Wealthify has become the latest platform to add an ethical option for its millennial audience of investors – allowing them to do their bit for the planet with their spare cash.
It’s the first to offer the option from a minimum investment amount of £1.
Moola, the robot investment platform run by Gemma Godfrey, launched an ethical option for investors in March this year, with a starting amount of £50.
Wealthify’s move is in response to increasing demand for this option from its customers, demonstrating greater awareness among investors that their money can do good and still make a profit.
“Our new ethical plans enable customers to ‘do their bit’ and have a more positive impact on society and the environment, whilst giving their money an opportunity to grow over the long term.”
Michelle Pearce, Wealthify
Robo investment platforms are designed to make investing easier and cheaper for a wider audience. They offer investment portfolios according to an investor’s risk profile, removing the need to pick funds on your own.
Michelle Pearce, CIO and co-founder of Wealthify, backed by Aviva, said: “We have listened to our customers and I’m delighted Wealthify is now able to offer ethical portfolios, starting from just £1. We want to democratise investing and give our customers the opportunity to invest in line with their principles.
“The fund providers we have chosen are best of breed in their relevant sectors of ethical investing; quality of governance; ethical stance, and historical performance. All fund providers are signatories of the Principles of Responsible Investing (PRI), the world’s leading proponent of responsible investing. Additionally, we know these fund managers can effect positive ongoing change in ESG standards via proactive shareholder involvement.
“Our decision to use actively-managed ethical funds reflects a desire to provide customers with the most ethically-robust investment plans possible. The layers of additional qualitative monitoring carried out by the fund providers, along with third-party independent verification and specialist assessments, should provide assurance to customers that their money is being invested in the most principled companies operating the highest ESG standards.
“In addition to ongoing screening from the fund providers, Wealthify’s investment team will also continuously monitor the underlying investments to ensure compliance with our own strict ethical investment policy3.
“We’re very proud to launch our ethical portfolios in response to growing demand from customers who want to invest without compromising their values. Our new ethical plans enable customers to ‘do their bit’ and have a more positive impact on society and the environment, whilst giving their money an opportunity to grow over the long term.”
A spokesperson for Royal London Asset Management said: “We’re delighted to be working with Wealthify. We believe their platform has a close alignment to the ethical principles and goals of its investors and compliments our Sustainable and Ethical range of funds. Wealthify’s easy to use ethical investment portfolios respond to increasing demand from consumers seeking to grow their assets by investing in sustainable activities that will minimise the impact to the society and environment.”
About the Wealthify ethical option
The ethical portfolios will span five risk levels (cautious, tentative, confident, ambitious, and adventurous), reflecting Wealthify’s current investment proposition. Ethical portfolios consist of exchange-traded funds (ETFs) and mutual funds, containing a mix of shares, bonds (corporate and government) and thematic investments such as gender equality funds, from a variety of regions across the world (UK, US, Japan, EU, Emerging Markets, and Asia Pacific) to ensure diversified portfolios.
Wealthify’s five ethical investment portfolios use active funds from best-in-class fund providers: Edentree, Kames Capital, Liontrust, Legal & General, Royal London, UBS, Stewart Investors, iShares, and Vanguard1. These providers have been selected by Wealthify for their exemplary quality of governance and ethical stance, and each employ rigorous and ongoing screening processes to ensure appropriate ethical credentials for the relevant funds are retained.
Fund providers will exercise negative screening for ‘sin stocks’ and positive screening that selects companies that demonstrate the highest environmental, social and governance (ESG) practices, as well as identifying and investing in those companies making demonstrable improvements2. The fund providers will regularly monitor this, as well as using their shareholder influence and voting power to steer organisations to even higher ethical standards. If an invested company consistently allows its ESG rating to slip, investors’ money will be withdrawn, and the company removed from the fund. Wealthify’s investment team will also regularly monitor and scrutinise companies in the ethical funds to ensure their standards of practice do not fall below expectation3. This will be done using specialist ESG company assessments conducted by a third party, analysing companies’ activities and policies against a specific set of criteria.
Wealthify’s investment team has developed a bespoke optimisation tool that acts to, as closely as possible, match the asset allocations of ethical plans to standard Wealthify investment plans, to ensure performance is in line. The tool looks at the underlying investments by region and asset type and makes sure they sit as closely as possible to Wealthify’s standard risk models.
The cost of investing in Wealthify’s ethical portfolios will be higher, because the average fund charges for ethical funds tend to be higher – there is more work involved in selecting the right stocks when you add sustainability concerns into the mix. The average charge for its ethical option is 0.54 per cent compared to 0.21 per cent for standard plans. Ethical funds are typically more expensive due to the extensive manual researching and monitoring carried out by fund managers on individual companies to ensure ethical principles are maintained4.
The process of creating an ethical investment plan remains the same as Wealthify’s current investment process; investors will have the option to “make it ethical” via a simple switch when creating their investment plan, altering the pool of funds Wealthify uses to build and manage their plan. Customers will be able to toggle the ethical switch on or off, making it easy for them to compare the cost implication of choosing the ethical route.
The Good With Money verdict
The sustainable investing movement is truly gathering pace, with more demand from customers and more competition among fund managers and investment platforms. It’s telling that the new breed of “robo” investment platform is making a play in this area, with the more traditional DIY platforms lagging behind in the amount of information they give to customers about ethical options. The newer platforms tend to target a younger audience, and its the millennial generation who are demanding investments that have a positive impact on the environment and society, because they are generally more switched on to the connection between where we put our money and our own impact.
Wealthify has clearly put a lot of thought into this option. The funds they have chosen for the portfolio are well-regarded both for living up to their sustainable or ethical aims and for their financial performance. The fees are higher, but it is impossible to get a genuinely ethical or sustainable fund without putting extra work in – so the charges are a fair reflection of what is necessarily a more active strategy. Overall, this looks like a great addition to the growing number of options for people with a more enlightened approach to what their money can do, without sacrificing personal returns.
The ethical funds included in Wealthify Ethical Portfolios:
- Vanguard US Government Bonds
- HSBC UK Gilts
- Vanguard Euro Government Bonds hedged
- Lion Trust SF Corporate Bond
- Kames Ethical Corporate Bond
- Royal London SF Managed Income Trust
- EdenTree Short Dated Bond
- Royal London Ethical Bond
- EdenTree Sterling Bond
- UBS US Most Liquid Corporates
- Royal London SF Sustainable Leaders
- LionTrust SF Global Growth
- LionTrust SF European Growth
- Stewart Investors SF Asia Pacific ex Japan
- Stewart Investors SF Emerging Markets
- Ishares MSCI Japan SRI
- Kames Capital Ethical Equity Fund
- L&G UK Ethical Trust
- EdenTree International
- UBS Gender Equality
The ethical funds Wealthify will use aims to exclude companies profiting from activities considered harmful to people or society, including so-called sin stocks: weapons, gambling, tobacco and adult entertainment. Other activities funds might consider when deciding whether to invest in a company include:
| Animal testing
|
Deforestation
|
Nuclear power | Environment / climate change
|
Oppressive regimes |
| Excessive political donations | Human rights issues | Intensive farming
|
Unfair labour practices | Genetic engineering
|
Exclusion and screening policies will vary between fund providers, but typically involves two levels of screening: 1) Negative screening to exclude companies involved in activities that are at odds with ethical and sustainable values, and 2) Positive screening, actively seeking and selecting companies and investments that demonstrate excellent environmental, social and governance (ESG) practices.
Fund providers will also consider investing in ‘improving companies’: those that may have poor ESG ratings, but that show strong commitment to improving practices or reducing reliance on activities that impact their ESG rating. Our ethical funds’ active approach to fund management means they can undertake a far more qualitative, one-to-one assessment on an individual company, taking a range of considerations into account rather than simply basing their decision on a fixed ESG rating.
Wealthify’s ethical investment policy (summary):
- Our investment policy is to have a tolerance of underlying companies in the funds generating no more than 10% of revenue in the following sectors: Arms, Pornography, Gambling, Tobacco
- Our investment selection process actively identifies companies that demonstrate excellent environmental, social and governance practices, such as positive environmental impact, social inclusion and reporting transparency
- We shall only consider those managers who welcome active engagement and dialogue in the investment process. We will look for evidence of firm-wide compliance with the spirit of our aims, such as diversity and payment of a living wage
- Wealthify will only invest in fully transparent funds where the underlying holdings are known and can be reliably tracked. Black box investment vehicles are ineligible for consideration.
- Wealthify’s Ethical Investment Review Board meets at least quarterly to discuss the asset allocation, fund buy lists, new product launches, and review performance.
- A fund that is found not to adhere to our criteria shall be divested immediately.
Wealthify’s ethical investment portfolios – costs and fees:
| Based on a £10k investment | Ethical plans | ||||||||||||
| Cautious | Tentative | Confident | Ambitious | Adventurous | Average | ||||||||
| Fund Charges | 0.42% | 0.46% | 0.52% | 0.6% | 0.69% | 0.54% | |||||||
| Spread Costs | 0.003% | 0.02% | 0.03% | 0.04% | 0.05% | 0.03% | |||||||
| Total cost incl. annual management Fee (0.7%) | 1.12% | 1.18% | 1.25% | 1.34% | 1.44% | 1.27% | |||||||
| Standard plans | |||||||||||||
| Fund Charges | 0.18% | 0.21% | 0.24% | 0.27% | 0.29% | 0.24%* | |||||||
| Spread Costs | 0.12% | 0.13% | 0.13% | 0.15% | 0.16% | 0.14% | |||||||
| Total cost incl. annual management Fee (0.7%) | 1.0% | 1.04% | 1.07% | 1.12% | 1.15% | 1.08% | |||||||
Wealthify portfolio costs:
| Ethical & Standard plans | ||||
| Account size | £1+ | £15k+ | £50k+ | £100k+ |
| Annual fee | 0.7% | 0.6% | 0.5% | 0.4% |
