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Tom Kimberly is the new general manger of Betterment Institutional
<p>Tom Kimberly is the new general manger of Betterment Institutional.</p>

Upside Co-Founder Hired to Lead Betterment Institutional

Betterment has hired a former competitor to take charge of its advisor-facing business.

The New York City-based automated investment advice service on Tuesday introduced Tom Kimberly as the new general manger of Betterment Institutional. Kimberly comes over from Upside Advisor, another white-label robo-advisor that Envestnet acquired in February.

“The experience I had at Upside, essentially in building a direct competitor with Betterment Institutional, gives me a set of experiences and perspective not only in the automated space, but in the automated advice space serving intermediaries and advisors,” Kimberly said. 

His immediate focus is on improving the user experience. Kimberly said the goal is for advisors to interact with clients, deliver personalized advice and create customized portfolios all on a dashboard that is the same “delightful” experience as the retail product.

The other focus is on practice management. Kimberley stressed that Betterment sees advisors as partners and said his team will work with firms on their digital strategy to ensure that Betterment Institutional is a successful addition.

In a blog post, Kimberly said his role would be in building Betterment Institutional into something that competes directly with traditional custodians.

“The service of holding securities on behalf of behalf of others is undifferentiated and available on a mass scale,” Kimberly said, adding that commoditization is why custodians have added other services like cash management, reporting and record keeping. “But incumbent custodians like Charles Schwab and others haven’t kept up with the pace of innovation required to meet the evolving needs of RIAs and their clients.”

Without the technology RIAs need, Kimberly said custodians aren’t adding value and it's squeezing RIAs’ margins. He added Betterment solves this with technology other custodian won’t, or can’t, provide.

Craig Iskowitz, the founder and CEO of the Ezra Group, agreed that companies like Betterment can adapt quicker, but disagreed that the big custodians are avoiding new technology for their advisors. 

"They all provide their own wealth management platforms for free; they all see that you can't just be a big custodian without anything else," Iskowitz said. "His statement that these custodians are stodgy and not technology-focused is just wrong." 

Iskowitz added that advisors choose custodians differently than how they choose technology, and upstarts like Betterment have a long way to go before commanding the kind of trust major custodians have. 

Michael Kitces, an industry blogger at Nerd’s Eye View and co-founder of the XY Planning Network, said this approach of building automated investment services for advisors has the potential to be far more disruptive in the wealth management industry than purely direct-to-consumer robos.

“From the Betterment side, this looks like a rising commitment to compete with RIA custodians as a better-technology custodian 2.0 solution,” Kitces said. He also pointed out that Kimberly’s move to Betterment comes two months after Upside’s other co-founder, Juney Ham, left Envestnet for Hired, an online marketplace for tech companies to find employees.

“From the Envestnet side, [this] raises questions of what the status is for their Upside Advisor acquisition when both co-founders leave within nine months.”

Iskowitz said he was surprised to see Kimberly depart from Envestnet so soon. Upside was still a small startup when it was purchased, and while Envestnet was probably impressed by the technology, Iskowitz said the Upside team was also an important factor. 

"With these acquisitions, it has to do with the people and wanting these guys as part of the braintrust," Iskowitz said.

As of press time, Envestnet has not responded to requests for a comment. For his part, Kimberly said the decision had more to do with leading the charge in building a digital-first custodian rather than needing to leave Envestnet.

“First let me say the guys at Envestnet are great. I enjoyed my time there very much,” Kimberly, though he said there was a lot going on there with the acquisitions of Upside, FinanceLogix and Yodlee. “For me, it’s really about finding the opportunity where I can have the most impact.” 

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