Offer clients custom ESG options with direct indexing
October 18, 2022
October 18, 2022
Your clients want to make sure their investments reflect the issues they care about and avoid supporting others. Their desire has made environmental, social, and governance (ESG) investing, also known as socially responsible, faith-based, values-driven, or sustainable investing, a burgeoning trend.1
It's true that you can help align clients' investments with their preferences using off-the-shelf ETFs and mutual funds. But for clients with very specific ideas about causes or issues they want their investments to support or exclude, Vanguard Personalized Indexing could be a more precise solution.
Like many people, your clients may focus mostly on the "E" of ESG—that is, environmental concerns like a company's carbon footprint or involvement with fossil fuels—but ESG investing can cover a much wider range of issues. For example, your clients can:
What makes a direct indexing portfolio so flexible? It's all in the structure—and its easy-to-use technology. With mutual funds or ETFs, investors own a single fund that bundles individual stocks together. With a Vanguard Personalized Indexing portfolio, investors own individual stocks directly in separately managed accounts (SMAs). The stocks in each SMA represent a benchmark that you and your client select. Direct ownership of each stock makes an SMA fully customizable—you can build portfolios that precisely reflect each client's preferences and outlook.
You can use negative screens, positive tilts, or a combination of both to tailor your clients' portfolios with direct indexing.
Vanguard Personalized Indexing offers a wide range of screens and tilts for your clients to choose from. You can also request custom options, such as faith-based or vegan. Once your clients have made their selections, you can generate impact and performance reports on demand, so clients can have a clear picture of the impact of their customizations.
Request a demo today to discover how Vanguard Personalized Indexing can help deliver additional value to you and your clients.
Vanguard Personalized Indexing is a flexible, transparent way to customize a client’s portfolio, but sometimes customizations can require special consideration from you.
In these cases, you can help your clients understand that positive impact doesn't require perfection. Together, you and your clients can prioritize their goals. That way, you can ensure that each direct index is customized effectively and that clients are comfortable with the risk level in their portfolios.
Vanguard Personalized Indexing gives you the power to offer clients a highly personalized, index-based, tax-efficient solution that incorporates their unique preferences. It can also give you an opportunity to forge deeper emotional connections with your clients as you discuss their varying interests and experiences and how they might want to incorporate them into their investments.
Share this piece with clients to help them understand the difference between screens and tilts and how they can use them to align their direct indexing portfolios with their values.
1 Alyssa Stankiewicz, 2022. Sustainable Fund Flows Dip for the Quarter but Peak for the Year, Morningstar.com. (Sustainability Matters.) Accessed July 22, 2022, at https://www.morningstar.com/articles/1076648/sustainable-fund-flows-dip-for-the-quarter-but-peak-for-the-year.
2 "Good" and "bad" behaviors are based on the data provider's criteria and may vary from an investor's personal beliefs and values.
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