Just like typical investment options, impact investing can be done in multiple ways. You can walk into your local investment office, find an advisor online, or consider a robo-investment platform or app. With each, comes a spectrum of services, products, and fees.
Your decision to invest your money is more than a financial one, it’s very personal. At Invested Interests, our goal is to provide you an overview of advisor options so you feel comfortable making a decision on where you invest your money.
Types of Impact Investing Advisors
- Stock Brokers
- Traditional Investment Advisors
- Financial Institutions
- Fee-Only Investment Advisors
- Robo Advisors
- Specialized Impact Investing Advisors
In a way, the “old-school” approach to investing. You’ve seen this in the movies. Rows of tables, computer screens, lots of phones. Brokers pace back and forth while telling their clients about the next hot stock tip. These brokers were paid when investors bought or sold security. They made a commission and the only reason you’d keep working with a broker is if their last stock tip made you money. But remember, they spent their time on the phone selling, not researching. The stock tip was usually just the trendy trade that the other brokers were talking about that day. This option really isn’t around anymore, at least not that we’ve seen for impact investing advisors.
Traditional Investment Advisor, Banks, & Financial Institution
We’ve grouped quite a few professionals together here. The reason? They offer a similar service and charge a similar fee. When you see ads (and maybe you’ve been their client) of your local investment advisor, Charles Schwab, Edward Jones, Wells Fargo, Bank of America, Goldman Sachs, etc you’re working with a traditional investment group.
They provide investment advice and charge a fee based on the total amount of assets invested. Some advisors will continue working closely with their investors, some do not. But with an advisor, the idea is that you are paying for an ongoing professional relationship/resource that will help you monitor and make changes to your portfolio. Advisors charge higher fees because they typically have large overhead expenses (offices, staff, research, travel).
Fee-Only Investment Advisor
What makes fee-only advisors different from traditional advisors is that they charge a one-time upfront fee for a plan or recommendation. They do not charge an ongoing fee based on the total amount of assets. However, once the plan is in place, it is up to the investor to monitor and make changes. Typically the fees are lower, but the ongoing service and relationship are non-existent. If you’re looking for impact investing advisors, the “advisor” part of the equation is missing here after the initial investment is made.
This is the “new thing.” Websites that use software to generate investment advice. The fees charged for these services are typically lower. And the recommendations offered by Robo advisors, the reputable ones, are generally good. A big reason for this is that for many people, in typical situations, good investment advice is also generic investment advice. A one-size-fits-all approach works for many people.
However, there is very little human interaction and no opportunity to develop a relationship with a professional. There is also very little ability to help investors with unique situations or requirements. If you have questions that fall outside of the software, you are left to read FAQs or perform your own Google searches.
What are Robo Advisors
See, Robo Advisors are automated investing services or online advisors that rely on computer algorithms to manage your investment portfolios. What we find coated in 21st-century weirdness is that none of this process requires much human interaction at all. Most robo-advisors can manage both individual retirement accounts and taxable accounts, some can even help manage your 401(k).
Now I don’t know about you, but I have a bag full of trust issues that prevents me from peacefully giving my hard-earned retirement money to a computer system. I’d much rather sit face to face, or face to screen, with another human that I can bog down with questions.
What Keeps Robo Advisors Around
I was going to bore you with the history of where these finance savvy robots came from, but instead, I figured you’d care more about what keeps them from going extinct. You can read up on their history on your own time here.
The real allure of Robo Advisors is the upfront costs they can save you. For example, Most robo advisor companies charge between 0.25% and 0.50% as an annual management fee, which is a lot lower than the current rates of face to face advisors. If you’re a real risk-taker, there are even a few free robo advisor options you can hitch your wagon to.
Another reason why someone may choose to go with a Robo Advisor is that they don’t have a strong preference as to what their portfolio looks like. Customization is not a common factor with today’s Robo Advisor options, which is a huge problem if you’re looking to try your hand in a little bit of SRI, ESG, or Impact Investing.
Robo Advisor Red Flags
To help you navigate whether or not robo advisors are the way for you to go, here’s a handy dandy list of red flags. If you’re looking to have anything on this list be a part of your investment experience, stay far far away from the robo advisor realm.
- The ability to personalize your investment portfolio
- Face to Face question and answer sessions
- A hands-on investment experience
- Investment planning and guidance
All in all, Robo Advisors serve their purpose well for those who are inclined to use the service. However, if you’re anything like us, you might want to stick to flesh and blood financial advisors.
Specialized Impact Investing Advisors: Invested Interests
We are a focused investment advisor-firm that specializes ONLY in impact investing. We do one thing and we do it well. Our three established portfolios are created based on long-term potential, influential social issues, and with our client’s financial futures in mind. Though we have established portfolios, we work on your behalf for ANY social issue you maybe passionate about, investing your money where it will be most impactful.
Unlike many online platforms, we build a long-term relationship with our investors. We routinely check-in for an update, and as your investments grow, your interests and advocacy naturally shifts, and your investment and outcome needs changes, we provide advice given your current situation, place in life, and goals.
Finally, because of today’s communication technology, we are able to offer our high touch service at a competitive fee. Whether you are just starting out with minimal investment, looking to roll-over a lifetime of 401k plans into a social investment fund, or have another investment strategy or goal, you’ll find our fees lower than a typical investment firm.