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A lot of folks with 401ks and IRAs probably don't think much about proxy voting, but it can be a powerful tool for the kingdom. Hi, I'm Rob West. As investors, we have an opportunity to make our Christian values known to the companies in our portfolio.
We just need to take advantage of it. Brandon Pizarro joins us today to tell us how, and then it's on to your calls at 800-525-7000. That's 800-525-7000. This is faith in finance, biblical wisdom for your financial decisions. Well, it's great to have Brandon Pizarro with us again.
He's president and chief investment officer of Guidestone Capital Management, an underwriter of this program. Brandon, great to have you back. Great to be back. Thanks for having me on today. I thought it'd be helpful to just start by giving a thumbnail sketch of proxy voting.
How does it work? Sure, certainly. I'll try to break it down in a digestible way to think about it. When you buy a stock in a company, really what you're buying is a piece of ownership. You're owning part of that company, and owners get a say in how that company does their business. Obviously, that say or that voice is scaled based on how many shares you own, but everyone has a say no matter what they own. In fact, one of your recent guests on this program, the co-CIO at Eventide Asset Management, really spoke to this ownership aspect, and that dovetails well with today's discussion. By and large, if you take a quick step back, what are corporations doing? They have to have these shareholder interactions so that people can make that voice be heard.
It's usually about once a year or so, and all of the owners, so to speak, gather. Well, obviously, not everyone can get together physically in one place and vote on a wide variety of things that's board of directors, executive officers, the security of their executive officers, just a whole slate of matters that are pertinent to the company. Then when they gather, they can certainly have their voice be heard from that one standpoint. One thing that people have to think about here, the word proxy, where that comes from, is they can delegate their right to vote to another individual or firm. They're standing in as their proxy, who then of course votes on their behalf. Very good. Talk about how this relates to ownership in a mutual fund as opposed to owning a stock.
Sure. Yeah, great question. When you own a mutual fund, you actually own shares in that mutual fund, and that mutual fund then owns the underlying shares of the corporations, the companies that are invested in there. As you think about it, mutual fund companies, they own hundreds and hundreds of stocks, ourselves included. It'd really be impossible for a mutual fund company on its own to go out and attend every single shareholder meeting, stand there, raise their proxy card, or vote electronically. I actually had an opportunity to attend a proxy meeting for a stock. I owned a few shares back when I was younger and moved to Dallas in a company that was Dallas-based. I got to go see this process in person and actually watch this unfold.
I can tell you from firsthand knowledge of a 20-something quite a while ago that it is a difficult process to attend all of those. That's really helpful. This really, Brandon, may be news to people that have owned stocks or mutual funds for a long time. Perhaps they got the letter in the mail about proxy voting. They didn't really know what it was, so they just threw it in the trash and didn't realize they have a real voice into the company. That's exactly right.
It happens all the time. Yeah. Before we head to this first break here, Brandon, share with us Guidestone Fund's history with proxy voting.
Yeah, great question. Our Christian faith governs all of our investment strategies. We know that no corporation is perfect, certainly. We have our Christian value screening process that eliminates some companies, but then there's still a very wide swath of the investment universe that we continue to own.
Even the quality companies that do pass these screens, they could still have some policies, procedures, business areas that don't fully align with every Christian's personal conviction. That's where engaging with companies from this proxy voting standpoint really allow us to make our faith known, make an impact for God's kingdom. We want to use these voting rights as a kingdom voice, so to speak, in that marketplace. Our history here, before 2023, we had delegated that voting responsibility to the mutual fund sub-advisors, those external asset managers that we utilize in our fund complex. However, we just felt led to do better, really, in this way as companies were really starting to get away from being about their business, making the widgets, providing the services that they are supposed to be doing. We thought, well, we need to make sure our voice is heard and injected that. Back in July of 2023, we took that process in-house.
We're now a year out. We voted for the prior year, all of those proxies in the way that Guidestone feels most aligned with Christian investors' wishes. That's really helpful. I think the big idea here is, as we talk more and more about the opportunity for believers to align their faith with their investment decisions, that certainly comes in at the investment selection process. You touched on that, Brandon, through screening. This whole area of proxy voting and shareholder engagement is another piece of that puzzle and a great opportunity for you to express your values as a believer. Well, when we come back, we'll give you some examples and talk about some of the wins that Guidestone has seen in this area.
We're talking today with Brandon Pizarro. He's president and chief investment officer of Guidestone Capital Management, an underwriter of this program. Back with more after this.
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Brandon, for somebody who's just joining us, a quick thumbnail sketch. What is proxy voting? Sure. Yeah, we're talking about proxy voting, which is really just when you own a stock in a company, you own a piece of that company. The proxy is just your ability to have a vote on what that company does as a publicly traded entity.
Yeah, very good. Then the next logical question is, do these votes actually make a difference? Is this something that can actually affect change? Why don't you share an example with us?
Sure, it certainly can. I think those that ignore their power, so to speak, are really leaving a key critical area of that ownership on the table. Let's unpack an example here. I think your audience and you've probably heard of de-banking, a trend, so to speak, that's come up. It's really a recent phenomenon. That's when banks decline services to clients based on so-called reputational risk or social risk or however it is that they couch it. What's really happening here is really, what are people thinking about when this takes place? They're being discriminated against.
I think it's myopically polarized. Frankly, I think a lot of the Christian value set where those that are having, say, their banking services with a certain bank, they might just wake up one day and essentially find that their accounts being closed and their money is being returned to them with no real reason or rationale for why that takes place. Critics have rightly pointed out that banks have discontinued doing business with these individuals.
It's probably or more likely that it's just because of a religious or political perspective. That's something that can't continue. That's a real life example of things that have happened. Now, what have we done about it? What have other investors done about it?
Well, the way to, again, have your voice heard is to bring these issues and attention to management. Beyond just banks in particular, a lot of companies have become really politicized. We've seen that over the last several years in particular.
It's really reached a critical mass. When an individual or an entity is told, you can't bank here for this particular reason, the obvious question is, well, why is that? Well, they're often not offered an explanation for that. Thankfully, in this proxy season in particular that we just saw, there was a lot of proposals on a wide range of companies' ballots really just asking for reports on viewpoint discrimination, really a counterbalance for, hey, tell us why you're going to just have this one vantage point or why you might be able to, quote unquote, de-bank someone without really any given additional thought or insight into that. We know that anecdotally, in fact, that companies like this viewpoint discrimination point on their proxy ballots because it offers an alternative. If you're having just one way of thinking, one way that people are pushing a company to act, in this case, we believe bad actors when de-banking Christians in particular is coming to light, then having this counterpoint is really something that a publicly traded company welcomes. They want a counterbalance and we want to be that counterbalance for the Christian investor along with plenty of other asset managers that are faith aligned.
That's really helpful. Brandon, I know you and I are in this space all the time, but it seems to me that there is a growing awareness on the part of companies and company leadership and the boards of directors around this idea that those of Christian faith values are going to show up increasingly and make their values known. And these companies seem to be responding in larger numbers. Are you seeing that? Absolutely.
I mean, they certainly are. And just because you're seeing this groundswell of support from, quote unquote, the other side, right from the Christian vantage point, it's really gotten attention. I mean, Christians own a wide swath of assets. And so we have to use what we have on this earth to make our wishes known and align ourselves with our biblical principles.
And voting with our capital, so to speak, is one very glaring way to get the world's attention. Yeah. Brandon, obviously, if you're an owner of a stock directly, you have to make those decisions yourself or you could delegate that to someone, but often you don't know who.
In the case of owning a mutual fund like a Guidestone mutual fund, then you know you have somebody, a manager who is aligned with your values doing that for you. And that really helps to make this possible. Isn't that right?
Yeah, it's absolutely right. We think of that as a key element in the mosaic of just this broad faith-based investing umbrella that, again, it's fine to exclude securities you don't wish to own for obvious reasons. But then again, the opposite way of saying, for those that we do own, making our voice heard, we think a lot about a verse, if I may, just to Matthew 5, 14 through 16. In that, Jesus calls Christians the light of the world and tells us that we should let our light shine before others so that they can see our good works and give glory to the Father. And I think that's a key element that's guiding principle really for the way that we're seeking to approach this whole proxy voting element.
Having the Christian voice heard through proxy voting is our way of letting our light shine and making that difference in the world. Yeah. And this is one piece of the faith-based investing landscape you touched earlier in our conversation around screening.
I'd love for you to talk about that as well. How does the team that you lead there at Guidestone Capital Management go about screening those companies that are either in or out of your portfolios? What does that look like at a high level?
Sure. Now, it's a rigorous process, but it's also art and science. I somewhat tongue-in-cheek or jokingly tell a lot of people that if you flip to the back of your Bible, there's not a clean index of all the securities you should be screening out in your portfolios. So because of that, we really just want to stay biblically grounded. And so we have a team dedicated to this effort where we seek to go in. We have a faith-based investing committee.
We certainly have software and tools that we get to drill down deep on where these individual companies are basically gaining their revenue. Is it from means that we find antithetical to our moral and ethical posturing? And it's through that Christian value screening where, yes, we're excluding securities, but more really, we're opting into those things that we think that we can gravitate towards. The publicly traded world is not chock full of quote-unquote Christian companies.
We know that to be the case. But if we can avoid those things that are securities that are the biggest actors of malfeasance from a Christian perspective, then that allows us to basically day in and day out, it's a daily effort ensuring that we don't own those securities. We communicate that clearly. We have very thoughtful conversations with our faith-based investing committee that I chair. We just had one such conversation yesterday and it allows us to really just think through navigating the environment in which we live in today, the global capital markets through a Christian perspective. And Brandon, of course, one of the objectives of investing is to seek appropriate risk-adjusted returns and I would imagine you would advocate that we can seek those returns and be aligned with our faith. We don't have to sacrifice one or the other, do we?
That's exactly right. When I think of faith-based investing, those are not mutually exclusive propositions that you should be able to have a faith-based element and still gain the return needed for whatever it is your end goal or end result is in investing those assets. And so because we think of those as not mutually exclusive propositions, we have to hold our own feet to the fire to what the world in secular investing, so to speak, thinks about when they think about benchmarking, peer medians, peer universes. Our team is myopically focused on beating those parameters in order to say we can showcase value net of our Christian value screen. We believe we've done that across our funds complex in a lot of ways, but it's something that we come in day in and day out and are tasked with.
Brandon, we're almost out of time. I want to finish with just what's going on in the larger faith-based investing universe. What are you most excited about as you see the innovation and the growth of this segment? Yeah, this is a really exciting time to be in this space. And I just see the crystallization and the catalytic nature really of faith-based assets moving in the right direction. I feel like there's a lot of camaraderie and mutual respect amongst faith-based investors. We are linking arms. We are making our voice heard.
Yes, we live in a world where there's competition, but at the same time, I really like the way that we have found a lot of common ground with other faith-based investors to make our voice heard collectively as a Christian community. Excellent. Well, Brandon, we so appreciate your time today.
Thanks for stopping by. Yeah, thank you. That's Brandon Pizarro with Guidestone Capital Management, an underwriter of this program. You can find out more at guidestonefunds.com slash faith.
That's guidestonefunds.com slash faith. All right, your calls are next. That number, 800-525-7000.
That's 800-525-7000. I'm Rob West, and this is Faith and Finance. We'll be right back with much more just around the corner.
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That's kingdomadvisors.com. Great to have you with us today on Faith and Finance. I'm Rob West. We're taking your calls and questions today on anything financial. We've got some lines open, 800-525-7000. That's 800-525-7000. Let's go to Chicago and talk to Larry on WMBI. Go ahead, sir. Hi, Rob. Thank you very much for taking my call. I really enjoy your show.
You really helped me a lot. Quick question. The situation is my daughter and her husband are fairly well off. They have their condominium paid for.
It's worth about $350,000. And they're looking to buy a home and they want to stay about $800,000 for a total purchase price. They've got about $300,000 to put down already. And they were thinking about selling the condo. And I said to them, as I've done many commercial properties myself, I said, don't sell the condo.
Get yourself a loan on the condo and have the loan paid for by renting it out. And this way, they can use the equity in the property as towards their down payment and knock the down payment of their new residence down to something a lot more manageable than what it would be otherwise. They're a little concerned about how that would all shake out. And I assured them that I've done this many times myself. And I think that it's a good way to go.
And I was just hoping to get your opinion on it. The tax breaks for having a commercial property and if the interest rates do go lower, you can always refinance and take more cash out. And like I said, though, I don't want them to get a line of credit.
I want them to get a home loan, a home equity loan for a fixed rate. Your thoughts? Yeah, let me just make sure I understand the situation.
I appreciate the background, Larry. That was helpful. So the home they're looking to buy, you said they're looking to pay about eight hundred thousand. Is that right?
Yeah, that's probably going to be a minimum. The way things are, it's probably closer to nine. OK, so let's say it's nine hundred thousand.
And what do you say? What did you say they have available in cash to put toward the purchase without selling the condo? About three hundred thousand. All right. And they were planning on putting the whole thing against it? Yes. And they still have enough for emergency funds and so forth. Great.
All right. So that would be so you said they put three hundred thousand down on nine hundred thousand. So about a third, which is great.
I mean, that's good. I mean, even though it's still a jumbo loan at six hundred grand, they're putting down thirty three percent. Now, you know, if the let's say they're, you know, interest rate is seven point five, you know, I mean, we're talking a pretty hefty mortgage payment. Have they looked at that just in terms of, you know, that's probably, you know, all in twenty somewhere around three thousand a month.
I would gather, you know, between property taxes, homeowner's insurance and the principal and interest. Do you know whether that fits in their budget? And I'd be looking for that to be no more than twenty five percent of their take home pay.
Yeah, we've already done that budgeting numbers and their maximum they can spend is forty five hundred a month. Well, they're within the range. Yeah, they're they make good money. They're OK. Yeah.
They're educated people and they're good people. Yeah, that makes sense. OK, so now let's flip over to what you're suggesting. So what's the value of that condo?
I would say it's probably right around three twenty five to three fifty and it's all right. And it's paid for. OK, very good. And so obviously, if they sold it, which was their original plan, now they're putting down six hundred and a quarter on a nine hundred thousand dollar home and they got a much lower mortgage payment. But you're suggesting don't sell it, keep it rented out. But you're also saying that you should get a loan against it and put that toward the new property in addition to the three hundred thousand.
Is that right? Yes, that's my suggestion. I understand that because it will be a rental that they won't be able to get, you know, the full amount for a loan as if they were if as if they had a mortgage, because I guess that's classified now as a commercial loan.
So they would probably be down around, I would say probably about 250 to 275 being that it would be now a commercial property. Yeah. OK. And are you looking, you know, for them to be able to deduct the interest? Is that why you're wanting them to do that? Well, that's so much to deduct the interest.
My whole goal for them is to build wealth. And if they if they hang on to the condo and rent it and essentially the loan on the condo and its costs are covered by a tenant, which they could probably get about three grand to thirty two hundred a month for from the numbers that I ran in that area. To me, it's it's a wash.
It's almost like a no brainer. Somebody's handing you three hundred twenty five thousand dollars and somebody else is going to pay for it. And you're building equity in your condo. I mean, I really don't see the downside. That's right. No, I hear you. But I guess I'm wondering why if they're if they're ready to be landlords and they've got the financial wherewithal to do it.
And you said they do. Why not just keep that property free and clear? Go ahead and rent it. Still buy the new place, put down the three hundred thousand, go and get the six hundred thousand dollar loan that they can more than cover because you said they could go up to forty five hundred. And I'm guessing it's going to be about three thousand a month. And then take that surplus cash flow that they're throwing off because they're going to get a better rate on their primary residence than they are on the investment property for the loan. Take that cash flow that they're throwing off and use that to pay down the primary mortgage. Oh, I see what you're saying.
In other words, just use the monthly rental that you're getting to add to the monthly payment on the primary on the new primary residence. Yes, I understand. I'm just concerned that the jumbo loan is going to be so much higher in that regard, you know, as opposed to, you know, instead of being a six hundred thousand dollar loan, they'd have a three hundred thousand dollar loan. Yeah.
Yeah. You know, I think it's probably going to be a wash. The difference between I think actually the jumbo rate is going to be less than the rate on the investment property, which is going to be a secondary residence.
So they could look at that. But I'm more inclined to them, you know, to keep get the mortgage the way they were planning currently. And then let's just use all that extra cash flow to throw it off and accelerate the mortgage payoff. And the fact that they're down under 20 percent of their take home pay on that mortgage, even though it's at three thousand a month, you know, is going to, you know, something they can still carry, even if they don't have a renter. But I think they're going to be better off with that approach. So I think one of the two would be perhaps the way to go.
But I kind of like and think that on paper, using the owning it free and clear on the investment property is the better option. Thanks for your call, Larry. We're going to finish up in North Carolina. Hi, Shelley. How can I help you? Oh, hi. Thank you for taking my call. I am almost 59 and I have been asked by my daughters to stay with her for a little while to help get her on her feet. And so I'm going to sell my house. I don't owe anybody anything.
I don't know what to do with the money from my house when I sell it. Yeah. And this is going to be a temporary move. Is that right?
Well, you never know. Wherever the Lord takes me, that's. Well, let's do this right now. I feel my pool.
Yeah. And I certainly understand that. And that'll be a blessing, I'm sure, to her. I think given the uncertainty around the timing of all this and where the Lord might be leading in the future, I just put it in a high yield savings account. You know, you could go to bankrate.com, find an FDIC insured savings account paying five percent. You won't have to worry about losing any of it. You'll get a good rate of return while you're waiting and then just discern where the Lord is leading next. So I think rather than investing it or anything else, it's going to lock it up.
Let's put it in somewhere that's safe. And fortunately, we're getting good rates of return right now. Hope that helps you again.
That website bankrate.com. Thanks, Shelley. Big thanks to my team today, Adam, Devin and Jim.
Couldn't do it without them. Thank you for being along with us on faith and finance. May the Lord bless you and we'll see you tomorrow. Bye bye. Faith and Finance is provided by Faith Buy and listeners like you.
