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  • Julie Skye

3rd Week of July 2021 Thoughts

Everyone wants into the Sustainable Impact Investing Party.

If you need any evidence that sustainable / impact investing is the place to be…you just have to see who, from the “old world” is scrambling to get into the game. “They knew, all the time, that of course, values matter.” Of course, they opined, “investing is not just all about the bottom line.” That “of course, they were on board all the time.”


Last week, Affiliated Managers Group paid $600 million for a majority stake in privately held, Parnassus Investments and I have to say, I understand…but my heart sank.

“We see ESG investing as one of the fastest-growing segments in the industry and of AMG” stated AMG’s Chief, Jay Horgen. “Parnassus is really ahead of that trend, given its authenticity and length of history in that space” he continued.


Other than an affirmation that SAA’s forward-thinking approach to investing puts us in a very sweet spot, it is hard to hear another firm lost some, or all, of its independence. Last year Boston Common Asset also sold 15% of their firm to AMG, following Calvert’s purchase by Eaton Vance in 2016. Morgan Stanley recently snatched up Eaton Vance…so now independent ESG firms are as rare as hen’s teeth.


Morningstar’s sustainability research chief Jon Hale recently stated; “Sustainable investments are increasingly being run by large asset managers for whom sustainable investing is a relatively recent focus.” In other words, ESG was not in their DNA: it was a business decision to attract clients. They are late telling clients that the environmental, social and governance landscape was the place to be. That Corporate Social Responsibility matters.


Welcome to the party: we are glad you are here. But just know that we will hold you accountable for how you operate in “our” space. The Founding Members of Sustainable Advisors Alliance have spent the last 18 months working to remain independent…and to keep our clients independent. We take this work seriously.


A recent $70 million enforcement action against fast-growing online brokerage Robinhood Financial and a potential $200 million fine for Charles Schwab Corp.’s robo-adviser platform, shed light on heightened transparency issues the Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority Inc. (FINRA) may keep closely on their radar.


Robo-advisers’…the online platforms that were created to help investors “go it alone” have experienced a meteoric rise since their debut in 2008. Schwab positioned their offering as superior because of the absence of investment advisory fees that firms like SAA charge for their services. Robinhood got into trouble for their options trading, which was available to anyone, even the newest investors, with insufficient risk disclosures and investor education. Schwab’s possible $200 million fine will help push not just robo-advisers but the entire financial advice industry increased transparency and making it easier to compare investment apples to other apples.


😲😲Why does this matter to you? Remember 30 years ago when it cost $500 for you to buy 100 shares of stock? Today, it costs $0!!! We all know; “If it is too good to be true, it probably is” and over the years I’ve helped clients understand that there are costs to delivering investment services…and that looking at the lowest cost provider often just pushed investment fees under cover where it was hard for us to help you uncover.


During these years of low money market yields we’ve talked about Schwab’s “Sweep” account…the money market that they managed that was paying almost 0% during this low interest rate environment. This low earning money market benefited Schwab, but we had a tool we had to fight back…Schwab’s Value Advantage Fund: SWVXX. I often ask how much you will be needing in the coming quarter as when possible, I’d buy this money market to earn, in some years, 2% more than the Sweep Account. The downside was that it often delayed getting you a distribution by a day or two…as I had to sell it a day before I could send it out.



😲Why does this matter to you? One of Schwab’s “slaps on the hand” was related to the very profitable business of using their own money market…and earning the expense ratio. If it is generating revenue from cash holdings in the portfolio, holding proprietary funds or other methods outside of a management fee then the marketing materials and disclosures need to ensure that we fully understand the full costs of the service

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