Nick Holeman of Betterment
Traditional financial advisors have been worried that robo-advisors would make the full-service model obsolete. In the meantime, Betterment has slowly expanded from a pure robo to an online advisor with three different business lines: Retail-to-Consumer, Betterment for Advisors and Betterment for Business, Nick Holeman, CFP, Betterment's financial planning expert, 27, tells ThinkAdvisor in an interview.
Now with $13.5 billion in assets under management, the firm claims to be the largest independent online financial advisor. Indeed, its high-net-worth offering, or Premium Plan, has been embraced by investors with accounts ranging from $100,000 to many millions, according to Holeman.
Such customers, potentially reaping the benefit of advanced strategies for investing and tax-saving, have unlimited access to human advisors: certified financial planners that Betterment hires and trains.
Last year, the company launched several different portfolio strategies for customization and flexibility. These include the BlackRock Target Income portfolio and Goldman Sachs Smart Beta portfolio.
Further, Betterment's budding 401(k) division for small businesses has turned out to be fast-growing and with strong long-term prospects, Holeman says.
The advisor arm — Betterment for Advisors — aims to "empower" FAs by providing high-tech back-office capabilities to free advisors to spend more time interacting with clients and prospects.
Holeman, a CFP with fee-only Pure Financial Advisors in San Diego before joining Betterment's investment team two years ago, works with product designers and engineers and gives wealthy customers one-on-one financial advice. He is also busy training the dozen CFPs – ages 20s-40s – that Betterment has hired to work with affluent clients. In the interview, he describes just what that entails.
Betterment, founded in 2008 as an automated digital-only advice platform, now has 340,000 customers, ranging from millennials to 85-year-olds, with an average age of 37 and an average balance just under $40,000.
Its website claims that Betterment's "approach to long-term investing can help you earn 2.66% more than a typical investor" through its technology, which, the digital advisor says, makes possible lower taxes and fees, and permits "better investing behavior."
ThinkAdvisor recently interviewed Holeman, speaking by phone from Betterment offices in New York City's Flatiron District. An IRS enrolled agent — the designation qualifies him to give tax-related advice — the CFP also gives volunteer seminars at the New York Public Library through the Financial Planning Association's New York chapter. He says that attendees are "definitely curious" about robo-advisors but that he isn't there to sell them on Betterment, just to help with investing and financial planning education.
Here are excerpts from our conversation:
THINKADVISOR: Please explain how Betterment wants to "empower advisors."
NICK HOLEMAN: What we really want to do for the traditional advising industry is empower advisors so they can spend more time with their clients, give better advice and take on more clients. We want to empower both investors and advisors [worldwide].
How do you help advisors now?
We have a network of traditional advisors who use all our tools and services as a resource; for instance, for automated rebalancing, automated tax-saving strategies, account opening and management or reinvesting dividends.
But the general perception is that Betterment is a robo-advisor for millennials.
We used to be strictly an automated service. But we are no longer. As our abilities continue to improve, we've slowly moved up the value chain, and now [in addition] we have multiple customers who have many millions of dollars on our platform.
How did you accomplish that?
As our products and services have evolved, we've begun to offer more advanced investment strategies, more advanced tax-planning and tax-saving strategies and better comprehensive retirement planning tools as well.
