Swell Investing closed down operations on August 30, 2019, after the following review had already been conducted. The company's homepage was replaced with a farewell message that stated, in part, "Swell was not able to achieve the scale needed to sustain independent operations."
Established in 2015 by west coast financial giant Pacific Life, Swell Investing provides generic algorithmic advisory services for client funds held through asset management accounts at Folio Institutional, a Virginia-based broker-dealer. The client transfers taxable funds or retirement rollovers held at other institutions into a Folio account at the time of setup or deposits funds directly into the account, with a $50 minimum opening requirement. Clients incur any costs generated by account transfers.
New clients allocate capital between seven socially-conscious pre-built portfolios created by Swell analysts to match the look and feel of mutual funds. However, fractional shares of portfolio allocations are bought for client accounts, rather than ownership in pooled funds, allowing Swell clients to participate as regular shareholders. All portfolio picks are user-defined based on personal preferences rather than a questionnaire intended to identify financial goals, risk tolerance, and investment horizon. The robo-advisor defines all portfolios as “moderately aggressive” due to the inherent risk of socially conscious portfolio components.
Client resources are disappointing, with neither the robo-advisor nor broker-dealer providing mobile apps, educational tutorials, or goal planning tools on their websites. Swell customer service is well below average, with a simple form entry page and email address as the only two approved forms of contact. No service hours are listed, there’s no live chat for prospective or current clients, and the small print tells account holders that they have to use email to “schedule” a phone call.
The account management interface presents standard performance metrics, with a handy link to the Folio Institutional account log-in, which leads to additional monthly breakouts. Public disclosures lack key documents, including a customer service agreement that is hiding behind an account paywall, but Swell does a superior job detailing portfolios and their relative performance broken down by time frames.
Socially conscious investing
Backed by a tier-one financial institution
Engages in tax-loss harvesting
Ability to change portfolio allocation with a few clicks
Annual fee and no hidden costs
No educational tools
Limited portfolio choices
Poor customer service
No goal planning
Hidden customer service agreement
New clients enter an email address and password to access the account setup page, which offers no financial checklist, goal planning, or questionnaire. Clients are told to choose a portfolio mix, which leads to a form entry with three pre-chosen categories – The Environmentalist, The Tech Optimist, and The Generalist – with a one-sentence description for each category. A fourth category lets the client generate a custom mix from seven pre-built portfolios, with percentage allocations that must add up to 100%. A few personal questions later in the setup process ask about risk tolerance and employment, but this is solely to determine suitability under FINRA regulations.
Clients can remove up to three stocks from the pre-chosen investment mix, but the editing is accomplished through email contact rather than the account management interface. Rebalancing takes place just twice per year, but the client can change allocations at any time. Accounts are managed passively between rebalances while Swell analysts optimize and manage the prepackaged portfolios. The robo-advisor supports individual taxable and retirement accounts, but clients can’t open joint or household accounts, marking a major omission. Taxable accounts cannot use margin or borrow from the account.
Account holders can review monthly transactions and relative performance statistics on the account management page and through a Folio account log-on. The interface offers little input about funding levels or portfolio mix, leaving decision-making in the hands of the client. Neither Swell Investing nor Folio Institutional provides financial planning tools, forcing customers to seek this information at unaffiliated third parties.
This lack of input is likely to confuse younger and less experienced investors. Website materials don’t disclose whether or not the account holder can speak directly with a company analyst or advisor.
Deposits require logging into the account management page and making a request that’s sent to a linked bank account. Users can automate the process by setting up recurring deposits. Withdrawals are requested through the account interface, but fund receipt takes up to eight business days if positions have to be closed to raise cash. There is no margin use on standard brokerage accounts, but all accounts earn interest through overnight sweeps into FDIC-approved instruments. Neither Swell nor Folio Institutional offers banking services.
According to Swell Investing marketing materials, company analysts conduct top-down and bottom-up research on thousands of companies to build “diversified, solutions-focused portfolios” matching United Nations' sustainable development goals that include no poverty, zero hunger, good health, quality education, climate action, and gender equality.
These social conditions form the basis for six narrowly-focused portfolios and a broad-based portfolio of up to 400 targeted companies called the “Impact 400.” The other six portfolios contain between 36 and 59 companies and are currently categorized as Zero Waste, Disease Eradication, Healthy Living, Clean Water, Green Tech, and Renewable Energy.
Swell and Folio engage in tax-loss harvesting. Algorithms rebalance just twice per year in response to underlying changes made to the seven portfolios, but clients can change allocations at any time. Clients are allowed to remove three stocks from the list at the time of initial account setup, but the marketing materials don’t specify whether it’s three from each portfolio or three across all portfolios. Company analysts make no changes or recommendations in response to client financial conditions because that data isn’t included in the account setup. There are no management facilities for secondary accounts at other brokerages.
Swell Investing and Folio websites are mobile-ready and easy to navigate. Swell has released a full-featured iOS mobile app but provides no Android OS support. This marks a major omission for a financial industry niche geared toward millennial investors.
The website contains just a handful of links that highlight major account features, explain services, and disclose legalese requirements. Prospective clients can log into the first few pages of the account management interface and enter different portfolios, but there’s little or no guidance, and results do not change in reaction to personal data inputs, unlike other popular robo-advisors. Nearly all algorithmic work focuses solely on the seven portfolios, rather than individual account requirements. Individuals shopping around for a broker will find monthly performance and management tools difficult to evaluate, with no FAQs and just a single screenshot on the home page.
The customer service link opens into a simple entry form, with no phone number, email address, live chat, or service hours. Other pages show contact links with an email address, while a few pages include a phone number. However, the account management interface states, “Want to schedule a call? Shoot us an email to get started.” It’s hard to decipher responsiveness with this cryptic message or why clients can’t just pick up the telephone. FAQs are useful but omit vital information on account management facilities and the customer service agreement.
Education & Security
The robo-advisor and broker-dealer use 256-bit SSL encryption and provide clearly-stated privacy policies. Folio Institutional holds all client funds, providing access to SIPC insurance and excess insurance. Folio resources are limited to a blog and market research section, while neither operation offers basic or advanced educational materials.
Commissions & Fees
Swell Investing charges a flat 0.75% of managed assets fee annually for advisory services, paid in 12 installments. There are no ETF or mutual fund fees because all positions are taken through fractional equities. There are no trading, withdrawal, or termination fees.
Is Swell a Good Fit For You?
Swell Investing offers a good choice for individuals seeking investments with companies that support the environment, green technological change, and social justice. However, there’s little or no hand-holding or consideration of individual financial circumstances, forcing the client to obtain that information elsewhere. Performance metrics suggest that returns will suffer with these portfolios, but the advisor does a good job refuting popular arguments against socially conscious investing. The lack of a joint account marks a major omission, denying couples and other partnerships the ability to invest as a group. It may also cause legal issues down the road if beneficiaries aren’t properly declared.
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