Swells is a startup venture backed by a 150-year old insurance company called Pacific Life based in Los Angeles. The firm was floated with the objective of providing a better investment option for people, who care about where their money goes and what it supports. And how it does this is, by identifying high-potential, high-impact themes, focused on a positive future, from healthcare innovation to clean tech. Dividends over $1 are automatically routed to the investment pool, thereby swelling the investable funds.
- Socially responsible investors
- Beginner investors
- Investors who prefer a monthly fee over a commission
- Variety of socially-conscious portfolios
- No commissions on trades
- Traditional and retirement accounts available
- More expensive than index funds
- Most portfolios underperform the S&P 500
Swell Investing is a newcomer to the robo-advisor scene, but its take on socially responsible investing is a unique one. The firm only invests in companies that comply with United Nations Sustainable development goals, such as ending poverty and hunger, developing clean energy systems and promoting gender equality. Unlike most socially responsible funds, Swell Investing hand-picks stocks and guarantees firms’ active participation in these goals.
Who’s Swell Investing For?
If you care about the environment, social justice, renewable energy (and more!) you may find a lot to like among Swell’s stock market offerings. Swell believes socially responsible investing is an underappreciated opportunity and invest in hundreds of up-and-coming small and mid-cap companies.
If you’re new to investing and want to start by buying impactful companies, Swell Investing is a great place to start. No real stock trading is involved; you just divvy up your assets between the six portfolios. You can change your allocation whenever you like, but the platform is geared toward buy-and-hold investors. If you don’t have a lot of money to get started, you’ll appreciate Swell’s low account minimums and lack of trading fees.
Swell Investing’s Platform and Tools
Swell Investing’s platform is simple and efficient. The website explains markets and investing in terms newcomers can easily understand without getting bogged down by jargon. Swell knows its client base might not be very knowledgeable about stocks and Swell can hold your hand throughout the process. For example, one of the first things you’ll see is this question about your goals.
Just enter your investing goals and an account is recommended for you. Since Swell Investing is a registered investment advisor and not a broker, you’ll actually be opening your brokerage account with Folio Institutional. Folio is a licensed broker-dealer who holds your investments and Swell acts as a fiduciary on your behalf.
Swell Investing (through Folio) offers four different account types:
- Flexible Swell: The traditional brokerage account
- Traditional IRA: Contribute pre-tax dollars
- Roth IRA: Pay no taxes on withdrawals
- SEP IRA: Retirement account for self-employed individuals
All six portfolios (and their various combinations) can be held in any type of account. Once you create an account, you’ll be able to fund it and manage your investments.
The portfolio management screen shows your account balance and the distribution of your funds in a pie chart. You’ll be able to track your gains, transfer money via ACH, set up an automatic deposit schedule and even remove companies from the predetermined portfolios. Again, there’s no stock trading done here, but you do get to remove three companies from your portfolio if you don’t feel they measure up to your goals.
Swell Investing’s Research Offerings
Swell Investing’s main clientele don’t have much need for Morningstar ratings and technical analysis. You won’t find any chart indicators, technical signals or even stock stats like P/E ratio, market cap or float. Instead, you’ll get research into what the companies in the portfolio actually do.
Each company has a little biography attached to it describing the aims of its products, recent headlines and which U.N. sustainability goals they qualify for. Here’s what the page on National Grid PLC (NGG) looks like:
Additionally, the FAQ pages are extremely detailed. Complex topics like taxes, IRA accounts and market capitalization are explained in terms anyone can understand. There’s also the Swell Investing Hub, a blog page featuring articles on politics, markets and understanding the opaque world of finance.
Swell Investing’s Commission and Fees
Swell Investing has no commissions on any type of portfolio alteration. Feel free to change your asset allocation as much as you like since you won’t be charged for any transactions. Swell’s price comes in the form of an annual percentage fee on assets, paid monthly. Unlike mutual funds and ETFs where the management fee is built in, Swell will charge your account monthly depending on your balance. Here’s an explanation:
Paying $75 a year on a $10,000 portfolio might seem like a deal when measured in coffees, but a 0.75% expense ratio dwarfs the cost of most index funds. Impact investing often comes with higher fees since the companies are smaller and less liquid, so this cost isn’t too unexpected. But for comparison, the Vanguard ESG ETF has an expense ratio of 0.12%. Swell Investing has high standards for the companies in its portfolios and watches them meticulously. Unfortunately, this comes with added costs.
Swell Investing’s Security
Swell Investing has relationships with the SEC, FINRA, and SIPC. As a registered investment advisor and fiduciary, Swell must follow SEC guidelines and act in the best interests of clients. Swell’s broker Folio is regulated under the SIPC, meaning customer accounts are protected up to $500,000 in the event Folio becomes insolvent.
On the platform, Swell Investing uses bank-level security features to encrypt customer data and prevent fraud. Swell also promises never to sell customer data to third parties in its Privacy Policy. The investment team at Swell has a long history in the industry, including CEO Dave Fanger, a two-decade veteran of the financial advisor industry.
Swell Investing’s Customer Support
Swell Investing needs some clarity in the customer service department. For starters, reaching the Contact Us page from the home page takes a little detective work. You’ll need to click on FAQs on the home page’s footnote, then locate the Contact Us page at the bottom of the help topics column. Once there, you can send a support message through its captcha system.
The Contact Us page does have a support phone number, but no hours of operation were listed (949 is an Orange County area code) and there’s no live chat. We sent a message to Swell Investing’s Facebook page and got a response within 24 hours advising us to set up a date and time for a phone call. Customer service options like these are disappointing in an age where most brokers and advisors answer questions in real-time. Swell Investing has a unique style and very little history, so a little more customer service availability would benefit potential customers.
Swell Investing’s Tradable Asset Classes
There’s only one asset class available on Swell: domestic equities. Swell Investing has compiled a list of nearly 400 publicly-traded companies working to solve U.N. sustainability goals. Stocks in the portfolio aren’t chosen by market cap, dividend yield or any type of technical analysis. Instead, each company is hand-picked based on how it’s helping to improve the planet.
Swell Investing has six different portfolios, each covering a different theme:
- Zero waste: 36 stocks
- Green tech: 60 stocks
- Clean water: 49 stocks
- Renewable energy: 56 stocks
- Healthy living: 53 stocks
- Disease eradication: 57 stocks
Health care and tech are the sectors with the highest concentration in Swell Investing’s portfolios. Financials and energy have almost no representation, which makes sense given the platform’s goals.
Clients can choose all six portfolios at once by investing in the Impact 400, which combines all 393 companies on the platform. You’ll recognize some of the top holdings: Apple, Costco, Unilever and Novartis.
Swell Investing’s Ease of Use
Even if you’re just learning how to start investing, you can quickly grasp Swell Investing’s mission and navigate the platform with ease. The website is simply designed and accessing your account takes only a matter of seconds. The platform is visually appealing and makes account management quick and convenient.
The only thing keeping Swell from a five-star category here is the customer service headaches. Where’s the contact phone number? How do I ask questions about my account? If these issues can be resolved, Swell Investing’s product will be much stronger.
Final Thoughts
Swell Investing is a great entry into the socially responsible investing space because it forces competitors to re-evaluate their mission. Swell doesn’t follow an index or squeeze questionable companies into portfolios. Each stock is carefully selected based specific sustainability criteria and less than 400 firms have made the cut so far. Customer service needs improvement and the company does use arbitrary endpoints to make it look like their portfolios beat the S&P 500 (they often don’t). But Swell Investing delivers where it comes to social responsibility. It remains to be seen if other funds can follow suit.
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About Dan Schmidt
Dan has written about a wide range of topics including stocks and investing, cryptocurrencies, banking, student loans, and credit cards.