As robo-advisor firm Betterment builds out its custodian platform with new investment management tools, the company is envisioning its RIA referral program pilot as a bridge between its retail and advisor channels.
“We kind of view the business as a big flywheel between retail, 401(k) and the custody side, and this is like the first forward deployment of connecting those businesses in a meaningful way,” director of sales Devon Klumb told InvestmentNews after being asked about Betterment’s client referral program that launched in a small pilot earlier this year.
Betterment unveiled several updates to its Betterment Advisor Solutions custody platform at a media briefing held in New York this week. The new features span customized client portfolio construction, a capital gains budget tool, direct indexing sleeves, UMAs, and rebalancing previews for client accounts.
The seperate Betterment Advisor Network (BAN) referral program charges a 0.25% annual fee on a referred client’s account assets, according to a regulatory filing from February 10. Betterment has $70 billion in assets under management across 1 million users, mostly within its retail channel, while about 600 firms use its Betterment Advisor Solutions custodian arm for RIAs.
“We're still in more of a pilot mode [for Betterment Advisor Network], which is really just gathering data on volume, conversion percentages, where can we step in and help to enable those conversion percentages,” Klumb said of the referral program. “Our thesis in general has been that a lot of folks start without a lot of complexity, they want to kind of do things themselves. Then life events happen, and you start to seek some advice from somebody, and we have a great opportunity to bridge that gap.”
If a retail client decides to participate in BAN, the client will receive names and contact info of one or more advisors using Betterment’s custodian services. Betterment’s referral pilot is similar to Robinhood Advisor Network (RAN) being rolled out to connect Robinhood retail clients with advisors who custody with TradePMR. Goldman Sachs and BNY Pershing have also introduced new programs in the RIA referral market, which remains dominated by programs from leading custodians Schwab and Fidelity.
“I think what us and other challengers do, and it's like this in every industry, is you challenge them to continue being a great option. So I think it's forced evolution from a product perspective across the board,” said Klumb. “We're feeling pushed to iterate and continue investing in our product and experience based on what some of these other challengers are doing. I think Schwab and Fidelity, they've got the business right now, but I view this as an industry that has room for everyone to exist.”
Betterment’s custody platform launched its solo 401(k) offer for RIAs last year to use with self-employed clients. They expanded that solution for advisors in partnership with Osaic and Hub International earlier this year.
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