Pacific Life Insurance Co. has rolled out a research subsidiary that’s targeting younger people with the prospect of adding an element of social consciousness to their portfolios.
Swell Investing LLC aims to help investors “[support] doing good while investing for yourself,” said Khanh Tran, president at Newport Beach-based Pacific Life, which is part of Pacific Mutual Holding Co.
Pacific Life is the biggest private company based in Orange County. It provides a range of insurance and other financial and investment-related services. It had about $137 billion in assets at the end of 2014. The latest revenue figure, from 2013, totaled $7.5 billion.
Swell has four portfolios based on different causes: ending poverty, fighting cancer, improving education and upholding human rights. Each holds shares of 30 companies that give the highest dollar amounts to the specified cause directly or through their charitable arms.
Swell chooses the 30 companies per portfolio based on “very detailed reports of tax filings,” which are a requirement for companies and foundations that give to charities, Tran said, adding that those companies tend to be larger and part of major indices and, as a result, have high correlations with the broad equity markets.
For instance, the top three holdings of the “end poverty” theme are Wells Fargo, which gave $202.6 million to the cause from 2010 through late 2014; Wal-Mart, which gave $160 million; and JPMorgan Chase, which gave $155.7 million.
A Swell customer could choose one or several among the four portfolios and carry out actual investment transactions through an account with Motif Investing Inc., a San Mateo-based registered broker-dealer that has partnered with Swell. The minimum investment is $250.
A $9.95 commission covers all the purchases for an individual portfolio.
Reallocations of holdings within a portfolio are possible and subject to commission.
Swell adds another layer of giving after customers make their choices.
“[Motif Investing] will take that [commission] … and pay Swell a royalty,” Tran said. “And then Swell will take 20% of the royalty—revenue, not income—and we’ll donate it to nonprofits” that are specified in advance in line with each of Swell’s four causes.
Organizations
Swell donates to United Way in the “end poverty” category. Susan G. Komen gets “fight cancer” donations, while Jumpstart is earmarked for “improve education.” The American Association of People with Disabilities accounts for the “uphold human rights” category.
Swell is headed by managing directors Liam Monaghan and Dave Fanger. Monaghan joined Pacific Life in 2010 as a product designer in variable annuities. He also is head of product development of Pacific Asset Advisors Ltd., the asset management unit of Pacific Life.
Fanger has been with the company since 2008 and became assistant vice president of corporate development in 2012, a role he continues to serve in.
Other Swell executives are Leslie MacDonald as legal counsel and Jeff Bradshaw in a finance capacity.
‘Innovative’
Tran said Swell’s launch is indicative of the innovative character of Pacific Life as a company.
“Broadly speaking, when you think about Pac Life, we try to be innovative in the different things we do,” he said. “[Swell] gives us access to a market that heretofore … Pac Life hasn’t had much exposure to. Historically speaking, at the genesis of Pac Life 145 years ago, we [set out to] provide life insurance, which means you only enjoy it when you’re dead. Now we’re doing retirement. You get to enjoy that when you’ve put in 40, 50 years of work. And then mutual funds—you can enjoy that during your working life. This (Swell), we see as an opportunity to cater to the younger people. Heretofore, our insurance product has not been one that young people will wake up and think about buying. … It also brings together investors who otherwise wouldn’t invest. Some of the younger [individuals] tend to stay away from investing, but here they get to do something good. … It’s about diversification, broadening our base.”
Tran himself has used Swell as an “opportunity to teach my children about several things,” he said. He opened accounts for them and taught them about “investing, in and of itself … and about doing good.”
Wait and See
Pacific Life hasn’t tried to “capitalize on” Swell yet, which officially launched last month, according to Tran.
“We want to see how this goes first,” he said.
Its role as a potential money maker for its parent company will depend on volume, said Tennyson Oyler, president of the Pacific Life Foundation and vice president of brand management and public affairs for Pacific Life.
Meanwhile, Swell can take advantage of being part of “a bigger company,” he said. “We can use the resources in-house. Accounting [for instance] is done with the corporate accounting team. Until [Swell] gets larger, we can house it within Pacific Life in terms of sharing resources.”
