Schwab, Merrill and Wells find unity on impact investing

At a Washington conference for fund managers, executives from the rival firms agree on what the investors of the future want

May 22, 2014 @ 12:11 pm

By Trevor Hunnicutt

wirehouse, charles schwab, impact investing, socially responsible, merrill lynch, wells fargo
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The brokers' business models may be diametrically opposed, but two men who sit in the C-suites at the Charles Schwab Corp. and Bank of America Merrill Lynch can agree on at least one thing: impact investing is here to stay.

Those are the views of Bernard J. Clark, executive vice president of advisor services for Schwab, and Andrew Sieg, managing director and head of global wealth and retirement solutions at Bank of America Merrill Lynch.

“I would look at your organization at the percentage of time you're thinking about impact-oriented investments — environmental, social justice strategies — and I would double or triple it,” said Mr. Sieg.

He said the interest in the investments is particularly acute among baby boomers, with the younger investors among that generation preferring investment strategies that take into account values other than business metrics when selecting securities. That's going to increase the popularity of those strategies in coming years, he said.

Mr. Clark also emphasized the appeal of such investments. Both executives sat on a panel with Bob Vorlop, head of products and advice for Wells Fargo Advisors, on Thursday in Washington.

The remarks dovetailed on what has become a dominant theme at the annual conference for asset managers held this week by the Investment Company Institute, a trade group. That theme is the widely expressed belief that financial planning goals and investment outcomes besides returns have become the driving force of investor sentiment.

“Outcome-based investing is kind of our new way to phrase or capture that broad change,” said Mr. Vorlop. “It's not about meeting a benchmark. It's not about having the best idea. It's the organization of the solution for the long-term.”

The firms struck a similar tone on the issues of impact investing, holistic planning and helping advisers deal with a deluge of complex investment products in spite of their fierce competition.

Schwab is an exponent of the so-called breakaway broker movement that's nibbled at the dominant market share of wirehouses like Merrill, whose 13,725 advisers manage $1.9 trillion. Schwab has about 7,000 affiliated advisers who run $1 trillion. Wells has 15,146 advisers and $1.6 trillion.

At one point, Mr. Sieg mentioned his firms' decision to employ a financial gerontologist — a social-scientist who studies the effects of aging — a move he sees as emblematic of the changes the industry is undergoing from an investment-oriented shop to a planning-centric firm.

Mr. Clark expanded on the point, saying that professionals like gerontologists and psychologists may be a part of the puzzle in solving investors' challenges by looking at their lives more holistically.

In a nod to much smaller competitors, Mr. Sieg said his firm is closely looking at Betterment and Wealthfront Inc., as it shapes its plans. The online platforms manage money and have raised eyebrows among advisers who have wondered whether the competition is a threat.

He said the firm is “looking at a whole host of fascinating, intriguing fin-tech companies — the Betterments and the Wealthfronts of the world — and trying to make sure we're watching what we're doing.”

“It's informing our product roadmaps and our approaches,” Mr. Sieg said.

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