Nearly 1,000 miles apart, these two financial advisors see some of the same trends: More clients are interested in socially responsible investing, but they don't see as many options as they'd like when it comes to delivering it.
"With this economic downturn, you would think people would be less concerned with SRI investments, but actually we've seen an increase," says Timothy Long, CEO and founder of Keystone Financial Associates LLC. Long is based in the firm's Mechanicsburg, Pa., office, but Keystone also has offices in Carlisle and Chambersburg, Pa., and Grantsville, Md.
Joel Magruder, CFP, president and CEO of Financial Partners Group Inc. in West Des Moines, Iowa, also says more clients want SRI. "I find clients are becoming more and more concerned that their dollars are going to causes that they are spending time fighting," he says.
Although the number of SRI mutual funds has grown, both advisors agree that all asset classes aren't well represented among fund offerings. U.S. large-cap SRI funds are easiest to find, but there tend to be fewer to choose from in international, small-cap and bond categories. When necessary to provide diversification, Long says, he will recommend ETFs that aren't screened to clients.
Both Magruder and Long have found that separately managed accounts often provide the diversification that they need for their clients. They both use SMAs offered through Curian Capital, based in Denver, Colo., as an option to help build customized SRI portfolios for clients. Curian offers 14 social screens and allows clients to exclude individual stocks as well.
Magruder has about 350 clients and about a third embrace SRI, he says. Most of his SRI clients are looking for faith-based alternatives that support Christian values and want to screen out companies involved with pornography, alcohol, tobacco, abortion, contraception and stem cell research.
Long also has a comprehensive financial planning firm that specializes in faith-based investing alternatives. He agrees that building SRI for clients does take more effort. Some clients are from similar backgrounds but aren't all looking for the same screens. For example, many of his clients are Mennonites and Quakers who believe in peaceful living, but some don't want to exclude defense industries. And about 15% to 20% of his Christian clients aren't interested in screening out companies that are in some way involved with abortion, he adds.
For some advisors, it's not worth offering SRI, Long notes. "A lot of it is a personal decision not to do it because it is extra work, extra time, and if you don't feel strongly, it becomes an extra expense. I feel it's a calling, a way of giving back. It helps people feel good about the decisions they are making."