Betterment incorporates external accounts onto its client and adviser platform

Firm says syncing all financial accounts provides a fuller financial picture for clients

Mar 9, 2016 @ 10:07 am

By Alessandra Malito

Betterment, the automated investing service, is now allowing users to integrate external financial accounts on its dashboard to provide consumers with a clearer snapshot of one's wealth.

The upgrade will allow clients to link bank accounts, other investment portfolios, loans, mortgages and credit cards, providing them with the ability to see their financial picture and total net worth in one glance. Previously, Betterment had visibility on other brokerage accounts and retirement accounts through its RetireGuide planning tool.

“Our goal is to be our customer's central financial relationship, where you do everything in the long term,” said Jon Stein, chief executive of Betterment. “We feel we can give better advice the more we know about our customers, and they can make better decisions too.”

Betterment will not provide advice on the external accounts, nor will it have detailed transaction information for credit cards like, an original account aggregation where clients can create budgets and flag expenses. The account aggregation is being powered on the back end by Quovo.

It will, however, show the accounts' total assets, the fees associated with it and where idle cash may be sitting. Betterment last year came out with RetireGuide, which does the same for 401(k) portfolios. With this update, clients will be able to tag external accounts as part of a goal.

Advisers will get the same insights through Betterment Institutional when clients link their external accounts to the platform.

“Advisers have been asking for this kind of holistic view and now they have it,” Mr. Stein said.

Matthew Fronczke, director of product consulting and research at kasina, said this is a step in the right direction, and all platforms will need to offer this in the future to provide a holistic financial picture.

“It seems like a nice addition for me to centralize everything and at some point it will become table stakes for most organizations,” Mr. Fronczke said.

Other robo-advisers already have this for their clients.

SigFig, a robo-adviser with about $70 million in assets under management, has account aggregation. Mike Sha, chief executive of SigFig, said it is an important feature not just for younger investors, but for those who are older and have collected more accounts through the years.

“It is so much more than connecting all accounts in one place,” he said. To those who are good at balancing their checkbooks, this is not as big of a deal, “but usually the problem is those people who don't manage well.”

SigFig, like many other platforms, does portfolio checkups, which allow clients and potential clients to link accounts and see if the portfolio is properly invested. The platform provides suggestions as to what the client or potential client should do, or brings on those assets if the user decides to transfer assets to be managed. Wealthfront does not have account aggregation, but the robo, which remains a direct-to-consumer platform, recently came out with their own portfolio review check as well.

Personal Capital, a hybrid robo-adviser that pairs automated investing with a human adviser and recently passed $2 billion in assets under management, also has account aggregation for various accounts, loans and home value. The hybrid RIA creates a financial plan that updates along with the clients' aggregated assets.

“Being able to look at a customer's aggregated accounts allows us to provide better advice than a robo-adviser or a traditional financial adviser,” Jim Del Favero, head of product at Personal Capital, said in an email. “For example, someone might self-report as being aggressive in their risk tolerance, but their aggregated portfolio is 20% in cash, which clearly isn't aggressive.”

Hedgeable, a robo-adviser with $35 million in assets under management, aggregates clients' savings and checking accounts, credit cards, loans, brokerage, mortgages and rewards. It also links to real estate value and private holdings, such as art, cars, wine, land and illiquid funds.

“You can pull in these accounts and say you're too exposed in one area or another,” said Mike Kane, CEO of Hedgeable. “Or maybe they already have a lot of equity somewhere else or they have a lot of debt and it may not be the best idea to keep giving money into an IRA.”

“It's traditional things an adviser would do,” Mr. Kane said.

For the tool to make Betterment even more competitive, the robo would have to start offering advice on these external accounts, he said. This is what larger institutions are doing, such as Fidelity's new project, Wealthscape.

“In some ways, holistic financial advice does require the human element,” Mr. Fronczke said.

Robo-advisers will need to focus on what advisers do to stay competitive, said Aaron Klein, chief executive of Riskalyze, a risk assessing technology platform with an institutional robo-adviser. He said the argument for robos has been: if you have a holistic view, you're being a financial adviser, but there's more to it, and that comes with advice.

Having a dashboard that aggregates accounts can help robos attract those assets onto their own platforms, but there's a ways to go before it can be an authentic advice model, he said.

“When the first robo can look at someone wanting to invest $10,000 and say 'that's a bad decision for you, instead of investing you should pay down student loans,' when the first self-directed robo does that, that's when we reach the point that they're actually delivering advice, not just self-directed investing,” he said.


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