Betterment presses Trump to keep DOL rule

Ad campaign suggests robo-adviser is ready to battle for fiduciary standard

Dec 5, 2016 @ 12:14 pm

By Liz Skinner

Robo-adviser Betterment is reaching out to President-elect Donald Trump to keep him from gutting the Labor Department's fiduciary rule for retirement advice.

It ran a full-page ad in Monday's Wall Street Journal directing Mr. Trump to “stand on the side of America's 75 million retirement savers, not the firms with deep pockets who are lobbying” to protect their interests.

“Americans' right to honest financial advice is in jeopardy, and we are counting on you to protect that right,” wrote Jon Stein, founder and chief executive of Betterment, in the ad that ran on B12.

Since last month's U.S. election of Mr. Trump, speculation has swirled that this pro-business Republican will kill or water down the DOL's fiduciary rule that's set for an April 10 initial implementation. It requires advisers offer only retirement recommendations that are in the best interests of their clients.

(More: Senate democrats control fate of DOL fiduciary rule)

The digital-advice industry, which says it meets the fiduciary standard, expects to gain more business from small investors after the rule takes effect, as some larger advice providers decide low-balance accounts aren't profitable enough for them to take the risk of being sued by investors who think an investment wasn't in their best interests. Some robo-advisers also are finding business working with broker-dealers to develop a post-DOL small-account solution.

“The robo-advisers see the DOL rule as being a disadvantage for broker-dealers, and they think they'll be getting business from broker-dealers dropping small accounts,” said Craig Iskowitz, founder of Ezra Group, a technology consulting firm in the financial advice industry.

(More: RIAs have been slow to prepare for the DOL fiduciary rule)

Even more fundamentally, the new ads may help Betterment with name recognition and trust, a challenge for an independent digital platform that has to compete against industry stalwarts like the Vanguard Group and Charles Schwab & Co.

“It will take a while for the general public to feel comfortable clicking a button to transfer a large part of their life savings,” Mr. Iskowitz said. “It's not just like buying a book on Amazon.”

Betterment ran a separate ad in Sunday's New York Times aimed at investors, recommending they ask their financial managers questions about fees and services to root out their fiduciary responsibilities.

Among other questions, the ad on the back of the Business section suggested asking: “Do you make more money recommending some investments over others?”

Betterment, which has about $6.2 billion in assets under management in its retail, retirement-plan and adviser-focused divisions, would not say what it's spending on the campaign, and is still deciding whether to run additional ads.

The price of a full-page ad in the Wall Street Journal is $315,616, and a full-page New York Times ad in the Business Section on Sunday is about $222,000, according to the papers' stated rates. Betterment's spokeswoman Arielle Sobol said the firm paid “significantly less” than these rates, but declined to provide the amounts.

The digital-advice firm has long been a supporter of the DOL rule through Betterment's blog and in appearances by Mr. Stein and other executives.

"There has been an increase in speculation about the state of the fiduciary standard in light of the election results and we want to continue to let our position be known while encouraging investors to make sure that they are receiving services and products in their best interests,” said Joe Ziemer, Betterment's vice president of communications, in a statement about why the firm ran these ads.

(More: Trump may kill DOL rule but financial advice industry still needs fiduciary regulation)

Wealthfront, a digital platform that manages about $4 billion for 90,000 investors, said it won't be taking this approach to supporting the law, even though it backs the fiduciary standard.

“You won't see us taking out large spend ads,” wrote Kate Wauck, spokeswoman for the firm.

“It's in our DNA as a company to be incredibly frugal with how we spend money and the areas we focus on are building new products and services that add value for our clients,” she wrote.

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