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Home Office News: RBC Wealth’s ESG Scrutiny, Fidelity’s Virtual Reality Onboarding, and More

By Julie Daclag September 30, 2020

Below is a look at some changes major distributors have made to their platforms that may have flown under your radar in the past month, collected from Distributor Profiles, a service of sister publications Ignites and FundFire.

RBC Wealth Management creates ESG ratings for asset managers

RBC Wealth Management has created its own rating system for third-party asset managers on its wealth platform that integrate environmental, social, and governance criteria in their investment processes.

The internal scoring, which started in January, is aimed at helping RBC Wealth Management’s manager due diligence team gauge how committed the asset managers are to ESG issues.

As of this month, the firm has 20 U.S. mutual fund providers on its platform that are classified as ESG managers. In 2021, the firm aims to rank all managers according to their type of product and investment vehicles, with a separate methodology for exchange-traded funds.

RBC Wealth Management categorizes ESG managers into five buckets: unaware, aware, integrated, best-in-class and thematic/targeted outcomes.

Unaware managers are those who have not fully integrated ESG. Aware managers are those looking at ESG but it is not core to what they do and it is not the driver of their investment process. Managers in the integrated bucket are those with strong portfolio management teams that look into ESG risks. Best-in-class-managers remove the worst actors from consideration. Thematic managers look for specific ESG themes or growth in ESG areas.

The manager due diligence team then rates the asset managers on a scale from one to four using RBC Wealth Management’s traditional manager due-diligence process, which is categorized into firm, people, process, and philosophy.

A low score doesn’t mean an asset manager will be removed from RBC Wealth Management’s platform, but that manager won’t get a spot in the firm’s internally-run discretionary portfolios.

Separately this month, Morningstar revealed its "Morningstar ESG Commitment Level,” an ESG rating system for asset managers and products. The rating system evaluates all funds and roughly 450 asset managers covered by analysts that include 4,000 strategies, open-end funds, closed-end funds, ETFs and separately managed accounts.

The strategies and asset managers are rated on a scale from best to worst. They are identified in ESG commitment categories: leader, advanced, basic, and low.

Fidelity onboards employees with virtual reality and drops investment minimums

Fidelity Investments has been using virtual reality in onboarding new employees.

Trainees in the FidelityYOU or the Year One University program can engage in the digital environment through virtual reality headsets. The trainee’s avatar carries out the onboarding tasks.

“The virtual reality pilot program was a practical way to solve for an immediate need,” Adam Schouela, head of emerging technology at the Fidelity Center for Applied Technology, says in a statement.

“Fidelity had been prepared to work remotely — we moved nearly our entire workforce to their homes, in just a week or so — and we were looking to build on and improve that experience. The VR headsets allowed employees to create deeper connections across teams and site locations, in a more human way than if the training were entirely on a video call.”

More than 140 virtual reality headsets were distributed to the homes of the FidelityYOU participants across the country.

New employees can interact with their coworkers, engage in scavenger hunts and attend information sessions using the virtual reality headsets. Videogame-like breaks are also part of the orientation experience in Fidelity’s pilot program.

Separately, Fidelity has lowered the investment minimums for its proprietary equity and fixed-income-based separately managed accounts that are available to retail investors.

The investment minimum for equity-based SMAs was cut to $100,000 from $200,000. The equity SMAs are: Fidelity Tax-Managed U.S. Equity Index Strategy, Fidelity U.S. Large-Cap Equity Strategy, Fidelity Equity Income Strategy, Fidelity International Equity Strategy, and Fidelity Tax-Managed International Equity Index Strategy.

The investment minimum for fixed-income SMAs was lowered to $350,000 from $500,000. The fixed-income SMAs are: Fidelity Core Bond Strategy and Fidelity Intermediate Municipal Strategy.

The investment minimum for unified managed account SMAs was reduced by 30% to 35%, depending on the asset allocation mix. There are seven equity SMA sleeves within the UMA: four Fidelity SMAs and three open-architecture SMAs.

The open-architecture SMAs are: Strategic Advisers Equity Growth SMA, Strategic Advisers Equity Value SMA, and Fidelity Strategic Advisers Blended International Equity SMA.

In another development, Fidelity has launched its first active ETF — the Fidelity U.S. Multifactor ETF. The product has multiple factor-tilting strategies for domestic equities. It tracks a proprietary index that screens companies that exhibit high value, quality, momentum investment factors, and low-volatility metrics. The ETF charges 29 basis points in expenses.

The debut brings Fidelity’s factor-based index ETF family to 15. Other products focus on traditional factors, such as value, quality, and momentum. They also include two multifactor foreign-stock ETFs, dividend-seeking strategies, and other factor-based stocks that aim to perform well in an inflationary environment.

The majority of Fidelity’s 33 ETFs are smart-beta index strategies. The firm runs 12 traditional index strategies, including 11 that are sub-advised by BlackRock. It has six active products, including three equity ETFs that use Fidelity’s proprietary portfolio-shielding methodology.

JPMorgan adds retirement portfolios to robo

JPMorgan has added portfolios to the retirement-focused option of its You Invest robo.

The You Invest robo has two programs — the glide path portfolios program and a general program.

The additional four retirement-focused portfolios were added to the general program. The portfolios are structured according to risk profile and — unlike the robo’s glide path portfolios — remain static across time horizons.

The portfolios are categorized as conservative, moderate, growth and aggressive. The aggressive portfolio has 90% allocation to equities — more than half of which is allocated to U.S. equities. The conservative portfolio has a 25% equity allocation and a 73% core fixed-income portion. All four portfolios have a 2% allocation to cash.

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Tags:  Finding and winning new clients , Client retention , Technology , Fees and compensation , Investment strategies , Retirement planning , Portfolio management , BlackRock , Fidelity Investments , JPMorgan , Morningstar , RBC Wealth Management , RBC

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