It has already been a pretty big year for Ethic, the tech-enabled ESG-focused asset management platform. In April the firm announced it had raised $29 million in a Series B funding round. Thursday the firm announced it has surpassed a major milestone: $1 billion in assets under management.
“This milestone is the culmination of the incredible efforts of our team,” said Doug Scott, the Australian-born co-founder and CEO of Ethic. “We feel like we’ve created a solution that resonates with the advisory community.”
That team, which Scott said has grown to 40—with plans to double over the next year—represents a mix of expertise, from front-end developers working on client experience, to sustainability experts, to those building and maintaining integrations, including to each of the four major custodians (TD Ameritrade still among them).
Alex Laipple, who heads up business development at Ethic, said he engages with advisors on a daily basis, having seen the firm’s client base and AUM grow from three firms and $20 million three years ago when he joined to 75 firms and $1 billion today.
For those advisors unfamiliar with Ethic, the firm operates as a subadvisor to RIA firms who access them via their custodial platforms. For example, in the case of Fidelity, advisors access Ethic through the Fidelity Separate Account Network, according to Laipple.
“We make money based on AUM and advisors make sub-advisory agreements with us,” he said.
Equally important to the technical mechanics of building and managing portfolios through the custodians is the front-end development where advisors learn to more effectively communicate with clients about ESG.
When asked about an often-stated advisor complaint about ESG: “Our clients are not asking us about it,” Scott and Laipple both said this sentiment is simply misleading, if not wrong.
“It is more about how you engage with clients,” Laipple said.
“ESG is financial nomenclature created by analysts,” said Scott. “We peel that back and try to make it more accessible to people, connecting with clients by finding out what is important to them.”
He used the example of water. If people are passionate about clean water, the company’s technology takes that and contextualizes it in ways that are not obvious to clients or advisors in terms of the connectivity between things, whether it is manufacturing practices that utilize water to how climate and warming are connected to water.
“Above and beyond that it is tying it to how advisors speak with their clients, from clean water to climate change to social justice,” said Laipple. “Personalization is a pillar of the business, matching what is important to clients using the front-end layers of our platform … and tying it to the benchmarks and tax objective of each client.”