Faith-Based ETF Aims to Compete With Secular Funds

Faith-Based ETF Aims to Compete With Secular Funds

The Inspire 500 ETF (PTL) brings lower fees to a new category.

Jeff_Benjamin
|
Wealth Management Editor
|
Reviewed by: etf.com Staff
,
Edited by: James Rubin

When it comes to investing, fees matter and that’s why most financial advisors rank expense ratios among the top ETF screens.

But the priorities change when it comes to certain strategies that cater to specific investor interests and passions.

ETF issuers offering things like ESG and various faith-based strategies remain the last castles of generally higher expense ratios. ETFs in such categories can escape with higher fees because investors in those funds prioritize the strategy over the fees, and in some cases, the investment performance.

Robert Netzly, chief executive of Inspire ETFs in Boise, Idaho, is taking a step toward upending that practice by offering the first faith-based ETF with an expense ratio below 10 basis points.

“I don’t believe investors should have to pay more to invest with a clean conscience,” he said. “We plan to launch more ETFs that compete with the secular market.”

At 9 basis points, the Inspire 500 ETF (PTL) tracks an index of the 500 largest companies that pass Inspire’s biblical values screens, and Netzly doesn’t expect that to mean sacrificing performance.

For instance, PTL, which started trading March 26, does not include any of the so-called Magnificent 7 stocks that recently started to retreat. But PTL does include smaller companies like Super Micro Computer (SMCI), which has gained 911% over the past 12 months or nearly four times the performance of Mag 7 posterchild Nvidia Corp. (NVDA).

Faith-Based ETF Issuer Invites Fee Pressure

“As we’ve been talking to advisors, we realized they’re looking for ways to get out of the Mag 7 because those names are rolling over,” Netzly said. “No pun intended, but it is kind of divinely inspired timing of the fund launch.”

PTL is Inspire’s ninth ETF and the least expensive. But Netzly said he plans to continue pushing toward lower expense ratios across his growing lineup that includes $2.8 billion in total assets under management.

Any movement toward lower fees will naturally move some ETFs onto investor and advisor radars, but it remains to be seen if faith-based and socially-conscious investors require that extra incentive, or if this is a real move to compete across the board on performance.

"Investors are driven by many things, and fees are one of them, but not the only thing,” said James Rockwood, founder and CEO of CapIntel in Toronto, Canada.

“Advisors need to be prepared to have conversations that offer more context than just fees or historical performance and be able to share in-depth content about ESG ETFs and whether they relate to a client's preferences,” he added.

Joe Petry, founder of Mayfair Financial in St. Louis, said the higher fees have been a “huge barrier in the past” when it came to recommending faith-based investments to his clients.

“As an economist and a Certified Financial Planner, I understand the importance of managing investments by controlling what we can, including diversification, asset allocation, and costs,” he said. “In the past, certain ESG and faith-based investment options charged high fees, which could be perceived as taking advantage of investors' emotions and commitment to making a positive difference.”

Autumn Knutson, founder of Styled Wealth in Jenks, Okla., is also familiar with the challenge of balancing client appetite for faith-based investments with fiduciary responsibilities.

“Low fees are certainly a consideration with investors and advisors, and if an investor is looking for a low-cost faith-based ETF, then 9 basis points is certainly worth considering,” she said. “That said, I do not see investors moving to faith-based ETFs that were not already looking for a fund of this value set as there are many ETFs offered that are of equivalent cost available on the marketplace.”

Jeff Benjamin is the wealth management editor at etf.com, responsible for coverage related to the financial planning industry. This includes writing, hosting podcasts, webinars, video interviews and presenting at in-person events.


Jeff is a veteran journalist with more than 30 years’ experience covering the financial markets. He has won more than two dozen national and regional awards for his reporting. He most recently worked as a senior columnist at InvestmentNews where he wrote about investment products and strategies, as well as the broader financial planning industry. Prior to that, Jeff worked as an analyst at Cerulli Associates where he researched and wrote reports on the alternative investments industry. Jeff also worked as a money management reporter at Dow Jones Newswires, where he covered the mutual fund industry.


Based in North Carolina, Jeff is a former Marine and has a bachelor’s degree in journalism from Central Michigan University.