Market insights and analysis

How dynamic, risk-managed investment solutions are performing in the current market environment

3rd Quarter | 2021

Market insights and analysis

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Updates on how dynamic, risk-managed investment solutions are performing in the current market environment.

By David Wismer

Countless news reports and research studies have examined the consequences of the COVID-19 pandemic in the U.S. over the past two years.

As important a topic as it might be, we may all be experiencing a degree of information overload.

However, the unpleasant fact remains that most Americans, according to recent research from Gallup, still see COVID as having an impact on their lives and do not see the situation changing any time soon.

The Gallup polling has been very comprehensive throughout the pandemic, probing areas such as vaccine acceptance, workplace and school health and safety practices, and a variety of behavioral issues and everyday activities. It has explored how attitudes and behavior have tracked concerning employment, career changes, health, fitness, emotional well-being, spirituality, socialization, personal finances, travel, and parenting.

These subtopics inform the major finding that 93% of Americans still feel “life is not completely back to normal.”

The Gallup research is illuminating concerning a broad perspective of the American public. But what about some of the changes seen in the advisory community and investor attitudes?

Changing priorities of financial advisers and their clients

In a series of articles that have appeared in Proactive Advisor Magazine dating back to spring 2020, the publication looked at how financial advisers adapted to working through the pandemic. Many of these articles were compiled in an e-book that can be downloaded here.

These articles looked at how advisers effectively adopted remote meeting practices, improved their use of technology, and found new ways of reinforcing strong adviser-client relationships.

Several articles also explored how advisers addressed some of the changing priorities of their clients. This included the reporting of many more client inquiries directly related to the pandemic: the reexamination of life insurance coverage, an enhanced interest in legacy and charitable giving, and a strong concern about investment risk management—given 2020’s market volatility and steep drawdown in the first quarter.

In September 2021, highly accomplished financial journalist Katie Kuehner-Hebert took a different look at financial advisory practices, exploring the effects of the pandemic on the career and succession-planning outlook for financial advisers.

Her thoughtful piece—“The ultimate question for advisors: ‘Should I stay or should I go’?”—included interviews with several industry professionals. Many advisers are grappling with new considerations about their health and mortality, their career and life goals, the value of their practice, the changing needs and demographic composition of their clients, and how their practice should look in the future.

She wrote in her conclusions,

“The COVID-19 pandemic has had a profound impact on how financial advisors are thinking about succession planning or exiting their firm. For many advisors, it has accelerated their timeline. For others, the adoption of more remote practices and greater use of technology has led them to consider staying in the business longer than they anticipated. …

“No matter how advisors are thinking about their future career plans, one thing is certain: The pandemic of 2020–2021 has prompted a period of self-examination and a heightened exploration of what is most important in our personal, family, and business lives.”

Faith-based and ESG investing

Two other trends have direct implications for advisers and their investor clients.

Pew Research found in 2020 that “nearly three-in-ten Americans (28%) report stronger personal faith because of the pandemic” and “… nearly half of Americans (49%) say religion is very important in their lives.”

This supports anecdotal evidence we have heard from financial advisers that they and their clients have been increasingly embracing the rising trend of values-based investing and financial planning.

This trend goes beyond faith-based investing and has only strengthened over the past two years of the pandemic.

A recent article published in Wealth Management makes the case for why ESG (environmental, social, and governance) investing “thrives in chaotic times.”

Referencing some of the theories presented in Nicholas Taleb’s book “Antifragile: Things That Gain From Disorder,” the article states,

“ESG investing involves companies and funds that address the potential negative effects of climate change, financial meltdowns and other disasters while also actively working to address the root causes of potential chaos. ESG investing is often seen as a risk mitigator—and if structured correctly could be a strategy for avoiding what Taleb describes as ‘Black Swans,’ or unexpected disruptions to the status quo.”

Of course, the movement toward ESG investing started well before the pandemic and has grown significantly over the past decade. The US SIF Foundation’s 2020 ”Report on US Sustainable and Impact Investing Trends” shows the remarkable growth since 2010.

Faith-based and ESG solutions from Flexible Plan Investments

Flexible PIan Investments (FPI) launched its principled-investing offerings—investments aligned with specific religious or social values—in 1998 with the introduction of the dynamically risk-managed ESG strategy, For A Better World. Faith Focused Investing, an actively managed portfolio designed to align with traditional Christian values, was later offered. You can see an overview of both strategies—and learn how investors in these strategies can give back 10% of FPI’s net advisory fees collected for these strategies to the charity or religious institution of their choice—here.

Well before the COVID pandemic was on the horizon, FPI began the development of a fund approach that could combine both ESG and faith-based investing values.

In January 2020, FPI launched the Quantified Common Ground Fund. Unlike other values-based funds, the Quantified Common Ground Fund seeks to satisfy both faith-based criteria (as defined by the eVALUEator biblically responsible screening tool) and ESG criteria (as defined by CSRHub ESG data). The Fund also aims to offer investors risk management as well as capital growth. It uses a proprietary momentum method of trading to take advantage of factors and sectors that are doing well in the current market environment.

Jerry Wagner, founder and president of Flexible Plan Investments, said in the press release announcing the Fund, “The popularity of principled investing in the U.S. continues to grow as investors become more interested in using their wealth to make a difference in the world. The Quantified Common Ground Fund offers these investors cutting-edge principled-investing strategies to help grow that wealth in a risk-managed way, which may empower these investors to make more of an impact.”

Interestingly, one of the historical concerns in the investment community (which has been refuted by many others in the industry), is that ESG or faith-based investing—while making investors “feel good”—may not be capable of delivering on competitive investment returns.

While past performance is no guarantee, it is notable that the Quantified Common Ground Fund (ticker: QCGDX) has now delivered a one-year return of 30.54% (through 9/30/2021). This is all the more impressive given the inherent risk-managed focus of the Fund. The Fund can now be found as a major component of several of FPI’s strategies.

Whether you are a financial adviser or an individual investor interested in more of a values-based approach to a portfolio, the Quantified Common Ground Fund offers an excellent way to take that to the next level in terms of investment implementation. 



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