Could this new breed of online advisers move ETFs’ cheese?

Time was when actively managed mutual funds were well and truly disrupted by the inexpensive ETF vehicle.

Fed up with lack-lustre performance and exorbitant fees, investors shifted $39 billion out of mutual funds since 2015. On the other hand, ETFs were laughing to the bank with inflows of $1.5 trillion since then.

But ESG investing is the new kid on the block – and it could be ETFs’ day of reckoning.

Do-It-Yourself ESG investing a la’ ETFs

Increasingly front-of-mind of investors these days is environmental, social or governance (ESG)-related investing.

Companies that are ESG-responsible have generated better returns. As well, they resonate with investors seeking to create a responsibly invested portfolio.

However, even an ESG-focused ETF may not be able to fully match an investor’s particular ESG priorities.

Enter online advisers that will help investors buy the stocks directly and create their own customized portfolio.

Startups such as Open Invest Co. and Ethic Inc. enable advisors and investors to design and implement their own portfolios.

“We help you create returns-driven, tax-efficient sustainable equity portfolios that align with your overall allocation strategy,” says the Ethic Inc website. “Become a sustainability thought-leader for your clients, and engage them on issues that they care about.”