In recent years, there has been a growing interest in values-based investing – aligning investments with personal ethics, morals, and beliefs. This trend reflects people’s desire to have their money make not just a financial difference but a social one as well.

 

According to a recent survey by Morgan Stanley, 75% of millennial investors see their investment decisions as a way to express their social, political, and environmental values[1]. This sentiment is fueling the exponential growth of sustainable investing funds focused on environmental, social, and governance (ESG) criteria. BlackRock, the world’s largest asset manager, reported that ESG assets grew 22% in 2020 and now make up a third of total assets under management[2].

 

While some critics argue that values-based investing comes at the expense of returns, research shows that’s not necessarily the case. A study by Bank of America found no statistically significant difference in returns between ESG funds and traditional funds over the last 10 years[3]. As metrics and reporting on social impact grow more robust, aligning investments with values may become an essential piece of comprehensive financial planning without sacrificing performance.

 

Harnessing Technology for Personalized Planning

 

Advances in artificial intelligence, big data, and robo-advisors are revolutionizing financial planning, enabling far more personalized strategies tailored to each individual. By harnessing vast data sets and predictive analytics, AI-powered platforms can develop customized plans reflecting clients’ unique aspirations, life stages, and values[4].

 

Leading robo-advisor firms like Betterment and Wealthfront construct diversified, automated portfolios aligned to investors’ specific goals, time horizons, and risk tolerance. Portfolios automatically rebalance as markets shift. Additionally, by minimizing human errors and biases while optimizing tax efficiencies, studies show robo-advisors generate equal or higher returns net of fees than traditional advisory services[5].

 

Integrating such technology can allow financial planners to spend less time number crunching and more time understanding clients’ values and building trusting relationships – a key tenet of values-based planning.

 

Crafting a Comprehensive Financial Plan

 

So how can individuals effectively incorporate their personal beliefs into a financial plan? The key is taking a comprehensive, goals-based approach.

 

First, clarify your values and causes that matter most. Do you want to avoid fossil fuels? Promote gender equality? Support affordable housing? Then quantify your top 3-5 financial priorities over the next 1, 3, 5, and 10 years. This includes target retirement savings, college funds, home purchases, vacation plans, charitable giving, and other goals.

 

Next, determine your risk tolerance. Those newer to investing may prefer a more conservative mix of 50-60% bonds and cash while more aggressive investors might allocate 80% into stocks. Choose a robo-advisor that constructs your portfolio accordingly.

 

Additionally, maximize contributions to tax-advantaged retirement accounts like 401ks and IRAs to supercharge savings. For investments outside these accounts, consider allocating 20-40% into values-aligned funds like ESG ETFs or community development projects. Monitor performance relative to benchmarks to ensure social impact doesn’t sacrifice returns over the long run.

 

As life changes, have your plan updated annually – or even more regularly. Getting married, having kids, and changing jobs all require reassessing time horizons, risk appetite, and goals. Your financial plan is a living document that evolves as you do.

 

The Rise of Values-Based Financial Planning

 

In today’s complex world, balancing personal values and financial priorities can be challenging. Yet technological advances paired with comprehensive goals-based planning help unlock this possibility. Investors no longer face a binary choice between profits or principles. By taking a holistic view encompassing all aspects of one’s financial life aligned to deeply held beliefs, values-based financial planning empowers both social impact and wealth building simultaneously.

 

Sources:

[1] Morgan Stanley Survey Finds Sustainable Investing Poised for Growth

[2] BlackRock 2020 Sustainability Report

[3] BofA: ESG Funds Outperform Peers Over 10 Years

 

[4] How AI Is Changing Financial Planning and Advice

[5] Do Robo Advisors Offer Value for Money?