49. Socially Responsible Robo-Advisors

Here’s this week’s letter:
I just discovered the show recently and have been learning a lot, especially as I think about stepping up my investing game. My issue is that I’m busy. I work at a startup and I just don’t know when I’ll have time to really sit and think through every stock in my portfolio and make sure that they are socially just companies and that I’m setting myself up safely for retirement at the same time. So, what do you suggest for the super busy investor who still wants to feel good about their portfolio?

Hey! Thanks so much for sending in your topic this week. Another very interesting one, and very timely. I mentioned back in Episode #25 a list of books for adults and kids on this topic of lining up our money and our personal values and one of the books I mentioned that I’m reading is called Activate Your Money by Janine Firpo. I’m still working my way through the book and I have just really enjoyed it. Your question took me right back to a section in the book about working with values-aligned financial advisors and actually a subsection of the book where she talks specifically about values-aligned robo-advisors.

I know I have said this many times over several episodes but just a reminder, I’m obviously not your financial advisor, consider this a learn with me type of discussion, I am not proclaiming anything from any mountain. I’m just doing careful research and reporting back what I’m learning.

So when you mentioned that you work in tech, it made me think you might be open to considering this newer trend of robo advisors. The advantages being low minimums, low fees, easy online access to see what’s going on with your portfolio at any time. After the robo-advisor understands some things about you and your goals, it will automatically make adjustments to your portfolio all the time to make sure you’re on track for what’s important to you. Robo-advisors are computers, so they’re not going to be able to establish a human connection with you, obviously, and so that means even when you are answering some of the seemingly basic questions about yourself, you won’t have the advantage of being able to talk to a human about your answers, and then the other limitation is that your robo-advisor might not include investment opportunities beyond your traditional stock, bond, ETF type of opportunities, but I think there’s a lot that sounds really intriguing about this option. Especially because so many robo-advisors have started to layer in this question of values-aligned investing.

So you can go with one of the popular robo-advisors like Betterment or Wealthsimple. In the book the author was also mentioning Folio. You can go with one of these more popular robo-advisors and they do offer some values-aligned choices but you could also go with a robo-advisor that takes it another step farther. These robo-advisors are, as the author puts it in the book, “designed with values alignment as a core part of their investment strategies.”

So those are robo-advisors like Newday Impact. They are a B-Corp, we talked about what that means in episode #10. They give you different choices for impact themes that you might be interested in. Climate action, sustainable agriculture, animal welfare, and fresh water. They donate 5% of their revenues to nonprofit partners.

OpenInvest is a public benefit corporation and another values-aligned robo-advisor. They give you a choice of 15 different impact themes and you can invest in individual stocks and you can vote your proxies via the app. We talked about what that means in the recent episode on Shareholder Activism.

And then there’s EarthFolio. You choose from different funds. They’ve been around for a long time, over 20 years. They have higher minimums. That’s going to be something to keep in mind when you’re thinking about which robo-advisor may make sense for you. EarthFolio has a minimum of $25,000 whereas the other two values-aligned robo-advisors that I mention have $100 minimums, that was Newday Impact and OpenInvest. And the fees for all three are ranging between 0.5% and 0.75%, which is another reason some people are finding robo-advisors to be attractive, the relatively low fees. You know, I’m also wondering if they don’t reduce or eliminate some of those fees entirely depending on how much you are investing with them.

So those are some interesting options, I think, for a busy investor who is kind of new to investing and probably open to a modern tech way of doing things. 

There’s another option that’s mentioned in the book called Ellevest. It is a robo-advisor for women. There were two cofounders, one of whom is a woman and came from Bank of America. Anyway, the premise is that mainstream investment firms are built by men for men but Ellevest takes into consideration some things that tend to make investing different for women- we tend to live longer, get paid less, and hit our salary peaks earlier in life than men and then we tend to have breaks in income to take care of children or parents. So anyway I remember when Ellevest started out just as a robo-advisor but now I see from their website that they have expanded quite a bit, to include debit cards, banking services, workshops, etc. And apparently they just raised a lot of money this year in series B funding, $53 million. 

So consider that a 4th option for a values-aligned robo-advisor. I hope you do keep in touch and let me know what ends up working for you. I know you’re busy, so I want to encourage you to pick an easy, relatively accessible option today rather than waiting to make a decision until you feel like you have enough time to do a deep dive. With investing, time is the most important thing, so I want to encourage you to go ahead and get your money started as soon as possible.

Thanks for joining today’s discussion. Share the episode if you know someone who might find it interesting. Please send in any topics that you’ve been thinking about. The email address is in the show notes, it is spenddonateinvest at gmail dot com. Anything related to how we can bring our money and our values into closer alignment is on the table, so please reach out with whatever you’ve been thinking about! You can always check out spenddonateinvest dot world to see more episodes and to provide a rating and review for the show! There’s also a beta feature where you can leave me a voicemail if you don’t feel like typing out your topic! That’s all for today. Let’s talk again soon!