More technology companies are rolling out platforms to meet the growing needs of the green community. Gaining momentum is one introduced by New York-based Envestnet, (www.envestnet.com), the brainchild of Bill Crager, its president.
Since the platform was introduced in 2007, some 12,000 advisors have signed on, including more than 1,500 RIAs. Broker-dealers using it include National Financial Partners, ING Advisor Group and Ameriprise Financial, among others.
"We built this as an adjunct to our core platform as we see more and more advisors expressing an interest in SRI solutions for their clients," said Crager.
Envestnet manages more than $400 million in assets through its SRI platform. Its 75 investment offerings in that space include separately managed accounts (SMAs), mutual funds, and exchange-traded funds (ETFs). Envestnet consulted with Veris Wealth Partners and KLD, both based in New York, in the construction of the platform. The firm also has a relationship with Blue Marble Investments, based in San Luis Obispo, Calif., which constructs SRI portfolios. In addition to traditional SRI screens, the platform's technology allows advisors to screen investments based on environmental, social and governance (ESG) criteria.
With Envestnet, Crager says, advisors have three choices for building an SRI portfolio: (1) they can choose from 75 asset managers who specialize in SRI investment products, (2) they can select traditional separately managed accounts and customize them according to clients' preferences, or (3) they can outsource the asset management to portfolio strategists such as Blue Marble Investments or Veris Wealth Partners.
Advisory firms give Envestnet's platform high marks. Antonio Camejo, CEO and co-chair of Portfolio Resources Group Inc. (PRG), an international, minority-owned advisory firm headquartered in Miami with AUM approaching $750 million, says the Envestnet technology platform has become central to his firm's growth strategy.
"We had been managing fixed-income portfolios for both private individuals and institutional clients since 1991," explains Camejo. "About seven years ago we realized that three things stood in the way of further growth: (1) the labor-intensive requirements of in-house reporting and billing; (2) the inability to adequately diversify clients across asset classes with the same level of expertise we had in fixed income, and (3) the lack of high-end professional portfolio presentation software.
As soon as they began offering clients an array of Envestnet offerings, according to Camejo, " new funds started flowing in. " Having access to Envestnet made it possible for PRG to take another leap in growth in early 2008 when they joined forces with a number of SRI advisors to form PRG's SRI division.
Thomas Moser, a seasoned SRI manager and now an associate director of PRG's advisory firm, manages two SRI portfolios on the Envestnet platform: High Impact Growth-Nuke Free and High Impact Growth & Income-Nuke Free. Moser says one advantage is that the portfolios are comprehensive (investments cover many areas, including clean energy, water efficiency, preventive health care, fair trade and organic foods) and conform with Morningstar's investment "style boxes," including foreign and domestic. "Envestnet provides the modeling tools we need and is the best of the advisor technology platforms we use," said Moser. "Some platforms had trading restrictions such as buying foreign shares only as ADRs. Envestnet is more flexible and innovative."
Ben Kille, a managing member of the RIA firm Private Capital Group, in West Hartford, Conn., ($400 million AUM), says that during the first two decades of his 25-year career, many advisors traditionally believed that clients had to sacrifice a certain amount of return in their portfolios if they wanted to invest according to their personal principles.
"It's been educational to learn that's no longer the case," says Kille. "The educational part has been that many companies in the green space have addressed these concerns."
Kille adds that the Envestnet platform has allowed his firm to tailor an institutional investment solution to match individual client preferences. "The ability to integrate the specific principles of a given client into their personal portfolio is appealing, be it an environmental, alcohol, tobacco, animal welfare, adult entertainment or numerous other factors," said Kille. "We can also get very detailed in the screening process as a result of the platform."
Kille said he'd like to see the platform adopt more fixed-income offerings to supplement its equity offerings. Another shortcoming is its current lack of capability to perform options strategies in its equity portfolios, Kille notes.
Bruce W. Fraser is a New York based financial writer who contributes frequently to Financial Advisor magazine. He can be reached at [email protected]. Visit him at www.bwfraser.com/home.