Best Brokers for Socially Responsible Investing

Advisors, Brokers, Investing, Investing Strategy

As a consumer, you’ve always been able to make values-based spending decisions. Now you can extend that philosophy to your portfolio through socially responsible investing options. (New to this concept? Read up on the basics of socially responsible investing, which is sometimes also called impact investing or values-based investing).

The growing popularity of SRI coincides with an explosion in the number of exchange-traded funds. ETFs, along with mutual funds, make it relatively easy for investors to support their beliefs within a diversified portfolio. That eliminates the agonizing legwork of identifying individual stocks that match specific criteria around social, environmental or corporate governance issues.

To meet growing demand among consumers for SRI options, online brokers and robo-advisors are expanding choices in this realm. Here are NerdWallet’s picks for the best online brokers and robo-advisors for socially responsible investors.

Best online brokers for socially responsible investors

These brokers provide a broad range of ETF and mutual fund offerings for socially responsible investors, along with tools and features that will benefit all types of investors.

What makes Charles Schwab and E-Trade stand out from the crowd? Selection and low costs. The two brokers have roughly comparable SRI offerings (each has more than 50 such ETFs and 220-plus mutual funds). While Charles Schwab has more commission-free ETFs, E-Trade offers more no-load mutual funds. More generally, both brokers have the features investors of all stripes desire: tools for beginners, free and extensive research, mobile apps and trading platforms. But it’s tough to top the low-cost model available at Charles Schwab, including trading fees, expenses and the growing number of commission-free options.

Many of the other brokers among NerdWallet’s top-ranked brokers for other criteria — Fidelity, TD Ameritrade, Merrill Edge — also have robust investment options for socially conscious investors. They just don’t offer the breadth of choices that Charles Schwab or E-Trade do.

Best robo-advisors for socially responsible investors

These online advisors provide portfolios for specific SRI strategies, offering diversification, but with lower associated costs and a hands-off approach.

Want to align your investments with your beliefs without the hassle of finding relevant ETFs or mutual funds? Robo-advisors may be a good option. Robo-advisors primarily use ETFs to offer a low-cost, hands-off investing approach. And until recently, most advisors didn’t have SRI strategies.

That has since changed with a handful of advisors bringing strategies specifically marketed toward socially responsible investors. In the same month, Wealthfront and Betterment — NerdWallet’s top picks overall for best robo-advisors — added such options to their lineup, while a couple of new SRI-specific platforms have launched in recent years. The good news: You have more options now. But as with any other type of investing, you’ll want to evaluate the tradeoff between fees charged and value provided.

Wealthsimple is the real standout in this category: It delivers the essentials of any good robo-advisor — clear and simple pricing, a beginner-friendly experience and low account minimums — while offering robust options for SRI investors. The company’s portfolios draw from six ETFs that focus on issues ranging from environmental to gender diversity and go beyond equities to include bonds. The company says it added these portfolios to its lineup to meet customer demand and that 35% of customers have at least one such SRI portfolio in their accounts.

Betterment is new to the socially responsible investing scene, but it’s hard to argue with the advisor’s reputation for providing low management fees, reasonable minimums and desirable features like automatic rebalancing. But the advisor doesn’t have the breadth of Wealthsimple in the SRI arena. When Betterment customers invest in an SRI portfolio, it draws from just two ETFs composed of companies that adhere to certain socially responsible criteria. Still, this is an encouraging start from a leading robo-advisor that has promised to bring more SRI options to the table as low-cost choices emerge.

Best option for a mix of a DIY and hands-off approach

This pick combines some of the do-it-yourself portfolio-building approach offered by the online brokers with some of the hands-off benefit of robo-advisors.

Online brokers are the clear choice for DIYers, while robo-advisors appeal to the set-it-and-forget-it crowd. Luckily, you have options if you fall somewhere in the middle. It’s possible to combine the best of both worlds: the screening mechanisms to identify socially responsible investments used by online brokers and the hands-off approach to investing inherent to robo-advisors.

Motif Investing’s hybrid model — part broker, part portfolio manager and part idea-generation tool — is a good fit for many socially responsible investors. The company has simplified its SRI offerings into three automated portfolios: sustainable planet, fair labor and good corporate behavior. But the options don’t end there. You can build “motifs” (themed collections of up to 30 stocks or ETFs) by screening for specific characteristics or filtering out others. And the depth here is impressive; socially responsible investing is a core tenet for Motif Investing.

Other niche platforms specifically catering to socially responsible investors also bear some attention, including Earthfolio, Swell, OpenInvest and Hedgeable.

How to pick a broker

Here’s a rule of thumb: Online brokers wanting to appeal to socially responsible investors will make sure SRI options are easy to find. Several of the major brokerages have a robust lineup of ETFs and mutual funds earmarked as SRI (or sometimes labeled “socially conscious”), along with tools to identify these investments. If you have a specific ETF or mutual fund in mind and are looking to narrow your options, check availability (and related fees) with the various brokers.

With a variety of options at your disposal, be sure to consider other factors specific to your goals — are you a beginner, a day trader, a retirement saver in need of an IRA rollover? Consult our comprehensive list of the best online brokers for general investors or use NerdWallet’s free brokerage comparison tool.

How to vet an SRI strategy

It’s also important to keep the following in mind as you decide which SRI investments will work for you:

  • Selection. A broker with a large array of options may be appealing if you seek variety, but if you have a specific fund or strategy in mind, a more limited selection may suffice.
  • Management costs. Not all ETFs and mutual funds are created the same, and associated management costs (expense ratios) can also vary widely when it comes to socially responsible options. Similarly, SRI portfolios at robo-advisors may carry higher fees than other offerings.
  • Diversification. As with any investing strategy, it’s important to remember the benefits of diversification (namely, reducing risk) and to include a range of assets that cut across various industries, company sizes and geographic areas when selecting investments that align with your beliefs.

Unsure how to approach SRI, or investing in general? See NerdWallet’s guide on how to invest money.

Best brokers for socially responsible investors: Summary

Broker
Best for
Highlights
Promotion
Account minimum
Start investing

Charles Schwab

Charles Schwab
5.0 stars
Breadth of available options, low costs50+ ETFs (6 commission-free); 270+ mutual funds (130+ no-load ones)$100 referral award for first-time clients$1,000

E*Trade

E*Trade
5.0 stars
Breadth of available options50+ ETFs (3 commission-free); 220+ mutual funds (140+ are no-load)60 days of commission-free trades with deposit of $10,000 or more$500
Wealthsimple
Wealthsimple
4.0 stars
Breadth of available optionsBased on 6 SRI ETFs$50 cash bonus for users who deposit at least $1,000 in the first 30 days$0
Betterment
Betterment
5.0 stars
Portfolio option; low feesBased on 2 SRI ETFsUp to 1 year of free management with minimum deposit$0

Motif

Motif
4.0 stars
Pre-built portfolios; customization3 portfolio options; customizable motifsTry Motif Blue for one month free$0

About the author