Current market environment performance of dynamic, risk-managed investment solutions.
By: David Wismer
Faith-based investing has seen significant growth in recent years, driven by investors seeking to align their financial decisions with their religious and ethical values. This approach often involves screening out companies involved in activities deemed inconsistent with specific faith principles, such as gambling, alcohol, tobacco, pornography, abortion, certain arms and drug manufacturing, and other factors. This trend reflects a broader movement toward values-based investing, where financial stewardship is guided by moral and ethical considerations.
Business Insider recently noted the surge in faith-based investing:
“Faith-based investments are a relatively small part of the ETF world, but investors—typically of Christian or Catholic faith—piled into these vehicles in the last year, many of which promise to keep money out of anything with links to things like abortion, tobacco, or gambling.
“The value of faith-based investments swelled to at least $130 billion last year, but the total size of the market is likely larger than that, according to a study from the faith-based investment advisory Brightlight.
“According to Brightlight's survey, assets managed by faith-based funds hit $100 billion for the first time last year, a 14% jump in the 15 months leading up to June 2024.”
How investors can navigate the faith-based investment landscape
Faith-based investing often faces several perceptual issues that can present initial obstacles for financial advisers and their investor clients. One challenge is the inherently more limited investment options available that align with specific faith-based principles. This may affect portfolio diversification and potentially limit access to some higher-performing stocks and industry subsectors.
Additionally, there is a perception of lower returns associated with faith-based investments, as some investors believe that prioritizing ethical considerations might compromise profitability. However, studies have shown that companies with strong ethical practices often outperform in the long term due to lower risks and better reputations.
Another hurdle, especially for self-directed faith-based investors, lies in the challenge of implementing the screening processes required to ensure investments align with religious values.
However, one advisory firm notes,
“… Evaluating companies based on their adherence to specific values requires time and expertise. Fortunately, many mutual funds and ETFs use pre-defined screens to eliminate industries or practices that conflict with religious principles, simplifying the selection process for investors.”
The firm offers the following guidance for new faith-based investors:
• “Educate Yourself: Take time to understand the principles of faith-based investing and explore available resources. Many organizations and advisors specialize in guiding faith-driven investors.
• “Partner with an Expert: Working with a financial advisor experienced in faith-based strategies can help streamline the process, ensuring your investments align with your values without sacrificing performance.
• “Stay Focused on the Long Term: Remember that faith-based investing is about creating lasting impact while honoring God’s provision. Patience and a clear vision are key to overcoming challenges.”
FPI’s approach: Faith-based investing with purpose and discipline
Flexible Plan Investments (FPI) takes faith-based investing a significant step further, offering an actively managed approach designed for investors who want their portfolios to reflect their faith-based values, while also aligning with a range of risk profiles and portfolio objectives.
FPI’s QFC Faith Focused Investing strategy combines asset-class diversification with a disciplined process focused on owning top-performing qualifying stocks and avoiding underperformers. It is available in five suitability-based profiles, each with preset allocations to equity, income, gold, and money-market funds based on an investor’s risk tolerance and time horizon.
The strategy starts with a universe of faith-based stocks drawn from the S&P 1500 Index. This universe is selected based on a screening by the eVALUEator service, which avoids companies involved in activities deemed inconsistent with Christian principles, such as gambling and alcohol production.
Another important feature of the strategy is FPI’s Give Back Program. This allows investors to give back 10% of the net advisory fees collected by FPI for these strategies to a client-designated church, religious institution, or socially responsible charity. You can learn more about QFC Faith Focused Investing and the Give Back Program here.
For individuals and families looking to go beyond investing with purpose, FPI also offers FPI Charitable--a donor-advised fund program that offers a tax-efficient, low-fee solution to support charitable causes. FPI Charitable is operated and maintained by the National Charitable Endowment (NCE), a 501(c)(3) charity established to support donor-advised fund accounts.
FPI Charitable has lower administrative fees than similar programs at Fidelity, Charles Schwab, and Vanguard on accounts of $125,000 or more, and there are no additional advisory fees from Flexible Plan Investments (FPI). FPI Charitable also offers access to dynamic, risk-managed investment strategies—designed to maximize a charitable giving account’s tax-free growth over time. You can learn more about how FPI Charitable supports long-term giving goals here.
For advisers looking to better communicate their firm’s commitment to faith-based investing, FPI offers a resource titled “10 ways to build your faith-based clientele”—a set of practical ideas for serving values-driven investors.
Why might this be an important initiative for advisory firms?
Two successful financial advisers interviewed for Proactive Advisor Magazine offer helpful perspective:
One advisor states, “We assist families, businesses, churches, and ministries in better utilizing the financial resources they have been blessed with. Through faith-based financial strategies and morally directed investing, we believe clients can feel confident about their financial future, prioritizing how that future reflects their unique values.”
Another summarizes, “I find that if clients understand what they are investing in, and how those investments align with their passions and values, they have a much better chance of sticking with the plan and being successful.”