Fidelity Investments, one of the world’s largest and most diversified financial services companies, recently announced a new relationship with Ethic, which offers advisors working with Fidelity a solution to create personalised portfolios for their clients based on their values and the issues that are important to them. With a focus on helping investors meet their financial goals, Ethic’s “values-aligned” separately managed accounts (SMAs) complement Fidelity’s portfolio construction resources to help advisory firms incorporate ESG investing into their business. This approach, which will be available to a limited number of firms initially, also provides a client engagement strategy that will help advisors connect with the next generation of investors.
“We see a significant growth opportunity for advisors who incorporate an ESG investing approach because it drives more meaningful conversations with clients. That leads to advisors better understanding their clients’ life goals and how they can help them feel more fulfilled,” said Bob Litle of Fidelity Institutional Asset Management.
“Not only do we believe this will help advisors and their firms differentiate themselves, but it will also accelerate our industry’s move toward sustainable investing and further Fidelity’s goal to offer investment options that align with investors’ values.”
The demand from investors is already there: according to Morningstar data, ESG funds attracted $8.9bn in the first six months of 2019 alone, compared to $5.5bn in all of 2018.1 And in fact, the potential for ESG investing is exponential. Today, ESG is a discrete category of investments, whereas in the future, Fidelity sees the possibility that consideration of ESG factors in asset selection could become the “new normal.”2
“The role of the advisor has evolved in recent years, first extending beyond portfolio creation and now outgrowing financial planning. Increasingly, clients require guidance in all areas of their financial life – including how best to align their portfolios with their unique values,” said Jay Lipman, co-founder at Ethic. “Ethic empowers advisors to seamlessly become sustainability experts and take ownership of that conversation, engaging and retaining existing clients while simultaneously attracting new ones.”
Ethic’s solution draws from several data sources to aggregate, analyse and predict sustainability issues, and uses quantitative portfolio construction to tightly track underlying benchmarks. Advisors can use Ethic’s technology platform to either select existing ESG models built around certain themes,
or to create a custom allocation using direct indexing. Ethic aggregates several data sources to analyse and predict sustainability issues, and to build “clean” portfolios.
For more ESG news, follow The European
I Morningstar.com, “Sustainable Funds in the US Saw Record Flows in the First Half,” July 11, 2019.