Investing

Swell Investing Review: A Roboadvisor for Socially Responsible Investing

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There are a lot of new robo-advisers out there. Most of them focus on making money, not how that money is being made. Swell Investing is one in a hand full of new automated investment platforms that put socially responsible investing first.

Generating returns in a financial sense is less important than where money is invested for a Socially Responsible Investing (SRI) platform. New technologies which will make a difference in the next hundred years will take substantial investment before they create the kind of returns that mainstream equities deliver, which is where SRI enters the picture.

SRI isn’t for everyone. Numerous companies in the space aren’t going to have the stability of a mega-cap that is included in the FTSE100, nor will they be able to offer the security or dividends that larger companies can deliver.

With all of that said, the field of SRI is growing.

Some pension funds are selling investments their members think are unethical, like companies that manufacture tobacco and nuclear weapons.

Swell Investing takes their activist investor stance to a whole new level. The platform also distinguishes itself in a few other ways that make it a unique investing tool for people who want an SRI portfolio.

Visit Swell Investing

Why Pick Swell Investing?

New ideas are rarely well funded. This is especially true for businesses that want to make a difference in areas which may not be profit-centric, like green energy or clean water. There are usually other solutions that make more money for investors without an SRI approach, but often they aren’t sustainable over a longer time horizon.

Swell Website

Swell Investing takes a direct approach to creating SRI portfolio options for its clients. Instead of using an automated system for portfolio management, Swell uses teams of portfolio advisers who make sure that their portfolio picks make sense for its SRI philosophy.

There are benefits and drawbacks to the Swell Investing methodology. On the plus side, you can be sure that all the companies that are recommended by Swell meet the social ideals that you signed up to support. Swell is more expensive than many of the other robo-advisers, which may put some wealthy investors off.

What Swell Investing Does for You

Many robo-advisers deal exclusively with Exchange Traded Funds (ETFs), but Swell Investing is different. Swell offers its clients direct ownership of the equities they invest via their connection with Folio Institutional.

For people that want a direct connection with the companies they are investing in and supporting, this approach provides some major benefits. Perhaps the largest one is that people who use Swell Investing have shareholder rights in the companies they buy. This entitles investors to annual reports, as well as the ability to go to shareholder functions, like the Annual General Meeting.

Robo-advisers that use ETFs to gain diversified exposure to market sectors won’t give you a direct holding in any company, which may not be as good for investors that want to learn more about the companies they are supporting.

Another benefit from direct holdings is that investors will be given a list of all the companies that are selected by Swell for a portfolio, which could help you to make additional investments in a company in a brokerage account outside of Swell.

Swell Portfolios

Swell Investing Actively Reviews Its Recommendations

Swell uses a review process to eliminate any companies that fall out of line with their values, which makes their system perfect for investors who want to know their money is going to people who are working to make a difference. Stocks that fall out-of-line with Swell’s principles will be removed from their portfolios immediately, and all stocks are subject to a semi-annual review process.

At the moment Swell Investing offers their clients six areas ( portfolios ) they can invest in:

  • Zero Waste
  • Clean Water
  • Healthy Living
  • Disease Eradication
  • Green Technology
  • Renewable Energy

The vast majority of the companies that Swell chooses will be small and mid-caps, but some of the portfolios have larger companies like Lululemon, Merck and Tesla included in them. Swell Investing also offers the Impact 400 Portfolio, which is comprised of 400 companies it thinks will make positive things happen globally.

How Investing With Swell Works

Swell Investing offers a range of account types, and also a 401k rollover service. The company is focused on US markets and investors, so if you are outside of the US, Swell Investing may not be a good choice for you.

Different Types of Account:

  • Flexible Swell-Brokerage Account – This option is available to anyone and offers no tax savings. The money which is deposited will be available whenever you want to withdraw it from your account. There is no limit to how much can be deposited, and more money can be added at any time.
  • Traditional IRA-Pay Taxes When You Withdraw/Retire – Eligible investors can contribute to this account with pre-tax dollars. Up to $5,500 per year (or $6,500 if you’re over 50) can be deposited tax-free. Any taxes will be paid when you withdraw, which you can do at 59½ years old. This money can be shifted to other long-term investments but is basically locked up until retirement.
  • Roth IRA-Pay No Taxes When You Withdraw (Conditions Apply) – This plan allows you to invest with already-taxed dollars, and pay nothing when you decide to spend your investments, as long as you wait until you’re 59½. You can put up to $5,500 per year (or $6,500 if you’re over 50) into this account. If you decide to raid this account before you’re 59½, you will have to pay taxes.
  • SEP IRA-Simplified Employee Pension – This plan was created for people that are self-employed and small business owners. It is like a Traditional IRA, but with higher contribution limits. This plan allows you to save 25% of your salary, up to $55,000, of your pre-tax earnings annually. Much like an IRA, most withdrawals will be taxed until you’re 59½.

Swell Account Types

Choosing the Right Plan for Your Needs

Depending on where you are in life, and what your investment goals are, one of the above plans will probably be a better fit. For wealthy individuals who want to get into SRI, the brokerage account is probably the best choice, as the amount that can be invested on a tax-differed basis is quite low.

For people that want to use their annual tax-differed contributions to get into SRI, any of the other plans would be a good fit. It is a good idea to talk to a licensed financial planner before deciding on how to save for retirement, and what kind of conditions apply to each kind of investment class.

Both Swell and their broker/dealer Folio are regulated by the Securities and Exchange Commission (SEC). In the event of insolvency, any securities would be covered up to $500,000. Folio is a member of both FINRA and the SIPC, who offers protection against loss of securities.

Swell Account Signup

After you open your Swell Investing account, you will be asked to select from the six sectors listed above or choose the Impact 400 Portfolio. Swell has a minimum investment of only $50 USD, which makes it really easy to start investing with their service.

Investors can choose to allocate their money in any way they wish on Swell’s platform. You can invest your money in one of Swell’s themed portfolios, or spread it across all seven options in whatever way you choose. Each portfolio has between 40 and 70 stocks, and you will be able to see exactly where your money is going once you invest.

Account Signup

Swell Investing’s fee structure is a mixed bag and could be seen as expensive compared to other automated investment services.

You will be charged a management fee of 0.75% on the money you invest annually, which is on the high side for an automated investment service. The fee is all-inclusive, and that is a big plus. Buying and selling specific stocks within a portfolio, or rebalancing your investments within Swell’s offerings won’t result in any additional fees.

Additionally, Swell allows you to change up to three stocks within the portfolios they build. You will have to call Swell during normal business hours to do this, but it is a great option for people that want another layer of control over how their money is allocated.

Socially Responsible Investing

Swell Investing Fills a Niche

It isn’t really fair to compare Swell Investing to other robo-advisers which operate outside of the SRI sector. Swell Investing also has an interesting approach to automated money management and relies heavily on portfolio managers to select companies that fit into their SRI focus.

Instead of trying to beat the market via the use of algos or fund picking, Swell puts SRI portfolio building first. Its platform it automated in the sense that it allows investors to easily select SRI sectors, but the portfolios themselves are the result of extensive human research.

Swell Investing also makes sure the companies it chooses make good on their promise to work in a socially responsible area of business. For an investor, all of this happens behind the scenes. The investment fees that Swell charges are a bit higher than other automated investment platforms, but they are cheaper than many actively managed funds from major banks, or hedge funds.

Swell Benefits

Who Does Swell Investing Fit?

Swell Investing doesn’t have loads of money under management. The College Investor reports that it has less than $25 million USD under management, which is a minuscule amount of money in the world of asset management. Part of the reason why Swell is probably a small asset management platform has to do with the SRI space generally.

SRI doesn’t put profit first, and this simply doesn’t add up for most investors.

A person who invests will Swell has to have an above average interest in potentially making a change for the better through their investments. The kind of companies that Swell Investing puts into its portfolios will be inherently more risky, and less well established.

Make a Difference With Your Money

There are a few reasons why Swell Investing is worth a look. SRI isn’t charity, but it isn’t cut-throat capitalism either.

Swell Investing could make a lot of sense, for twenty-somethings whose income is rising. Learning to sock some money away is a great habit. A Swell Brokerage account, or IRA, is a great way to put some money into the market. Swell Investing makes sure that your money goes to companies that are working on change, which may appeal to young people who don’t like the direction global industry is going.

Pretty much any tax-differed investment strategy is going to yield more than sitting on cash in time-deposits. Young people can afford to back riskier companies and may find an SRI approach to be preferable to the big banking mentality.

Swell requires a minimum investment of $50 USD, which makes the platform super accessible to almost anyone with an income.

Swell Investing is also a great tool for established investors who want to support companies that ( mostly ) fall outside of the mainstream investment community. For people that want an easy platform to deploy their investment money into the SRI sector, Swell Investing makes it easy.

Swell Investing Platform

Who Should Avoid Swell Investing?

Swell Investing is laser-focused on a hand full of SRI areas. Investors who are looking for a one-stop-shop for automated investing should look at platforms that offer exposure to ETFs, or more customizable investment solutions.

The fee structure that Swell Investing may not be a great fit for high-net-worth investors who want to put millions of dollars to work in SRI. A $1,000,000 dollar portfolio at Swell would cost $7,500 a year in fees, which is enough to make a specialist SRI planner worth looking into.

There are no major downsides to Swell Investing, but it is a very niche robo-adviser. Despite numerous reports that Swell doesn’t offer tax-loss selling to its clients, their broker/dealer Folio specifically states that they do.

Socially Responsible Investing: Swell Competitors

Although Swell Investing is a unique company, there are other SRI focused investment platforms out there. Some of them could make more sense for investors who want to deal with one automated investment platform, and don’t want to be limited to SRI.

Betterment

Betterment has emerged as one of the most popular robo-advisors. They offer a wide range of investment options, including purpose-built SRI portfolios. Betterment offers super low management fees, and no minimum investment.

Investors pay 0.25% per year of their account balance for the Digital plan, which rises to 0.40% percent to upgrade into the Premium plan. The company offers both brokerage and IRA accounts. There is no additional fee to invest in an SRI portfolio with Betterment, and the portfolios are treated in the same way as all their other portfolios.

Betterment is a good choice for investors who have a large portfolio, and want to keep their fees low. It is also a good pick for younger people who don’t have much to put into their investments yet.

Earthfolio

Earthfolio has been around since 2000, and could be considered the first automated SRI service in the world. The company was founded with SRI as a core principle and that remains true today. Much like Swell Investing, Earthfolio only offers SRI portfolios. Unlike Swell, Earthfolio also invests in corporate bonds.

With a $50,000 USD minimum investment, Earthfolio isn’t for young investors who are just starting out. The company charges a flat fee of 0.50% per year for their services, and all accounts are held with TD Ameritrade. Earthfolio uses mutual funds to gain access to SRIs, instead of ETFs, which is another way they differ from most automated investment platforms.

Earthfolio does have a long history to draw on, especially in an industry that is populated by young companies. It offers a wide range of investment options, low fees, and makes sense for wealthier investors who want a mix of assets in their SRI portfolio.

Swell Investing Fees

Swell Investing keeps things very simple when it comes to fees, there is just a 0.75% Annual fee with a minimum account value of just $50 which makes it very accessible to most investors. There are no trading fees, no pricing tiers and no expense ratios.

Swell Fees

Pros:

  • Low Initial Investment ( $50 USD)
  • Well Researched Portfolios
  • Customization Options
  • The Impact 400 Portfolio
  • Direct Ownership of Companies
  • Periodic Portfolio Updates
  • All Inclusive Pricing (0.75% per year)

Cons:

  • Portfolios are Volatile due to small market cap stocks
  • Not much Portfolio Diversification

Conclusion

Swell Investing is one of the only ways that investors can automatically invest in socially responsible businesses that have been thoroughly researched. Its management fees are slightly higher than other robo-advisors, which may be a hindrance for a high-net-worth individual who can afford the minimum investment in other automated SRI platforms.

Swell Investing isn’t going to be a good fit for investors who need to own a wider spectrum of assets or want to put their money to work outside of SRI. It also may not be a good choice for older people, who need to have more stability in their holdings. New ideas can pay off big, but smaller companies are also subject to huge swings in market value.

If you want to learn more about Swell Investing, you can check out its website right here. While Swell Investing might not be perfect for everyone, it offers a lot of research and functionality to people who want to add SRI to their investment plan.

Visit Swell Investing

Swell Investing

8.6

Ease of Use

9.0/10

Fees

8.0/10

Reputation

9.0/10

Customer Support

8.0/10

Design

9.0/10

Pros

  • Low Initial Investment
  • Well Researched Portfolios
  • Direct Ownership of Companies
  • All Inclusive Pricing (0.75% per year)
  • Periodic Portfolio Updates

Cons

  • Volatile Portfolios due to Small Caps
  • Portfolio not Diverse
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Nicholas Say grew up in Ann Arbor, Michigan with a father that would read him the Wall St. Journal along side of other bed-time fare. He has traveled extensively, and been lucky enough to study a changing global economy in person. Nicholas spent many years in the Southern Cone of South America, sometimes in the middle of the countryside where livestock starts its journey to all points of the globe. Today he is thoroughly bemused with the stance that Central Banks have taken in the wake of the 2008 meltdown. There is no telling what will come out of the global financial system next, but he is glad that he lives somewhere that gold can be bought and sold readily!

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