Betterment launches robo-adviser for advisers

Betterment founder and CEO Jon Stein says Betterment Institutional lets advisers get in on the “robo-adviser” game by allowing them to outsource portfolio re-balancing, daily tax-loss harvesting and more.
OCT 16, 2014
Digital investment management firm Betterment on Wednesday announced the launch of an automated “robo-adviser” for traditional advisory firms, with Fidelity Institutional Wealth Services among the first to sign up for the platform that connects advisers and clients online. Called Betterment Institutional, the platform is now in beta, with 25 advisory firms using it, said Jon Stein, Betterment's chief executive. Fidelity IWS will bring a number of investment advisory relationships to the Betterment Institutional platform, he said, though he declined to give a specific number. Betterment Institutional lets advisers get in on the “robo-adviser” game by allowing them to outsource portfolio re-balancing, daily tax-loss harvesting and trust functions that Betterment already offers to retail customers, according to the company. (More: Debunking 3 big myths about robo-advisers) In addition, Betterment Institutional will provide advisers online client sign-up, statements and reporting, and billing software and fee collection. Clients can access their accounts via the web or mobile applications via iPhone and Android. “What's most exciting to me is that it's a true hybrid solution,” Mr. Stein said. “Advisers use many tools to view client accounts, including Excel, tax management software and portfolio re-balancing. Betterment Institutional provides those tools but it also provides tools for the advisers' clients to be able to log in and view their accounts with the adviser's branding.” This is not the first time that a digital investment platform has been introduced to the advisory world, but such platforms are still in the early stages. On Oct. 1, for example, high-profile advisory firm Ritholtz Wealth Management announced the launch of Liftoff, a robo platform designed by technology startup Upside Financial. And adviser consultant Steve Sanduski predicts that the robo and human worlds will increasingly converge, with advisers such as Ric Edelman and Savant Capital “leading the charge from bricks and mortar advising to the world of high-tech online investing.” (More: Meet Jon Stein, Betterment's ambitious CEO) The fee for advisers using Betterment Institutional is 25 basis points. There are no minimums, no upfront costs and no transaction costs. For that price, advisers can offer clients 12 low-cost ETF portfolios in 12 global asset classes. David Canter, executive vice president for practice management and consulting at Fidelity Institutional Wealth Services, said Betterment Institutional offers advisers work-process efficiencies to make their businesses more scalable and attractive to next-generation investors. He said he hears weekly from advisers who want to be in on the trend toward shared digital platforms for advisers and clients. “We view this as a significant practice management solution for the advisers we work with,” Mr. Canter said. “Betterment Institutional is a very elegant and easy platform that can help advisers serve the emerging and mass affluent parts of their business. More advisers are opening up their minimums for the investors of tomorrow.” Similarly, Mr. Stein reported adviser demand at Betterment for digital technology. “A number of advisers have been coming to us over the past several years and saying, 'Why can't I use Betterment's technology for my customers?'” he said. ”On the Betterment Institutional landing page we have 800 to 1,000 advisory firms signing on for demos.” Russ Thornton, a vice president at Wealthcare Capital Management who uses Fidelity IWS as his primary custodian, said he is familiar with the Betterment Institutional launch and thinks it will be a boon to small advisers who are just starting out or breaking away from a wirehouse. “Historically, they had to figure out technology for trading and re-balancing, for fee billing and management, portfolio reporting and accounting,” Mr. Thornton said. “A lot of advisers still piece together a platform of these disparate parts and hope they're integrated. What Betterment Institutional is doing is a package deal, with all these solutions in a single platform that works well and is tightly integrated with an adviser's back-office management as well as a client facing platform with a nice bow on top for 25 basis points.” However, Mr. Thornton said he is unlikely to adopt the Betterment Institutional platform in his own practice. “I already have a turnkey asset management platform in place that my firm built, and it also includes integrated financial planning,” he said. “So I already have what Betterment offers, and I would argue I have more benefits and features because of the financial planning piece. I may want to do a demo out of curiosity, but it would have to be awfully compelling to motivate me to change from where I am now. Without the financial planning piece, I don't see it happening."

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