TD Ameritrade Expands ESG Offerings To RIAs - WealthManagement.com

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TD Ameritrade Institutional, the brokerage and custody service provider to more than 4,000 independent registered investment advisors, is expanding the environmental, social and governance (ESG) investment offerings on its platform.

Through its Model Market Center, TD Ameritrade Institutional advisors will now have access to four new ESG model portfolios created by Nuveen for the platform. The risk levels of the portfolios, created entirely of exchange-traded funds, range from conservative to aggressive and are designed to be “complete portfolios off the shelf,” so that even advisors with little or no expertise in ESG investments have that offering available to clients.

The strategies are meant to filter investments that score negatively on rankings of corporate governance, “controversial business involvement” and environmental impact. 

Advisors that use TD Ameritrade Institutional’s Veo brokerage also can apply a screening tool to view 559 mutual funds that have identified themselves as socially responsible and open to new investors, including 234 funds that can be traded commission-free. They can also use the screening tools to view 63 ETFs that identify themselves as socially responsible–eight of which are commission-free.

“I think there is a growthing need to offer ESG strategies,” said Dani Fava, director of product strategy & development at TD Ameritrade Institutional. The majority of financial advisors across channels offer or have offered socially responsible investments in the past, the products and portfolios are garnering assets.

Total U.S. assets in SRI grew by a third to $8.72 trillion between 2014 and 2016, according to the most recent report by the US SIF Foundation. That represents roughly one-fifth of the $40.3 trillion in total U.S. assets under management.

Fava doesn’t foresee advisors moving a tidal wave of assets into the new ESG models and investments. However, she thinks “they will be less afraid to have the conversion” if they can confidently offer a complete ESG solution to clients. Most advisory firms aren’t equipped to create ESG models or accomplish the necessary due diligence on ESG investments to offer them as a solution to clients. The hope is that TD Ameritrade Institutional’s new offerings will fill that gap.

“What we’re trying to do now is bring it all together and make the accessible it easy for an RIA,” Fava said.

Offering more ESG investments is also as much about satisfying current investors as it is about about the anticipated demand in the future. More than half of millennials, an age group on the receiving end of a $30 trillion wealth transfer over the coming decades, say they make investing decisions based on SRI factors, compared with more than 40 percent of Gen X and baby boomer investors.

“We think that ESG is going to see more and more widespread usage,” said Martin Kremenstein, Head of Retirement Products and ETFs at Nuveen. “And we also see that model portfolios are getting more and more widespread usage, so putting them together is a fairly easy value prop for us.”

The models are available to all advisors on the platform for no additional fee and there is no asset minimum. Fava said TD Ameritrade Institutional is considering other ESG model portfolios for its platform.