Betterment, the four-year-old robo-advisor, announced Wednesday the launch of Betterment Institutional, which will provide advisors with a self-branded, automated platform to serve existing clients and attract new clients with Betterment's investing, tax harvesting and automated rebalancing offerings.
Jon Stein, the founder and CEO of Betterment, said in an interview that Betterment Institutional, or BI, "brings the power of Betterment to more people," partnering with advisors who want to leverage BI's technology solutions in their practices.
Betterment has formed a "strategic alliance" with Fidelity Institutional Wealth Services (IWS), Stein said, which David Canter of Fidelity IWS said reflected the RIA custodian's deep interest from a practice management standpoint in educating its RIAs about the benefits of using technology to improve their practices.
"Having looked at their platform, it's exceptional from an advisor standpoint," he said. "It drafts off the business to consumer orientation" of Betterment's offerings, but "with advisors as the hub" of the relationship with the investor. Betterment Institutional will become one of the practice management tools that Fidelity IWS offers to its RIA clients and prospects.
Since its founding in 2010, Betterment has attracted 50,000 customers to its automated advice platform, Stein says.
While there has been some concern among advisors about robo-advisors, Canter said many advisors see "this digital advice proposition not necessarily as a threat but as a way to serve the clients of tomorrow in an efficient, scalable solution." Betterment Institutional, he says, "is a way to activate a digital advice strategy for their businesses." Moreover, Canter wonders, "Could this change the client acquisition model for advisors?"
Stein said 25 advisory firms have been beta testers of the Betterment Institutional platform, and an additional "800 to 1,000 firms" have expressed interest in adopting the platform.
How does the platform work? For the advisor, BI provides a dashboard (see screen shot) that allows the advisor to view and manage existing clients and their assets on the platform. The advisor uses the dashboard as well to invite prospects to sign up for the platform, which Stein said can take as little as 10 minutes to complete. Betterment provides the engine for the platform, but everything the client sees is branded with the advisor's name and logo.
Betterment also takes care of the billing and collection of fees from clients. Betterment itself charges a 25 basis-point fee, but advisors using the platform are completely free to set their own fees, based on the specific services they offer to individual clients. "It's a hybrid solution," says Stein, that provides tools for advisors and their clients, including BI's automated tax loss harvesting, rebalancing and dividend reinvestment. "It's self-serve to some degree, so the advisor gets to focus on high-value services like trust services or multigenerational issues. Betterment helps make the advisor more efficient."
The platform provides collaboration tools like WebEx and JoinMe, and gives advisors the option of "co-browsing" with their clients, so that the advisor sees what the client sees on the client version of BI at the same time. After the advisor invites the client to join the platform, "the experience from start to finish is electronic," Stein says, including onboarding of a new client. "There's never any paperwork or signatures," says Stein.
Stein says the platform is a "completely safe environment" and that "the client experience is all branded with the advisor's brand — the emails, the statements…all go through the advisor."
As seen in a demo of the BI platform by Betterment product manager Nick Gavronsky, Betterment's investing offering is based on specific client goals, and the client (and advisor) sees whether the client is "on track" toward his or her goals through a simple red or green light. The advisor dashboard, Gavronsky says, shows total assets under management on the platform, the number of clients and the specific accounts. It also shows if the client has added funds to his account and allows the advisor to set his fee for each account.
