Looking Forward with Houston Business Journal
As many try to recover from the pandemic, Houston Trust Co.’s CEO has a few suggestions for laying the foundation.
As society attempts to climb out of the pandemic, people have become more conscientious about their future than ever. And David Lummis thinks a perfect place to start investing in that future is through real estate.
Lummis, president and CEO at Houston Trust Co., believes now is as good of a time as any for people — especially young people — to invest in real estate because of the low interest rates on mortgages. Asset ownership offers protection, which, after more than a year in a pandemic, could be the difference between being on the street and having a cushion to fall back on.
“There’s a portion of the younger generation that really doesn’t want to own assets, but I wish they would,” Lummis said. “I think owning a home has a lot more benefits than just financial.”
Lummis has deep familial roots in Houston with his lineage dating back to the early days of the city. According to Lummis, his great-great grandmother was the niece of one of the Allen brothers who are known as the founders of Houston.
Lummis graduated from Princeton University with a degree in liberal arts before he found his passion in finance and accounting.
He was recruited by the founders of Houston Trust Co., James A. Elkins Jr. and James A. Elkins III in 1994 to join the company as the president and CEO where he has since remained.
“Overall, it’s a company that administers trusts and estates,” Lummis said. “That all happens at the intersection of law, accounting and finance. We’re not purely an investment firm.”
Lummis talked to the Houston Business Journal about how the pandemic impacted investment trends and what the future of investing might look like with the delta variant becoming more prevalent.
How did you get your start in finance?
I came back to Houston in the 1980s and worked in a bank training program. I really enjoyed accounting and finance, and that’s where I was first exposed to it. I went back to school, and got an MBA and a master’s in accounting. Then, I went to work for Lazard in New York in the late ’80s. My wife and I wanted our first child to grow up in Texas, so we moved back to Houston where I worked in large family office for a few years. Jim Elkins told me he wanted to set up a trust company, and he asked me to join him. I thought that was a great idea, and I’ve been here since 1994.
What do investment trends look like among your clients as we come out of the pandemic?
The year that energy and oil companies had in 2020 was sobering for a lot of Houston investors. Prices dropped so low, but they were able to make a comeback this year. The older investors who were comfortable holding these legacy energy and oil stocks were jolted. Now, they’ve become more interested in the benefits of diversification.
Does this look different among your younger clients?
I think the younger generation had already been there with diversification. Both the more senior generation and the younger generation have embraced technology. Most recently, clients of all ages have required our opinion on shifting into and out of positions. Our advice remains the same with long-term investment approach with strong, well-managed, and resilient companies.
How do you think the rise of the delta/lambda variants might affect investment trends?
This resurgence with the new variant isn’t going to fundamentally disrupt the recovery of the global economy. A potential lockdown in Europe or Asia might move investment capital and economic activity more to the U.S. and more developed Asian and European countries.
Recent surveys have shown the importance of socially responsible investing to consumers. What are your thoughts on how financial advisors and investors should navigate investing in a company whose values might not align with their own?
It’s a very popular topic. Particularly in the institutional investment world with pension funds, university and retirement plan endowments. Our general view is that we can access this information through a vanguard index.
The equity managers that we mostly use say that a good investment is a company that’s able to sustain and grow its business over the long long term. Companies that can do that over decades have to be responsible and take care of their employees and customers. They won’t last very long if they don’t. This also tends to reduce the diversification of an investment portfolio because it excludes entire industries based on ESG characteristics. It can impact your return and increase the risk of your portfolio. If you’re a fiduciary like we are, your job is to provide good returns for your beneficiaries at reasonable risk. But it is a legitimate way to assess a company.