People who live in Beverly Hills are probably better known for their glamorous lifestyles than their righteous moral compasses. Yet some financial advisors have found beneath the glossy exterior of the legendarily materialistic enclave a sizable niche of people looking to invest in line with ethical, religious or environmental beliefs.

Mary King, a Merrill Lynch vice president and wealth manager, is one of those advisors. Working out of her Orange County home and Merrill's Beverly Hills office, she serves 50 clients and manages some $250 million in assets in accordance with those clients' ethical guidelines. "I could probably expand my client base more, but I'm putting my career on cruise control right now because I have a young child," says King, whose client base consists mainly of those interested in faith-based investing.

About 400 miles up the California coast in San Francisco, Merrill Lynch private wealth advisor Hilary Giles helps people who want to invest all or part of their portfolios along environmental and social guidelines. A good number of these clients have built their fortunes in technology and biotechnology stocks, among other industries in that area. "Many of my clients drive hybrids and have solar panels on their homes, so their interest in environmental investing isn't too surprising," she says.

The notion that advisors like Giles and King have built thriving practices around values-based investing might seem at odds with their employer's recent financial woes and ethical lapses. Just two years ago, Merrill Lynch had billions of dollars in toxic debt on its balance sheet and played no small role in helping ignite the Great Recession. Stories about former Merrill CEO John Thain's $87,000 office rug and his last-minute handout of billions in bonuses while the company was struggling to survive did little to help Merrill Lynch's reputation. Soon after Bank of America acquired the company in September 2008, the bank's stock suffered crushing losses, and skeptics said that the $29 per share purchase price, a 70% premium over Merrill Lynch's pre-acquisition value, was too high for a firm with such huge liabilities.

Yet even in the heat of the turmoil, Merrill's field force tried to contain the damage its reputation had suffered among clients. "We emphasized that client assets at Merrill Lynch were safe and in no way co-mingled with the firm's assets," says Rehana Farrell, a managing director at the firm's Managed Solutions group. As for socially responsible investors' concern about Merrill's recent malaise, Farrell says, "It really hasn't been a hindrance at all. The subject doesn't come up."

Back On Track
With both the stock market back on track and real estate perking up, things have improved considerably for both Bank of America and its new brokerage. Contributing to that growth is Merrill's value investing business, which has grown steadily and become more organized over the last few years. That growth didn't start with dictates from company headquarters, but with grassroots efforts by the firm's advisors.

The most cohesive and well-organized group in the values-based investment area is Merrill's Christian Focus Group. Established four years ago by two advisors with Christian clients, it has expanded to 650 advisors throughout the country, and more than 300 of them have joined in the last year alone. Advisors in the group come from Houston, Tennessee, Beverly Hills, Chicago, Boston, New York and other areas of the country.
Besides their religious directives, these clients might also ask their advisors to take into account concerns such as the environment.

"This isn't only about Christian values, but about values in general," says Farrell. "We even have some Jewish advisors in the group who want to understand their Christian clients better."

In the last year, the firm has stepped up its efforts to educate advisors in the field about what's available to investors who want ethical, environmental or religious screens, says Jay Morrison, a vice president at the Managed Solutions group. While there are no figures on how many investor dollars are allocated to socially responsible or ethically screened investing, Morrison says that about 10% of those clients who use separately managed accounts, (those with a $250,000 investment minimum) have identified social or religious values as important. Besides the selling agreements Merrill has with some 60 values-oriented mutual funds, the company also offers socially responsible separately managed account platforms guided by religious values.

SRI clients run the gamut from small investors to the ultra-wealthy. "We have Bible Belt investors with a few thousand dollars, people with multimillion dollar accounts, and everything in between," says Farrell. "These are all people who want the opportunity to advance philosophical and moral ideals and influence outcomes through investment."

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