Incorporating religious values and laws into financial plans often means recommendations to keep debt low and make generous charitable contributions.
Want to organize your financial life in a way that is consistent with your faith?
A growing number of financial advisers and firms are helping clients do just that.
Some focus mainly on constructing investment portfolios that avoid “sin stocks”—a category that typically includes tobacco, gambling and pornography. But many go further, by incorporating religious values and laws into financial plans for clients. Often this translates into recommendations to keep debt low and make generous charitable contributions.
“Our mission is to help people organize their finances so they have more to give away,” says Ron Blue, founder and retired CEO of Ronald Blue & Co., which manages $6.5 billion for mainly evangelical Christians.
“It’s very countercultural to say, ‘I am not going to get everything I want and will live below my means in order to be generous to others,’ ”
The ranks of faith-based advisers are growing. Ronald Blue, which says its goal is to see “individuals and families practicing biblical stewardship and experiencing freedom from economic fear, bondage and conflict,” has 7,000 clients, up from 6,000 in 2014. With 13 offices, it is the nation’s fifth-largest independent registered investment advisory firm in terms of assets under management, according to Financial Planning magazine.
A growing number of Wall Street firms, such as Morgan Stanley, MS, -0.47% Bank of America Corp.’s BAC, -0.64% Merrill Lynch and Ameriprise Financial Inc.,AMP, -0.52% have so-called Christian focus groups. At Merrill Lynch, 700 advisers have joined, up from fewer than 25 in 2007. These fast-growing networks allow advisers to share “best practices” in areas including how investment selections can align with Christian values, says Hilary Irby, head of Morgan Stanley’s Investing with Impact initiative. Generally they may screen out certain types of stocks, such as alcohol, tobacco, gambling, sex-related industries, weapons makers and defense contractors.
Meanwhile, Kingdom Advisors, a nonprofit founded by Blue in 2003, has trained more than 2,500 advisers to serve Christian clients, up from 1,491 in 2014. Among other tasks, the program—which requires financial planners to complete 50 hours of coursework and have either 10 years of experience or a professional designation such as certified financial planner—educates advisers on Bible verses that pertain to money and on incorporating “values and priorities of Christians,” including charitable giving, into financial plans, says Rob West, president of Kingdom Advisors.
Fueling the growth is the rising popularity of socially responsible investing, which seeks to achieve both a positive social impact and a positive financial return, says Julie Hammerman, executive director of JLens Investor Network, a nonprofit that provides education and shareholder advocacy for Jewish investors, including foundations and endowments affiliated with Jewish institutions. JLens plans to introduce an S&P 500 index fund “based on Jewish values” that will use shareholder-advocacy techniques to push corporations to support such causes as fair treatment of workers, environmental preservation and support for Israel, she says.
According to the nonprofit Forum for Sustainable and Responsible Investment, $8.7 trillion is managed using socially responsible, faith-based or other screening methods, up from $6.6 trillion in 2014.
Niche for advisers
With investment returns expected to remain below historical averages and competition from low-cost robo advisers growing, advisers are looking to differentiate themselves to justify their fees and “gain the trust” of prospective clients, says Paul Auslander, former president of the Financial Planning Association.
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Like most fee-only advisers, many faith-based advisers serve clients with relatively high net worth. But Ronald Blue has a division that accepts clients with portfolios as low as $50,000. The 2,400 advisers at Thrivent Financial—a nonprofit membership organization that formed from the 2002 merger of two Lutheran financial-services organizations—require no minimums, says CEO Brad Hewitt.
Fees at some of these firms are higher than the standard 1% of a client’s assets a year. For example, at Azzad Asset Management Inc., a Falls Church, Va., firm that caters to Muslim clients, fees start at 1.75% to 2% of assets, depending on the type of account, and decline as assets rise. Their minimum investment is $500,000. The fees are charged due to the labor-intensive nature of the services, including the need to screen out certain stocks and calculate the zakat, or the mandatory 2.5% of certain property that Islamic law requires be used for charitable and religious purposes, says spokesman Joshua Brockwell.
At Ronald Blue, investment fees start at 1% of assets and can be as low as 0.15%, depending on portfolio size. The firm also charges clients financial and estate-planning fees that typically range from $1,500 to $10,000 a year, says Executive Vice President Erik Daniels.
For investors looking for a faith-based adviser, Auslander recommends choosing one with a responsibility to act as a fiduciary—meaning, in your best interest—and who holds a designation that requires extensive training and experience, such as the certified financial planner.
For Christians, the Certified Kingdom Advisor designation is a useful supplementary adviser-screening tool, he adds.
‘Purpose of money’
Like their secular counterparts, faith-based advisers help clients with financial planning, investment management, insurance, estate planning and tax preparation.
But while “traditional retirement planning focuses on the accumulation and preservation of wealth,” a faith-based approach includes “a recognition that the purpose of money isn’t to get more for me,” says West of Kingdom Advisors.
Instead, says Thrivent’s Hewitt, the goal is generally to help clients determine “what’s enough” for them to live on and use the rest to “serve others.”
“It’s very countercultural to say, ‘I am not going to get everything I want and will live below my means in order to be generous to others,’ ” he says.
Some advisers say they encourage clients who can afford it to increase their charitable donations. Daniels says he recently had a conversation with a client who “was making quite a bit of money and was financially independent, so I asked him to consider increasing the amount of his giving.” The client decided to donate 15% of his income to charity, Daniels says. “Ecclesiastes says we need to enjoy the fruits of our labor,” Daniels says. “We are not going to judge your lifestyle. It’s your decision. But our job is to encourage clients to handle wealth for God’s purpose.”
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Some faith-based advisers instruct clients to avoid debt. “Debt in the Scriptures is not forbidden but it is discouraged,” says Daniels, who says his firm has gone so far as to recommend that some clients prepay a mortgage, even if that means reducing their liquid investments.
Under Islamic law, interest-bearing securities aren’t permitted. But Azzad sponsors a mutual fund that aims to give clients a bond-like return by investing in sukuk, or “Islamic bonds,” which entitle the investor to a percentage of revenue from projects like toll roads, apartment leases and other assets that generate income.
Anne Tergesen is a reporter for The Wall Street Journal in New York. Email her at [email protected]
The article ‘Investors Follow Their Faith’ first appeared in the March 27, 2017 print edition of The Wall Street Journal.