric Brotman, and we’re excited to be bringing season six to our growing audience. We’ll be bringing you interviews with amazing guests every other Thursday. And on alternating weeks, we’re hosting a new segment called diary of a financial advisor, which we know you’ll all love. So please subscribe to our show and check out our new episodes every Thursday. Today, I’m pleased to be joined by Karyn Polak in studio in the worldwide headquarters of Don’t Retire Graduate. Karyn is the founder and chief activator of Shift the Prism. She’s a lawyer by training and an equity and inclusion through finance advocate by passion.

Eric Brotman [00:00:45]:
She spent her career at the intersection of values aligned impact and financial services working with large law firms and financial institutions and most recently under her own umbrella to mobilize capital for the greater good investing for people, planet, and place. Karyn, welcome not only to the show, but to the studio.

Karyn Polak [00:01:04]:
Thank you for having me.

Eric Brotman [00:01:05]:
This is, this is, gonna be an interesting conversation because I I think there’s so much said about how to do well and so little sometimes talked about in how to do good. Mhmm. And that really is the Venn diagram that you’re trying to build. And I I think people don’t necessarily know the difference between philanthropy and impact investing. People don’t necessarily understand the difference between a charitable, charitable gift and an opportunity to change the world while still making a return. So I think our audience is really gonna enjoy learning some things that that aren’t common. Yeah. These are things we don’t talk about a lot.

Eric Brotman [00:01:41]:
So I guess first, tell us a little bit about your background because you you did work with some of the big the big boys on Wall Street, so to speak, and and I’ve spent some time with those firms. So tell us a little bit about that background and what brought you to where you are today.

Karyn Polak [00:01:55]:
Yeah. Absolutely. Thanks so much for having me here, and thanks for what you do. I, started out in big law. That’s kinda how people tip typically go after law school. And I did a lot of work for banks and investment banks and ultimately, came in house. And so I I started my in house career at Citigroup. And then between Citi and PNC and Transamerica, really worked across the breadth of traditional finance.

Karyn Polak [00:02:25]:
So from consumer all the way to insurance, from wealth management to asset management, investment banking to corporate banking and the like. And across that time, throughout that time, I was also always trying to figure out where are we actually having impact. Who’s the customer? Who are we impacting? What’s the work accomplishing? And whether that was with my team or within the company or within the communities in which we were doing business, really trying to make a connection between finance and people. What’s the human end of this? And so I, I decided a few years ago that having worked across traditional finance, big financial institutions, I really needed to explore all of those financial institutions, banks and non banks that are outside of the big institutions, whether that’s community banks, credit unions, CDFIs, and many other players in finance, including just your own savings or checkings account checking account. So really looking at how can you, as an individual or in your company, do better, be more intentional with your dollars?

Eric Brotman [00:03:44]:
So so that is a lot to unpack. You know, having been with the big companies, they’re they’re all about profit. Often they’re all about profit from quarter to quarter. So it’s not even looking out at the long game and saying, what’s our ten year plan? It’s what are the next ninety one days gonna bring to our stockholders, which is really kind of a soul sucking, thankless way to do business. I’m so glad that we are very much a private and not a public company and don’t don’t have to deal with that. That’s really challenging. So so trying to bring, I’m I I don’t wanna say it’s a moral compass because at the end of the day, there are plenty of people and plenty of institutions doing great work, of of all sizes. So I’m not trying to paint corporate America necessarily as the as the evil empire.

Eric Brotman [00:04:29]:
I’m really not. But to bring sort of that moral compass to and to bring that to Main Street rather than Wall Street

Karyn Polak [00:04:37]:
Yes.

Eric Brotman [00:04:37]:
And to create, opportunities for, a wide range of humans, which isn’t always available. I mean, some of these institutions do only work with ultra wealthy or, or, or huge sovereign funds or, or these, these multibillion dollar, situations. And let’s face it, most of us are not that.

Karyn Polak [00:04:58]:
Exactly.

Eric Brotman [00:04:59]:
And so if if we’re trying to not only create investment opportunity for people who wanna grow their own personal wealth, which and I’m not painting personal wealth as evil whatsoever. It’s what I do for a living. I think it’s great to build financial independence and then to do some good with it. So, not painting wealth as an evil thing either, but how do we, how do we teach Main Street? What exists out there other than just what they see going across the bottom of, of their their news ticker or, or what they’re reading about on their on their app or I mean, so much of this is misinformation. And when you’re talking about private investments, it’s harder to find.

Karyn Polak [00:05:41]:
Yeah. For sure. I would say a few things. First, I think that often what I’ll call big finance makes people believe that it’s complicated, it’s hard, we know best, and so just come to us. We’ll make it easy for you. And I think you’re exactly right that the big financial institutions in particular, you know, I come at this as a lawyer and a regulatory expert, if you will, a skilled person in the in the kind of foundations of the laws that created what we have today as big financial institutions and others. And over time, you know, financial institutions banks started out 200 ago, purposefully to support their own communities, the people around them. It’s the it’s the it’s a wonderful life.

Eric Brotman [00:06:32]:
I was just I was just literally picturing that scene in my head. That’s so funny.

Karyn Polak [00:06:36]:
That was precisely the right picture to have. And yet over time, we added on many more sort of legal and compliance constraints. We added on, the profit maximizing motive and and real focus. We added on the stock market and the quarterly earnings and made it harder and harder for institutions to actually think about that person at the end of the dollar and not just the how much what’s the percentage or what’s the numbers coming across the ticker on the bottom of the TV. And so that’s that’s a a big part of the exploration that I did over time even before I stepped away from the big institutions is working in economic development with community organizations, with industry groups, with, others that were working to try and advance the economic value and and benefit and thriving of the people around them. So when you talk about the the difference between Wall Street, how do we help people to see the opportunities outside of Wall Street, outside of the stock market? Some of that is exactly how I spend my time these days. It’s It’s really trying to open people’s eyes to the opportunities that they have. And I’ll give you just one really, quick example, easy example.

Karyn Polak [00:08:00]:
We like to say, where does your money sleep at night? So if you happen to be fortunate enough to have a checking or savings account, which many people do, but there are certainly people who don’t, if you have a checking or a savings account, if you’re keeping that money in a big institution like the ones I used to work for, well, they’re spending it elsewhere. Right? They’re lending it out to the big institutions. They’re lending it out, to the sovereign wealth funds or otherwise. If you keep that money in Harbor Bank, for example, here in Maryland, that is a community bank. Harbor Bank is making loans to your community, is making loans to the people around you. So they’re using your deposits to invest in our community, and that’s one of the easiest ways that you can transition or at least that you can use your own agency to be able to contribute in your own community even as you are building wealth with those those dollars.

Eric Brotman [00:09:01]:
So you brought up regulatory and compliance. And what fun would it show be if we didn’t talk about regulatory and compliance? There there’s in the financial advisory space, all of us as advisors are regulated in in an infinite number of ways, which I don’t need to tell you about, But for our audience, if you ever wanna you ever wanna sleep at night, read some of that. You’ll go directly to bed in a hurry. But there are so many different entities and institutions and things that are weighing in on, on on all of us. And one of the things that that most financial advisors cannot do is is certain types of private placements, certain types of other advocacy because and, well, we can talk about the because. It might be because it’s hard to regulate. It might be because the profit motive isn’t shareable with the powers that be I mean, there’s so many reasons, some, more, benevolent than others, but there there’s so much of that. And so when we’re trying to assist clients, families who want to make a difference, I mean, historically it was all about profit.

Eric Brotman [00:10:11]:
Then there was discussions about, well, what about the the sin stocks? How do we avoid we don’t wanna be involved with tobacco or firearms or or in certain countries or nationalities or other things. And and pension boards and big institutions have to deal with some of that stuff. And then there was ESG. Then it was, well, what about the what about the, you know, the governance and and what about the the the sustainability and all these things? It’s really tough for most Main Street Americans, most families to spend any time looking into that at all. So they’re going to typically trust either what they’re reading online, which if you’ve been on, say, WebMD lately, you know that you’re dying of everything.

Karyn Polak [00:10:52]:
Exactly.

Eric Brotman [00:10:53]:
So you can’t trust everything you see at Naturally Online, or they’re trusting the financial institutions that are managing their affairs or assisting in managing their affairs. And each of those institutions, particularly those that manufacture product Yep. Have an axe to grind.

Karyn Polak [00:11:07]:
That’s right.

Eric Brotman [00:11:09]:
So how do you navigate that? I’m gonna leave it at that. How do you navigate that? Because there’s so many forces making this more difficult.

Karyn Polak [00:11:18]:
Yes. There absolutely are. And and I think you’re right that there are a lot of factors there. Some of it, is, oh, you know, we want to protect the individual investors. So we wanna make sure that all the right work has been done behind it. All the paperwork is correct. All the the, details are solid. And yet sometimes it’s simply because it’s easier, as you said, whether it’s profit or the middleman or otherwise.

Karyn Polak [00:11:46]:
And so one of the ways one of the, fascinating and somewhat new over the last ten years or so, ways in which you can get involved even in your own space and without having to worry about those restrictions is something called crowdfunding. And now this might sound completely crazy to you or or, doesn’t make any sense. You you’ve not heard the term crowdfunding. What it really means is if you for example, if there’s a restaurant in your community, and I’m thinking of one here in in Baltimore, Baltimore. If there’s a restaurant that would like to open up a second shop or would open a like to open up a sandwich shop, but they they don’t have enough money to do that, they can, through certain mechanisms, go to their customers and their neighbors and their friends and say, would you like to invest in our business? And for even, you know, $25 or a hundred dollars in a very small amount of money, With a very small amount of money, you can invest in that business. Usually, it’s a loan. So you you are gonna get some money back. Your your the the idea is that you would get a return on those on that loan, but it’s a way for you to be both a customer and an investor.

Karyn Polak [00:13:10]:
And then it means as a neighbor, you’re also you’re committed. You’re dually committed to that business. Right? You want that business to succeed because you wanna be able to eat at it, and you want it to be able to succeed because you want them to pay back your money. So that’s, I would say, on one end of the spectrum. But you’re right about the sort of private more, bigger ticket or bigger dollar, private investments are much harder to make that connection between the local place based opportunities to invest and the people who can help you do it. Because just as you said, most financial advisors aren’t they’re not doing the the work, the the diligence on those, opportunities, or they’re just not aware of them. They’re they’re obligated to present what they have as their products and services that are available, and so they don’t talk about those private opportunities. So we can come back to that, but, also, I wanna pick up on your comment about, philanthropy.

Eric Brotman [00:14:12]:
Mhmm.

Karyn Polak [00:14:13]:
Because I think that piece, I really talk often about it’s not an either or. Philanthropy feeling like, okay. I’m giving away my money. That’s a small portion of my money, and then I’m gonna make as much as I can so that then I can do a little bit of that. I like to talk about the spectrum that exists between philanthropy and full on for profit, you know, I’ll say profit maximizing investing. There’s a lot of room there. So I’ll I’ll stop there, but we can explore the different ways in which that that spectrum shows up.

Eric Brotman [00:14:45]:
Well, there are there are a growing number of, databases for this. There’s a growing, awareness of this. And I think people are, people are getting savvier about where their money is going. And you said, where does it sleep? And in a perfect world, I never want my money to sleep. I want it to be working for me all the time, and doing something for me. And I also don’t know if I’m if I’m investing in that sandwich shop, are dividends paid in, like, roast beef?

Karyn Polak [00:15:12]:
Right. Exactly.

Unnamed Voiceover [00:15:12]:
Like, could they

Eric Brotman [00:15:13]:
be tough? I don’t know. So so when you’re talking about philanthropy Mhmm. One of the things that comes up, particularly local philanthropy, is a community foundation or organizations that that can be a clearing house so that you can make a single donation potentially, or you can have funds held within a foundation that can then say, here are 15 organizations that meet the criteria that you’ve set up. They’re working with, an older population or an underrepresented population or children or whatever it is. And and so whatever you’re passionate about, they can plug it in and usually with a small radius. It’s usually based in that area. And I know how that works from a philanthropic standpoint. Yep.

Eric Brotman [00:15:56]:
How does it work from an investing standpoint, from a from a social impact investing standpoint? Is that still community foundation fodder, or is that where Shift the Prism comes in and and organizations like yours? What’s the difference there?

Karyn Polak [00:16:10]:
So even in a community foundation, if you think about it, there’s the money that they’re granting to community organizations, and they’re exceptionally good at understanding who needs what and where the the greatest needs are and doing exactly as you described, sort of categorizing so that you as a donor can can put your money where you’d like to. But they also have a a pot of money that they have to invest in order to be able to to grant out. So while they’re sitting with that investment portfolio, if you will, those investment dollars at the same time as they’re making grants on a day to day basis, those investment dollars can also be invested for impact.

Eric Brotman [00:16:51]:
Are they,

Karyn Polak [00:16:51]:
though? Sometimes. So that totally depends.

Eric Brotman [00:16:54]:
Yeah. I mean, how do we how do we know as someone who says, yes. I’d like to work with the Baltimore Community Foundation or or DC or anybody else. How do we know that some of those dollars that are not yet being granted, that are being endowed maybe, or or being, or being held for for a specific purpose? How do we know if they are or can be also in community investments?

Karyn Polak [00:17:19]:
I I think it’s a question that you really need to ask the foundation or the donor advised fund. We can talk about what donor advised funds are, but same kind of concept. You put your you you donate your money to a fund, whether that’s a community foundation or a donor advised fund, and ultimately, it is to be granted out. But there are investments behind it. There’s an organization called Impact Assets that is a an enormous staff, a a donor advised fund, and 100% of their dollars are invested for impact. So they grant out dollars per their donors’ requests, and all of their investments are also invested in opportunities to expand that impact. And that gets us back a little bit to philanthropy and the spectrum. Mhmm.

Karyn Polak [00:18:05]:
Because even within philanthropy, even within the the idea of a pot of money, whether it’s a donor advised fund or community foundation or a family foundation, that, you you grant out a certain portion to the community or writing a check. Mhmm. There are other ways for you to use that pot of money for impact. You can make a recoverable grant. So you make a grant that you could actually earn back depending on, the success of that enterprise. So now you can redonate those dollars. You could make a, you could provide a loan guarantee that just says, I’m gonna backstop, you know, this loan that someone else is making to this organization. You could make a a program related investment.

Karyn Polak [00:18:54]:
So you could make an investment actually in an organization that’s consistent with your with your granting or with your mission. So there’s lots of different ways in which even within the the umbrella of philanthropy, you can expand your impact.

Eric Brotman [00:19:12]:
So financial services is an industry that scares some people. I mean, partly because of horror stories you hear, but but even putting that aside, even if you have great people and a wonderful team, you still I I still sometimes wonder if the people we serve don’t occasionally feel like we’re Charlie Brown’s teacher. Yes. Like, there’s so much. All of the things you just brought up are at least somewhat familiar to me because of what I do for a living, but only anecdotally. And beyond that, people would need to know to ask the right question to get that kind of answer. So where do you go to learn these things in a way where you don’t have to become an expert, but you can at least vet the potential experts you’re gonna work with? How how do you do that? How would somebody get started?

Karyn Polak [00:20:05]:
It’s such a great question because there are a lot of resources out there, but you you’re right. First, you need to know where to go. And even before you know where to go, you gotta ask the right questions. You need to know to ask the right questions. Sometimes, I’ll talk to someone who’s an advisor in one way or another, a lawyer, a financial advisor, or otherwise. And what they say is, well, I’m I’m driven by my clients. So what my clients come to me and ask for, that’s what I deliver. And I often say, well, the world doesn’t move in that direction.

Karyn Polak [00:20:34]:
Right? The world won’t move if all we’re doing is the way that people we’re only asking the questions that people know to ask. You need to sometimes kind of put something on the table and say, have you thought about this? So first, I would say the some there are some easy places to go for information. There’s an organization called As You Sow that k. It has lots of good information. The Sustainable Investment Fund, US SIF, s I f, sustainable investment fund organization, they have a ton of just very basic information

Eric Brotman [00:21:09]:
k.

Karyn Polak [00:21:10]:
To help people just to get comfortable enough with investment to not feel scared by it. There’s organizations like Invest for Better, and others that are trying to give people back the power that they really do have, but that we in financial services sometimes suggest they don’t have or that they shouldn’t, you know, worry about so that people can, can can feel more comfortable in this space.

Eric Brotman [00:21:39]:
So sometimes you hear the term diversification used a lot of different ways. Sometimes it’s tax diversification. Sometimes it’s diversification of a portfolio or of a strategy. Is this something that is a diversifier in a broad portfolio, or is it something that’s a driver where you said this is philosophically what I’m doing rather than I’m doing this as a part of the overall plan? Like, where would one go to find out the the results, the returns, the opportunities, the the data to say, yes. I this is a viable investment strategy for someone who feels passionately about x.

Karyn Polak [00:22:17]:
Yeah. I think there are a lot of, resources out there, both institutions that are gonna talk to you about it more broadly and also places where you can go and and dive in deeper. But the the there is a need to, there is data out there, and sometimes I think that data doesn’t compel people. So I’ll I’ll I’ll let me explain.

Eric Brotman [00:22:44]:
Sure.

Karyn Polak [00:22:45]:
In the ESG space, for example

Eric Brotman [00:22:47]:
Mhmm.

Karyn Polak [00:22:48]:
There there’s a whole spectrum here too, in terms of opportunities, investments, and funds that are doing well and intentionally and can demonstrate that that actually is having a positive effect. There are some that will you know, we call greenwashing. Right? That they’re saying that they are sustainable or they’re focused on the environment, but they’re really not. I’m gonna put those aside. But let’s talk about the ones that really are doing great work and making a difference, whether that’s environmental or otherwise. There is great data to show that many of those, many of those investments and funds have performed or outperformed, have equally performed or outperformed

Eric Brotman [00:23:29]:
k.

Karyn Polak [00:23:30]:
The non environmentally friendly ones. Some of it is an overtime kind of thing. Like, it takes longer to demonstrate the impact. Some of it is you’re right. How how passionate are you about it?

Eric Brotman [00:23:43]:
So Yeah. I mean, historically historically, folks would approach that type of investing as I’m willing to to sacrifice some return to feel good about it.

Karyn Polak [00:23:53]:
Yes.

Eric Brotman [00:23:54]:
Which I I I’m not sure if that’s there was always the counterargument of why not just go make lots of money and then give it to the organizations that mean something to you, and it’s like a chicken and egg kind of thing. Like, I’m not sure either one is better than or right or wrong, but isn’t that sort of an age old debate?

Karyn Polak [00:24:11]:
It is an age old debate. And I’m gonna go back to my role as a lawyer. And and but I promise it will not be boring, I hope.

Eric Brotman [00:24:20]:
If it’s boring if it’s boring, we can’t have you back.

Karyn Polak [00:24:23]:
Exactly. So I and I wanna be here.

Eric Brotman [00:24:25]:
So Okay. Very good.

Karyn Polak [00:24:27]:
As a lawyer, my job, especially as a general counsel, has always been to identify as all of the risks that may be present in something, in an activity, or in an investment, and then to help you to evaluate how those risks show up or which ones are greater or less than. When when you’re making an investment in a company or in a fund, you absolutely every person, whether they’re you’re they’re your financial adviser or the investment manager or otherwise, should be thinking about all the risks, and that includes how is this company, how how are they treating their employees, how do they show up in their communities, how do they how does their product or service and their supply chain and all of the different elements impact the environment. And here’s why. Because even if it’s not tomorrow that that will come back to haunt the company if they’re doing something horrible, it will come back in two or three or five years. So what I would say is if you think about sustainability writ large, a company will be more sustainable if it’s not destroying the environment, if it’s not being terrible to its employees, and if it’s producing something that that feels like it’s actually needed in the world. So from that perspective, I would say you you take the returns, the the potential returns and the risks, and you want and the impact. You think about the risks, the liquidity. So can I get my money back today or tomorrow? Or how when am I gonna get my money back if I get my money back? And, and the potential for return.

Karyn Polak [00:26:05]:
And you also think about the impact. And when you add all of those together, if the end result is positive, okay, then that’s probably something that you should look at. If you have a company that is making a 20 x that is making, you know, 200% return, so giving you you give them a dollar, they give you $200 back next month, but they are destroying the earth, then that’s I’ll call that, let’s say, a negative something return. And when you add those together, presumably, that 200 gets to be a lot less. So what do you want at the end of the day?

Eric Brotman [00:26:41]:
I want everything.

Karyn Polak [00:26:42]:
Mhmm.

Eric Brotman [00:26:43]:
I want all the things all the time. Can you arrange that for me, counsel?

Karyn Polak [00:26:48]:
I can try.

Eric Brotman [00:26:49]:
So we’re we’re running short on time. I have two or three questions left that I’m that are in my head that I just wanna make sure we get out. The first one of which is, what is your why? Mhmm. Why did you why did you why did you give up what I’m sure was a very stressful but high paid gig Yep. To do something that made you feel good. What is the what is the why?

Karyn Polak [00:27:13]:
For me, what’s most important is that every single individual has access and opportunity as best as possible. Because I I just I I am curious about people. I am fascinated by people. And I think there’s often, someone who you think, you know, you you would never expect to accomplish much in in the world, and it turns out that they accomplish great things. I think there’s a lot of hidden talent in the world and just hidden gifts. And so I want every individual to be able to have access and opportunity to be the best that they can be. In that vein, I found I was so focused in my big corporate world on numbers Mhmm. And and I’ll say data, that I didn’t see the human at the end of of the work.

Karyn Polak [00:28:10]:
And I really wanted to do something that felt like I could see the people that I was trying to help, The people or just that I was trying to lift up or to amplify what they’re doing. So that was that’s my why.

Eric Brotman [00:28:26]:
I love that. And and, you know, it does make a difference. It makes a difference if you can feel you get home at the end of the day. Yes. And, you know, your spouse or significant other or best friend or you in the mirror ask, what did you accomplish today? How was your day? And if you can’t say I made somebody’s life better, simpler, easy, you know, more comfortable something, you you then what did you do? We we sold more widgets today?

Karyn Polak [00:28:53]:
That’s right.

Eric Brotman [00:28:54]:
And I’m not suggesting that I’m not suggesting there’s only one way to do this. And you certainly have to reach a certain level, I would think, of financial security before you take that risk. So the the leap is a little bit a little bit less of a leap of faith once you’ve reached a certain critical mass of your own independence, your own financial wherewithal. And I’m certainly wrestling with some of that myself because I’m I’m in a position to to to do some good, and I and I wanna make make that happen. So, what’s next for you? What do you wanna not do, but what do you wanna be when you grow up?

Karyn Polak [00:29:27]:
For me, I think I wanna be valuable. And I know that’s not a a a a role or a profession, but I I really just wanna be valuable to my community, to my friends and family, to the the country, to the world around me. So how can I actually spend my time working in ways that will advance and help people to thrive?

Eric Brotman [00:29:51]:
Well, you’ve already done that for the last half an hour.

Karyn Polak [00:29:53]:
Oh, I try.

Eric Brotman [00:29:54]:
So thank you. This was great. It was fun to have you in studio. It was, it was great to have you on the show. Where can people learn more about you and more about Shift to Prism?

Karyn Polak [00:30:03]:
They can, look up shift toprism.com. We have a website, so feel free to look there. I’m on LinkedIn under Karyn Polak, and, and now I have a Substack, which is kind of frightening. But, yes, you can find me. I promise.

Eric Brotman [00:30:16]:
Such a Gen z. You’re so Gen z, Karyn. Thanks for being here.

Karyn Polak [00:30:20]:
Thank you for having me.

Eric Brotman [00:30:21]:
This was fun. I’d like to thank everyone for listening and watching today. If you enjoy our show, please subscribe, leave a rating on your favorite podcast platform, and share it with your friends and family so they can join you on your journey to financial freedom. If you’d like to send us a topic or idea, we’re a great guest in studio, and you’d like us to discuss it in a future episode of Don’t Retire Graduate, please post it on our Facebook page or tweet us at Brotman Planning. We’ll be back next week with another entry in our diary of a financial advisor and in two weeks with another engaging guest. For now, this is your host, Eric Brotman, reminding you, don’t retire, graduate.

Unnamed Voiceover [00:31:00]:
Securities offered through Kestra investment services, LLC. Kestra IS, member FINRA SIPC, investment advisory services offered through Kestra advisory services LLC. Kestra AS, an affiliate of Kestra IS. Kestra IS or Kestra AS are not affiliated with Brotman Financial or any other entity discussed.