In an increasingly chaotic world, more clients are asking their advisors to have a little faith.
ESG may have dominated the headlines, but faith-based investing has steadily — and quietly — been on the rise, according to a number of faith-based advisors contacted by InvestmentNews. Chris McMahon, CEO of Aquinas Wealth Advisors, for example, says the number of referrals and inquiries at MFA Wealth, the sister firm to Aquinas and a traditional RIA with over $500 million in assets under management, have surged in the past year.
“Clients couldn't invest this way for a long time because they didn't have the means to do it. Now they're saying to their advisors, 'This is important to me, I want to do it,'” McMahon said.
Faith-based investing inquiries to the combined firms have reached a new high of approximately 80%, McMahon said. That includes institutional investors such as religious organizations and faith-based groups.
Aquinas Wealth Advisors developed the Faith In Finance program, which allows clients to assess their current portfolios for performance and faith alignment. Aquinas’s Catholic values investment strategy is guided by the U.S. Conference of Catholic Bishops' framework for economic life.
As to the question of whether his clients can do well and have faith, McMahon says the firm's “faith-based model portfolio has outperformed our non-faith-based model portfolio over the last 24 months.”
Similarly, Robert Netzly, CEO of Inspire Investing, said he continues to see a groundswell of interest and adoption of faith-based, biblically responsible investing. In Netzly’s view, Christians all over the world are beginning to realize the critical importance of aligning their investment dollars to support the biblical values they hold dear.
“This renewed vision of Christian stewardship of the marketplace is causing Christian investors to manage their portfolios differently than before — excluding companies profiting from immorality, endorsing companies operating as a blessing to their stakeholders, and engaging with companies to influence them toward biblical values,” Netzly said.
It’s worth pointing out that Inspire, which boasts $2.25 billion in AUM, has been ranked among the fastest-growing RIAs in the nation and has been included four times in a row on the Inc. 5000 list of fastest-growing private companies.
“At Inspire Investing, we are committed to doing our best to invest for the glory of God,” said Netzly of the staunchly pro-life firm, which has 28 financial advisors in its wealth management division, as well as thousands of external advisors using its line of ETFs.
The cornerstone of its ETF investment process is the Inspire impact score methodology, which seeks to identify the most “inspiring, biblically aligned” companies in the world to invest in.
Netzly says the firm’s biggest inflows this year are into its Inspire International ETF (WWJD), which is rated five stars by Morningstar and is outperforming its category handily over the past 3 years. The passively managed WWJD has returned 8.34% annualized over the period versus 4.46% for the foreign large blend category, primarily due to excluding investments in nations like China and Russia.
On the active side, the Inspire Faithward Mid Cap Momentum ETF (GLRY) is in the top 2% of all funds in Morningstar’s small growth fund category over the past year.
Rodney Loesch, a financial planner at LPL Financial, often helps churches or foundations with specific faith-based desires at his practice. Since he doesn't have an in-house, proprietary screening process like Inspire, he sought out a screening software that complies with the U.S. Council of Catholic Bishops guidelines.
“In two cases that come to mind, a Catholic school foundation wanted to make sure that any mutual funds that they held did not hold companies that either supported or encouraged abortion,” Loesch said.
Ben Smith, founder of Cove Financial Planning, specializes in socially responsible Investing, however, he has also helped several clients build and manage faith-based portfolios.
In the building phase, Smith ensures their investment mix aligns with their time horizons, risk tolerance, liquidity needs and tax situations. Once he has an understanding of which asset classes will best fit their portfolio, he researches fund options that align with their faith-based criteria. This can include both positive and negative screens. Negative screens might filter out exposure to investments involved with gambling, alcohol, tobacco, abortion, guns and ammunition.
“In addition, we might deploy inclusive screens on investments that consider stewardship, racial and gender diversity and things like charitable giving,” Smith said. “As we manage the portfolio, I ensure that the investments are properly screening in and out the criteria we assigned in the building phase while also adhering to the client's broad asset allocation and risk-return needs.”
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