Advisers on Betterment’s platform can now offer their business-owner clients a 401(k) solution, a move by the robo-adviser to help attract additional assets while fostering the growth of both its advisory and retirement plan business lines.
Betterment announced Tuesday the national launch of its Advised 401(k)s, which are available to the 550 advisory firms on the Betterment for Advisors platform, according to a company spokesperson.
By integrating the 401(k) function from Betterment for Business with its adviser service, Betterment can act as the plan’s 3(38) investment manager. Betterment collects the assets under management fee advisers set themselves, and forwards it to them on a quarterly basis.
With a significant portion of individual wealth held in 401(k)'s combined with the recent surge in robo-advisor account openings, it makes sense for Betterment to leverage the momentum and capture assets as they roll out of 401(k) plans, according to David Goldstone, Backend Benchmarking’s head of research.
“Betterment's integration of these two business lines and the recent Personal Capital acquisition by Empowerment are both examples of how firms are seeking to find synergies between 401(k) plans and individual wealth management businesses,” Goldstone said.
Further, tapping into 401(k) plans allows advisers to attract additional business and get their foot in the door with a marketplace that isn’t typically in their wheelhouse, according to Celent analyst Andrew Schwartz.
“As robo-advisers become more sophisticated, they’re going to start looking into areas to offer their advisers more options,” Schwartz said. “People like the ability to choose from a myriad of offerings, and these tools can be a huge value add to allow certain firms to tap into another marketplace.”
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