Tanay Tatum-Edwards of FreeCap Financial: “Start investing early”

Start investing early: My grandmother was a small business owner who did not have access to a 401K through her employer. When she passed away, her wealth was in a savings account and in real estate. Not once in her life did she invest in the stock market. That’s a huge mistake. I’ve spoken to […]

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Start investing early: My grandmother was a small business owner who did not have access to a 401K through her employer. When she passed away, her wealth was in a savings account and in real estate. Not once in her life did she invest in the stock market. That’s a huge mistake. I’ve spoken to many women who fear losing their hard-earned money, so they keep it in cash rather than investing it. However, interest rates on savings accounts are lower than inflation, so if you only put money in savings, you’re technically losing money every month.

As a part of our series about “Women Leading The Finance Industry”, I had the pleasure of interviewing Tanay Tatum-Edwards.

Tanay Tatum-Edwards is an impact investor and founder of FreeCap Financial, an ESG investment data provider whose first product offers a revolutionary market-based approach to ending mass incarceration in the United States by providing corporate data transparency to inspire socially responsible investments. As a Fulbright scholar, Roddenberry Fellow, Echoing Green Fellow, and Halcyon Fellow, Tanay has dedicated her life to the pursuit of social equity and racial justice.

Thank you so much for joining us in this interview series! Can you tell us the “backstory” about what brought you to the finance field?

I never expected to work in finance. My background was in international development. After college, I spent time as a Fulbright in South Africa and teaching English in Ecuador, before returning to the US to fundraise for AIDS advocacy nonprofits. I went to graduate school because I was frustrated with how the individual development programs I built did not lead to the systemic change I had hoped.I thought, maybe there’s a way to scale some of this work using business instead of philanthropy. I was fortunate to land at Tufts University’sFletcher School which had robust finance and social impact programs. That’s where I was introduced to impact investing. Once I learned we could leverage investor tools to make the world more equitable, I knew I had found the scalable solution I was looking for. After graduation, I landed my first job in impact investing at a small asset management firm in Washington, DC.

Can you share with our readers the most interesting or amusing story that occured to you in your career so far? Can you share the lesson or takeaway you took out of that story?

It’s not an amusing story, but an important one that reshaped the trajectory of my career. A few years ago, while attending an impact investing conference, I sat in a room full of mostly white people who said they wanted to invest in racial justice. When someone from the audience asked the all-white panel investment solutions on the market, the panel didn’t respond well.

At that moment, I realized just how out-of-touch the “social” metrics in Environmental, Social, Governance (ESG) investing were from the needs of Black people on the ground and from the retail investors who care about social causes. We live in an increasingly diverse society , and the options on the market today are building and sustaining systems and structures that do not meet our increasingly diverse needs. As I looked at the folks in the room, I realized that if I didn’t try to create a solution to this problem — who else would? That’s how I started the journey that eventually led me to create my own financial data company focused on racial justice investing.

Are you working on any exciting new projects now? How do you think that will help people?

Currently, my team is excited to launch a product in September of 2021, which gives investors unprecedented transparency on corporate involvement in the prison industrial complex. In this report, we rate S&P 100 companies based on their “criminal justice footprint.” We assess everything from a company’s exposure to prison labor in its supply chain to its second chance hiring policies for people returning from prison. This is an entirely new investment lens for the ESG community! And this research will help asset managers and financial advisors align their clients’ investment strategies with their values more closely.

What do you think makes your company stand out? Can you share a story?

Our team is closely connected to the social problems we’re solving; this is why we can credibly help shape the trajectory of racial justice investing. Growing up in a small town in rural Florida, some of the smartest people I know went to prison instead of college. I studied the prison industrial complex, trying to find a way to understand how and why so many people I grew up with were pipelined into the prison system. I realized that the prison system was an example of how corporations profit off the exploitation of people every day. If people truly understood that they could direct their investments to companies that provide opportunity, rather than feed injustice, they would. In growing my team, I have intentionally worked alongside individuals with identities that are underrepresented in the finance sector, who provide a unique lens to the solutions we build.

Ok. Thank you for all that. Let’s now jump to the main core of our interview. Wall Street and Finance used to be an “all white boys club”. This has changed a lot recently. In your opinion, what caused this change?

Quite simply, it’s bad for business. A recent report from McKinsey & Co showed that companies with diverse executive teams outperform their peers overtime. So, if you want to create the best products that reach the most people, you need diverse perspectives in the room. Additionally, clients are demanding more from these institutions. If you can’t provide someone with a financial advisor or relationships manager who can understand their unique identity needs, people will take their money elsewhere. I’m happy for the progress made, but we still have a lot to do, particularly when it comes to promoting women of color to senior leadership positions in finance.

Of course, despite the progress, we still have a lot more work to do to achieve parity. According to this report in CNBC, less than 17 percent of senior positions in investment banks are held by women. In your opinion or experience, what 3 things can be done by a)individuals b)companies and/or c) society to support this movement going forward?

Individuals: For women working in finance, it’s important to go where you are appreciated. There are women building investment firms to reflect our values. If the men at your investment bank are passing you over for opportunities, go to where you are valued or build something on your own to open doors for others.

Companies: Promote more women, more quickly. It’s frustrating hearing people say there’s a pipeline problem to senior leadership. The analyst classes at big banks are filled with women, and at some point, the culture is filtering them out of executive-level positions. Every time you promote because someone fits the mold you’ve seen perform well in the past, you automatically overlook marginalized people because they haven’t had opportunities to showcase their talent. Additionally, give men parental leave packages. This would support women in the workforce, so they’re not penalized for having children.

Society: Let’s use our dollars to incentive companies to do better through our business. There are now gender lens investments funds. These make it easy for you to only invest in companies that promote women. Choosing to invest in those funds sends a clear signal to companies that they need to do better. Additionally, as a consumer, choose to spend money at businesses that reflect your values. If the entire C-Suite of a company is all white men, take your money elsewhere.

Let’s now turn to a slightly new topic. According to this report in Fortune, nearly two-thirds of Americans can’t pass a basic test of financial literacy. In your opinion or experience what is the cause of these unfortunate numbers? If you had the power to make a change, what 3 things would you recommend to improve these numbers?

First off, we need to fund the Consumer Financial Protection Bureau. Some banks engage in predatory behavior and intentionally make it difficult for people to understand the lending agreements they’re entering — having a well-funded government agency to monitor this behavior would help increase transparency for consumers and promote financial literacy.

Second, it’s important for banks and investment advisors to distill information in a way that’s simple for their clients to understand. For example, creating platforms that allow people to see how the money they invest today benefits them in the future. It’s a simple way to provide transparent financial education that meets people where they are.

You are a “finance insider”. If you had to advise your adult child about 5 non intuitive things one should do to become more financially literate, what would you say? Can you please give a story or example for each.

1. Bank with an institution that offers free financial education: There are some banks that are much better at educating their clients than others. CDFIs and Credit Unions often view financial education as part of their mission and have resources for their clients. When it comes to investing, I’ve been impressed with the financial education that robo-advisors do for their clients. For example, ElleVest and Wealthfront’s platforms are great at letting you create specific goals (e.g. purchasing a home, growing your family, retirement, etc) and explaining how much money is required today to reach those goals on your expected timeline.

2. Set up an emergency fund: I am a huge fan of emergency funds! You never know if you’ll have a medical issue that keeps you away from work or find yourself unemployed for other reasons. Depending on your lifestyle and risk tolerance, setting aside 3–6 months of living expenses is usually recommended.

3. Start investing early: My grandmother was a small business owner who did not have access to a 401K through her employer. When she passed away, her wealth was in a savings account and in real estate. Not once in her life did she invest in the stock market. That’s a huge mistake. I’ve spoken to many women who fear losing their hard-earned money, so they keep it in cash rather than investing it. However, interest rates on savings accounts are lower than inflation, so if you only put money in savings, you’re technically losing money every month.

4. Be smart about debt: Just because you are approved for a loan, doesn’t mean you can actually afford to take on debt. When my husband and I bought our home, we were shocked by how much more we were approved for than we could responsibly manage given our income. Purchasing a house at the amount deemed “affordable” by our lenders would have stretched our budget and left us unable to invest in other asset classes.

5. Treat saving for retirement like a bill: When setting our budget, we allocate money each month to our monthly bills and our long-term investment goals. Only after our investment bucket is filled, do we decide how much is left for discretionary spending.

None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story about that?

My first boss after graduate school, Kayoko Lyons, really pushed me to excel in my role. I was new to the asset management industry and suffered from imposter syndrome. Not only was this my first finance job, but I also did not have a typical Wall Street background. However, she taught me that everything in finance is immensely learnable, and she trusted me with work that built my confidence. She put me on high-profile projects that put me in front of the senior leadership at the company and showed others how capable I was — which was important. I’m not sure if I would have had the confidence to leave that job and build my own company if I hadn’t had that successful introduction to the industry.

Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?

“When someone shows you who they are, believe them the first time. They know themselves much better than you do.” — Maya Angelou

I no longer invest energy in people who say they care about diversity but don’t act according to those values. There are people in finance who want to be allies to women and people of color — sometimes you must work harder to find them as mentors, but they exist. Instead of trying to get a seat at the table of the “all white boys club” (which often doesn’t want me there anyway), I spend my energy building community with allies so that we can create our own table.

You are a person of great influence. If you could inspire a movement that would bring the most amount of good to the greatest amount of people, what would that be? You never know what your idea can trigger. 🙂

The way we engage in capitalism today is broken — the fact that people can make a profit while exploiting people and our environment is detrimental to our society’s long-term success and sustainability. I would make it so that every investment decision had to factor in the environmental and social impact risks and benefits, not just the short term financial gains. Thankfully, I get to work towards this vision everyday at FreeCap.

Thank you for the time you spent on this interview. We wish you only continued success.

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