As executives at Betterment began looking at more ways to tie products together, they landed on adding a new 401(k) solution to the arsenal. Called Advised 401(k)s, the offering is available to advisors using Betterment for Advisors and blurs the divisions between the B4A business and Betterment for Business.
Under Advised 401(k)s, Betterment acts as the plan’s 3(38) investment manager, as well as collecting and distributing AUM fees set by advisors. Those fees are in addition to the management fees the plan pays to Betterment; Betterment does not charge advisors for their use of the platform for 401(k)s, according to Danielle Shechtman, a spokesperson for the firm. There are 12 integrated payroll providers, including ADP, Rippling, Paylocity and Workday, she added.
Advisors can present the product to their existing wealth management clients, particularly small-business owners who might be looking for a 401(k) offering for employees of their firm. Advisors also have the option of maintaining the “stickiness” of Advised 401(k)s by using custom emails to invite 401(k) plan participants to become clients of their own wealth management practice.
Betterment began working in earnest on the feature back in January, said Jon Mauney, GM at Betterment for Advisors. Early observations were that there was an “obvious synergy” between the Betterment for Business and Betterment for Advisors divisions and Advised 401(k)s was the way to address it.
“[What] we are looking at right now is not necessarily going out and actively seeking 401(k) plans, but [this is] something for our existing business-owner clients,” said Jeff Wolniewicz, co-founder of Complete Wealth in Buffalo, N.Y., and an early user of the service. “It’s something that we can now bring to the table that improves the overall client experience.”
The Advised 401(k) offering is useful for Wolniewicz’s business owner clients who might be considering adding a 401(k) offering to their benefits, he said. The manner in which Betterment provides the service makes it easier for the advisor, the business owner and the HR personnel who might be charged with implementing the plan. With some states adding auto-IRA programs, the Betterment offering is a step-up from those basic plans, to "provide a low-cost 401(k) plan for the small to mid-sized companies that want to reward their employees," he said.
Another draw of the new feature is that it’s easier to transition 401(k) participants into individual planning clients. Not only is the client already familiar with Betterment, but it’s a purely digital transition, said Wolniewicz. “It’s just one less headache for the client—and for the advisor.”
However, the evidence of the feature’s evolution from two different business lines is apparent, he noted. There are two sign-ins: one for the B4A line and another for Betterment for Business.
Mauney said there are no immediate plans to create a single sign-on for Advised 401(k)s and that the advisor platform receives outsize investment, in terms of development, compared with the whole of Betterment.
But that’s not been enough for some advisors. While he doesn’t do advised 401(k) business, Donovan Brooks, founder of Storyline Financial in Saint Joseph, Mo., said that he didn’t get enough transparency and feedback at Betterment for Advisors, which led him to take his business away from the company and over to Altruist.
“Advisors just want to be in on the loop,” he explained. Betterment offers a “sleek platform,” he said, "but it was still ultimately built as a retail platform—and it shows."
Not all have had that experience.
"Jon Stein, the CEO, said that there’s a commitment to the Betterment for Advisors platform. I don’t see anything that goes against that,” said Wolniewicz. “I see a commitment to this side growing and I would have no knowledge of them giving more improvement to the retail side than to the Betterment for Advisors side.
“From what I can see, they happen hand-in-hand. Simultaneously,” he added.