Investors seeking to remove stocks of firearms or ammunition manufacturers from their investment portfolios may encounter difficulties. Private Wealth Systems indicates need for transparency and control in investment reporting.
(Charlotte, NC) March 12, 2018—The shooting last month at Florida’s Parkland High School, which left 17 people dead, has precipitated a national debate on the ownership and support of firearms and the best ways to reduce the risk and severity of future such events. Among the many other segments of the national population, the shooting has set off a wide-ranging search for answers in the investor community. “Feelings are strong on all sides of this subject,” says Craig Pearson, CEO and co-founder of Private Wealth Systems, “and some investors are expressing a desire to purge their portfolios of holdings in companies that manufacture or sell guns or ammunition. Investment advisors and wealth managers across the country have been scrambling to comply with these requests.”
Pearson, whose company is a global leader in investment reporting software, notes that meeting these investors’ wishes, in many cases, is not an easy thing to do. For one thing, the names of these companies are often not well known and do not particularly stand out in a prospectus. Some, like Sturm Ruger & Co., are well known as gun manufacturers and immediately recognized as such, but many others are not. The famous Smith & Wesson brand is now traded as American Outdoor Brands Corp., and the venerable Winchester brand is now owned by Olin Corp. National Presto Industries, famous for its line of small kitchen appliances, is actually a defense contractor that makes more money from the sale of ammunition and other lethal material than it does from consumer goods. 1 Popular consumer brands such as Dick’s Sporting Goods and Walmart sell guns to consumers.
This difficulty is compounded by the fact that many of these securities are held by exchange-traded index funds (ETF), which hold shares of every company in whatever index they are tracking. Two of the world’s largest asset managers, the index giants BlackRock and Vanguard, are now among the top shareholders of three publicly traded gun companies: Sturm Ruger, American Outdoor Brands, and Vista Outdoor. BlackRock has said it will be contacting officials at these three companies and asking them how they are responding to the shootings. Vanguard, which has 20 million clients, said it was unrealistic to cater to such a wide variety of views on pressing social topics. “We believe mutual funds are not optimal agents of social change,” a spokesman said. 2
Pearson points out that investors who do wish to be agents of social change, or at least to have their portfolios reflect their views, have options. The investment strategy known as “sustainable investing” takes into account factors such as a company’s record on consumer protection, board diversity and managerial practices, among others. This, he observes, is not a minor activity. Over the next two to three decades, Bank of America Merrill Lynch predicts that millennials could drive some $15 trillion into Environmental, Social and Governance (ESG) funds in the U.S.3 There is growing evidence that suggests ESG factors, when integrated into investment analysis and portfolio construction, may offer investors potential long-term performance advantages.
“Particularly in the case where a family has significant wealth,” says Pearson, “the preferences of investors can have a real impact—as long as their financial advisors and wealth managers are aware of each investor’s personal preferences.”
Private Wealth Systems’ company officials claim that having built a flexible and powerful wealth management reporting platform, they have enabled financial advisors the ability to understand and comply with their clients’ individual wishes—which is the only reporting system on the market that allows each investor to characterize individual investments with personal classifications so they can determine what is and is not socially or personally acceptable to them for investment purposes.
About Private Wealth Systems, Inc.
Private Wealth Systems is a global financial technology company that was founded by two industry veterans: Craig Pearson, who built and sold the largest legacy provider of consolidated wealth reporting working with several hundred family offices across four continents and five of the top private banks, and Joanne Frawley, who helped design the Rockefeller family investment reporting platform and who has since built three other increasingly complex reporting systems. Designed to support advisors and their ultra-high net worth clients, the cloud-based Private Wealth Systems platform captures, consolidates, cleanses, calculates and presents actionable insight across complex, multi-asset, multi-manager, multi-jurisdictional wealth holdings while adhering to a broker dealer’s strict privacy controls. The company was named a FinTech20 Top Technology Company to Watch by American Banker in 2017 and a FinTech Top 50 Innovator by CIO Review in 2018. Visit www.privatewealthsystems.com.
- Zigler, Brad, “Don’t Own A Gun? Maybe Your Fund Does,” WealthManagement.com, February 20, 2018.
- Thomas, Landon Jr., and Grocer, Stephen, “You Might Be Giving Gun Companies Money, Even if You Don’t Own a Gun,” New York Times, February 26, 2018.
- Kassell, Matthew, “Think you know about socially responsible investing?”, Wall Street Journal, July 19, 2017.