OpenInvest is a leader in changing the way we invest. By combining the automation of a robo-advisor with well-vetted strategies that promote socially responsible companies, you can make a difference with your investments while still planning for your financial goals. The experience is truly a la carte and you also access a ton of helpful information and research to determine OpenInvest’s exact methodologies for each impact area.
Here’s everything you need to know about how OpenInvest works and the causes you can choose to support through your investments.
How It Works
In addition to answering questions about your financial situation, the initial questionnaire from OpenInvest also prompts you to identify causes that you’re passionate about. The result is a customized portfolio that’s managed with automatic rebalancing.
OpenInvest pairs your stock or equity portfolio with a bond portfolio. There’s even an option to include a green bond fund, which supports projects with qualified green building and sustainable designs. Your stock selections are designed to mirror the S&P 500, but prioritize actual investments based on your selected causes. Ultimately, the goal is diversification through investments that align with your values.
You also get updates on the social impact made by your investments. Your OpenInvest dashboard shows impact in real-time for categories like carbon, gender, or weapons. The app is available on phones, computers, and tablets, making it easy to track your account progress and make any changes you see fit.
You also get autonomy when it comes to investing or divesting from specific companies. If you don’t like how they operate or what they stand for, you can take them out of your portfolio. This is a rarity among robo-advisors, who don’t often let you get involved at such a granular level.
Types of Accounts Offered
OpenInvestment offers both taxable and tax-advantaged accounts. You can open the current types of taxable accounts:
- Joint (with a spouse or partner)
- Custodial (on behalf of a child)
- LLC (an account owned by a company)
There are also several IRA options available to choose from. Traditional and Roth IRAs can be set up directly online and offer specific tax benefits that vary for each one. OpenInvest also offers SEP IRAs for self-employed individuals, but you have to contact them directly in order to open your account. You can also do a 401k rollover but they don’t currently manage 401ks directly.
OpenInvest may have a slightly higher management fee than other robo-advisors but they also claim not to charge any hidden ETF fees or trading fees. When you compare costs, it’s important to realize you don’t need to consider average expense ratios because those fees aren’t coming out of your OpenInvest account.
You also don’t have to worry about being charged when you open or close your account.
OpenInvest’s standout feature is the ability to pick and choose where your dollars go — and where they don’t go.
How Socially Responsible Investing Works with OpenInvest
OpenInvest currently has 10 themes you can pick and choose from. Each cause is designed to screen out companies with bad practices in those areas and also highlight companies that are leaders within the field.
Here’s a rundown of each cause currently available from OpenInvest:
Racial Justice: includes companies that are transparent on how they’re stacking up against their own diversity targets. You’ll also be divested from companies that pollute disproportionately in communities of color.
Your Community: Currently only available to institutional investors, you can choose a region of focus and invest in companies that deploy capital to address community-specific needs.
Healthy Hearts: Excludes companies that contribute to heart disease in some way. In addition to tobacco and alcohol companies, choosing this category divests you from companies involved in soda, sugary snacks, meat processors, and fast food.
Dark Money: Another divestment category, OpenInvest uses the CPA-Zicklin Index to identify companies that are transparent with their political contributions as well as those who try to hide their contributions and efforts to sway public policy.
Greenhouse Emissions: This cause allows you to invest in companies with the lowest carbon emissions among their peers and divest in those who have the highest emissions. OpenInvest also places favor in those companies that lobby for climate change and renewable energy and similarly against those who lobby against a global policy approach to issues related to climate change.
Pipelines on Indigenous Land: This category divests from financial institutions that fund pipelines on indigenous lands. Also included in this divestment list are energy companies that own or operate these pipelines.
Deforestation: This category ranks the top global companies whose supply chains contribute to deforestation across the globe. You’ll divest from companies ranked poorly for their anti-deforestation policies.
Fossil Fuels: Choosing this cause lets you divest in oil, gas, and coal companies with the highest emissions. Instead, you’ll invest in those with the lowest emissions. OpenInvest warns against completely divesting from fossil fuel companies because it will affect the diversity of your portfolio. But if you’re dead set against putting your money into the traditional energy sector, you can make that request directly with OpenInvest.
Weapons: In this category, you’ll divest from any company that earns more than 5% revenue from weapons and ammunition sales, including weaponizable technologies.
LGBTQIA+ Rights: Allows you invest in companies that rank well on the Corporate Equality Index from the Human Rights Campaign. It also divests you from those who rank poorly. OpenInvest also includes companies that have signed on to the Business Statement for Trans Equality.
Prison Industrial Complex: This category mostly divests you from companies who significantly contribute to the prison industrial complex. This includes any businesses that profit from imprisonment or prison labor, banks that invest heavily in private prisons, and companies that lobby for pro-incarceration issues. Choosing this category also allows you to invest in companies that have signed the Fair Chance Business Pledge and hire people with criminal backgrounds.
Refugees: This category includes investing in 21 U.S.-based companies identified by OpenInvest as making contributions to refugee welfare. This includes practices such as providing refugees with employment, donating to aid operations, and offering their in-kind services.
Ethical supply chains: OpenInvest supports companies that rank well practicing against human trafficking, forced labor, and other types of human exploitation in the supply chain.
Big Tobacco: If you’re against investing in companies that are owned by Big Tobacco, you can choose this category to divest in those that earn more than 5% revenue from any type of tobacco product.
Women Leaders: This category allows you to only invest in companies that have at least 35% representation of women on their board or in the executive level.
If you have more questions about the methodology behind each of these categories, OpenInvest provides a significant amount of information and research for each one. Definitely visit their website if you want to know more specifics about their cause-based investment parameters.
Not only does OpenInvest offer tax-loss harvesting to investors, it’s also covered in the fee and available to all taxable accounts. However, this feature is only used at the individual equities level because regulations limit tax-loss harvesting when applied to ETFs and mutual funds. OpenInvest does say tax-loss harvesting is not always available or successful but it’s still there for those who are excited by the prospect of limiting your capital gains tax. Plus, it’s included in your management fee regardless of your balance amount.
Another perk with OpenInvest is that there are no hidden fees. At first glance, the 0.5% management fee might seem above average for robo-advisors, but you won’t pay any fees for ETFs. It’s a transparent way to do business, which is of course, all part of being a company that promotes socially responsible practices.
One major downside of opting for OpenInvest is that not all services can be executed directly online. For example, you have to contact OpenInvest directly if you want to set up recurring investments from your bank account. There’s no automatic way to do it through your dashboard.
Similarly, if you want to change your recurring investment amount, you need to follow-up with them directly. The same holds true for doing a 401k rollover into your account.
Who It’s Best For
OpenInvest is explicitly designed for people who want their investments to match their values. Other robo-advisors offer a single socially-responsible portfolio that can be added to an investor’s portfolio But it’s rare to see a platform that is designed to let you pick and choose causes that are the most important to you and completely shape your portfolio based on your beliefs.
The Bottom Line
If you’re staunchly against investing in companies in which you don’t believe in, then consider choosing OpenInvest for your portfolio. You truly have the power to build the portfolio you want and can sleep well at night knowing you’re growing your wealth in a way that feels right.