A name change, some more offerings, even an upcoming memo to advisers: these are just a few modifications Betterment is making to expand its platform and address concerns from its decision in June to temporarily suspended trading the morning after the Brexit vote.
Betterment Institutional is now Betterment for Advisors, says Tom Kimberly, the platform's general manager. "It states our mission and what we're about more clearly," Kimberly says. "We think it sends a clear signal to the market about who we work with."
As part of its rebranding, Betterment for Advisors will also expand its offerings, adding strategies from Vanguard and Goldman Sachs to the platform, in addition to Betterment's own portfolio.
Kimberly says the expansion is aimed at creating a "curated suite of different strategies," in recognition of adviser desires for flexibility and greater customization of client portfolios. They will be ETF-based strategies meant to incorporate client demands such as impact investing and could see offerings from up to 10 other providers.
"We work with partners who we feel have a good alignment with Betterment as a platform," Kimberly says, adding that Betterment is not currently working with a partner providing actively managed strategies, "but it's certainly a possibility."
The flat 25 basis points platform management fee on assets remains unchanged.
TRADING POLICY MEMO
Kimberly adds that Betterment has been engaged in an ongoing internal discussion about its controversial trading suspension, and has sought the input of advisers. The firm is putting final touches on a memo about its trading policies, he says.
"This is something we gave a lot of thought to," he says. "We spoke to a lot of advisers, some of whom were perfectly happy with the decision, some who provided important constructive feedback."
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The firm's decision has advisers and clients questioning the investment policies and maturity of the digital platform.
June 29 -
The robo adviser expands its offerings and is developing a memo to answer concerns after the firm temporarily suspended trading the morning after the Brexit vote.
September 14 -
Robo advisor seeks to add a piece of the $4.6 trillion market to its business.
September 11
Kimberly deferred comment as to whether advisers will be able to opt out of a trading suspension on the platform if they wanted to take action during a market event, stating it is a question that will be answered in the memo. He did not give a date for the memo's release.
"It's all about setting the right expectations, being transparent and upfront," Kimberly says, noting that the platform did not lose any advisers in the wake of the suspension. "[Advisers] are fiduciaries to their clients, and it's important … to give them the information they need to be able to do that."
Currently Betterment's RIA platform serves over 350 advisers, the firm says. It does not break down assets managed by its different branches, but firm spokeswoman Arielle Sobel says the robo adviser's total AUM now stands at $5.8 billion.
RIGHT DIRECTION
The platform's rebranding effort is a good move, analysts say.
“Betterment for Advisors is a much more effective name for the firm’s adviser-focused wealth management platform than Betterment Institutional, especially given the Betterment for Business brand focused on the defined contribution market," says James McGovern, vice president of consulting services at Corporate Insight.
"This rebranding provides Betterment with a good opportunity to show they’ve learned from their Brexit-related blowback. The fact that they will now provide access to outside portfolios from firms like Vanguard and Goldman Sachs is an interesting pivot.”
It's important for digital platforms serving advisers to redirect and expand as the competition has increased, says Alois Pirker, research director for Aite Group's Wealth Management practice.
"Opening up of the platform is very necessary to be successful in the adviser space," Pirker says. "Advisers will want to customize the offering and have flexibility, that's one of the big strengths that FutureAdvisor has."
BlackRock's FutureAdvisor robo platform has snagged four large institutional clients, the latest being U.S. Bank, since it acquired the startup last August.
Betterment's rebranding and expansion of the platform shows how it has learned from its early partnership with Fidelity, Pirker says.
"The big question now is, how they get scale in the RIA space," he says. "Distribution into the RIA market never easy, often it's one firm at a time, and even then it's only a fraction of the assets at each firm. The sales model has to be scalable. We'll see if they can pull it off."
Additional customization for advisers is a step in the right direction, adds Bill Winterberg, founder and president of FPPad.com. "It does allow the adviser to offer at least something less cookie-cutter."
Winterberg noted the platform's expansion is interesting, as it becomes "more like an SMA or a TAMP," he says, but wonders if the adviser offering "will do fee parity with retail," as an investor with over $100,000 in assets can be invested in Betterment's portfolios for 15 basis points.
"If I'm an adviser, I would tell my client starting with over $100,000 to close their account and go to retail, they'll get the same Betterment for 10 points less," he says.
