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The faith-based investor: Making financial decisions based on religious beliefs

Published: Monday, Aug. 25 2014 5:20 a.m. MDT

Updated: Tuesday, Aug. 26 2014 6:33 a.m. MDT

Robert Churchill, Getty Images/iStockphoto

When the Rev. Phil Blackburn and his wife, Tasha, stabilized their finances and started saving, they began looking into mutual funds.

Blackburn, the pastor of First Presbyterian Church in Fort Smith, Arkansas, noted that their first priority was to find a fund that would pay off financially without crossing certain ethical boundaries. He asked his financial adviser to research faith-based mutual funds that avoided weapons manufacturers.

"As a Christian and as a pastor, I have some obligation to be consistent across the board," Blackburn said. "My faith has to play a role in all the aspects of my life. If it doesn't, then what does it really mean?"

Larger institutions go through the same self-analysis Blackburn did. Earlier this summer, the Presbyterian Church (USA), Union Theological Seminary and the University of Dayton adjusted their investment portfolios to reflect their values. Deseret News National reported that the two schools would divest from fossil fuels, while the PC (USA) ended its relationship with Israeli companies tied to the occupation of Palestine.

Faith-based investors like Blackburn are a subset of so-called socially responsible investors that money managers are increasingly accommodating. Mutual fund families like The Timothy Plan or Amana Mutual Funds Trust build investment options around religious convictions, empowering investors to put their money where their faith is.

"People should be comfortable with their investments," said David Kathman, a mutual fund analyst at Morningstar, a Chicago-based investment research and investment management firm. "If (faith-based investing) helps people sleep at night, that's great."

Socially responsible investing

The 2014 Investment Company Fact Book reported that $15 trillion was invested in U.S. mutual funds last year. Faith-based funds are often discussed alongside the larger trend of socially responsible investing. Socially responsible mutual funds are defined by Forbes as funds "which eliminate or favor certain investments for moral or ethical concerns."

And although the number of investors who are influenced by their faith is impossible to come by, the market for such customers could be huge. Pew Research Center reported in 2012 that 79 percent of Americans consider themselves members of Christian, Muslim or other faith groups.

Stephen Ally, the vice president of The Timothy Plan, said that despite the company's success in attracting faith-based investors, it is still "barely scratching the surface."

The Timothy Plan has attracted mainly Protestant and Catholic investors to its funds, which are designed around the company's conservative Christian beliefs.

Although personal faith clearly influences the The Timothy Plan (its website includes the testimony of the company's founder and Ally's father, Arthur Ally), its faith-based funds and socially responsible investing are still built around the same financial fundamentals as other funds.

"We should perform as well as other funds that don't do what we do," Ally said.

That's why after Blackburn met with his financial adviser about faith-based investment options that would meet his moral expectations, they then spoke in terms of performance.

"He described to me what he understood to be (the investments' moral) parameters and then gave me performance-based advice," Blackburn said.

Emotional investing

As Blackburn and Kathman noted, one of the strengths of faith-based investing is that it allows faithful investors to know they don't have to leave their beliefs at the door of a financial adviser's office.

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