Betterment partners with BlackRock, Goldman to offer more portfolio options

Robo-advice pioneer gets more sophisticated with smart-beta offering

Sep 13, 2017 @ 12:36 pm

By Jeff Benjamin

+ Zoom

Betterment has partnered with BlackRock and Goldman Sachs to push its digital platform further into the realm of more-complex investment strategies.

The robo-advice platform, with $10 billion under management, announced Tuesday it is adding an income portfolio option from BlackRock and a smart-beta option from Goldman.

The latest additions continue a theme, according to Dan Egan, Betterment's vice president of behavioral finance and investing. The strategies join core tax-advantaged, taxable and socially responsible portfolios, and two municipal bond options for high-tax residents of California and New York.

"These are all examples of us trying to make it even easier for our clients to reach the appropriate investment solution," Mr. Egan said. "Across the board, we are looking at more personalization, with services and features that families tend to use."

But as Betterment has continued to evolve, some have started to question the direction of growth for a digital platform that is leveraging low-cost investing to the mass consumer market.

"In the grand scheme of things, this means nothing because the average Betterment client has no idea what the pros and cons of something like smart beta are," said Paul Schatz, president of Heritage Capital Management.

But Mr. Egan said the strategies being added to the Betterment platform, specifically the smart-beta portfolio, is appropriate for the target market.

"We're seeing more appetite for variety and tailoring, and we need the right breath of solutions to allow investors to do that," he said.

Smart beta is a generic term for strategies that alter allocations within traditional indexed portfolios. There are multiple varieties of smart beta, which attracts as many proponents are critics.

"Smart-beta products can play a role in risk reduction and possible return enhancement, but they're complicated enough that it requires some investor education," said Todd Rosenbluth, senior director of mutual fund and ETF research at CFRA.

Mr. Schatz was more direct, describing smart beta as "quasi passive management."

"For people to think smart beta is a new and unique thing makes me laugh," he said. "Betterment should have just stuck to their knitting of cheap, passive strategies."

Meanwhile, as part of the statement, Betterment founder and chief executive Jon Stein said the robo-platform is responding to customer demand.

"Betterment has an increasingly diverse customer base; they all want to put their money to work, but not necessarily in the same way," he said. "Adding these options to our existing portfolio strategies will help us deliver on our promise to provide customers with a personalized investment plan tailored for their individual needs and preferences."

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