401k robo giant Betterment for Business is further appealing to its millennial base with the introduction of socially responsible investing options on its retirement platform.
The SRI portfolio is meant to empower “participants to align our retirement savings advice to their personal values.”
“We decided to develop an SRI portfolio because, currently, most 401k participants do not have access to any SRI solution,” the company said (where else?) on its blog. “That fact may seem counterintuitive considering research showing there are important benefits to providing SRI options within a 401k solution.”
It quotes a 2017 survey from NAPA that reported that 67 percent of employees who do not participate in their 401k plans would choose to do so if they had access to an SRI-oriented portfolio.
Furthermore, 60 percent of surveyed participants said that they would increase their contribution rate if they knew their investments were doing social good.
“By offering SRI to 401k participants, we believe we can help plan sponsors increase plan participation and help SRI-focused investors save more for retirement,” Betterment added. “The SRI portfolio is designed to maintain our fundamental advice for a low-cost, diversified investment strategy with tax optimization while helping socially conscious participants make sure their investments reflect their personal values.”
It noted that 401k plans have only started to include SRI funds in the last few years. The first SRI-oriented target date fund didn’t enter the market until 2016, and Betterment claims most SRI products in employer-sponsored plans are actively-managed mutual funds with high fees.
“As we developed our SRI portfolio, we analyzed all low-cost SRI funds available, searching for products that could replace components of our core strategy without disrupting the diversification or cost of the overall portfolio.”
Participants in Betterment for Business plans will have the opportunity to invest using an approach that “reduces exposure to companies that are deemed to have a negative social impact—e.g., companies that profit from poor labor standards or environmental devastation—while increasing exposure to companies that are deemed to have a positive social impact (companies that foster inclusive workplaces or commit to environmentally sustainable practices).”