Online investment service Betterment announced Thursday that it’s moving beyond automated asset allocation with a new product that algorithmically generates retirement planning advice.
RetireGuide, which Betterment calls an “advice engine,” builds on top of the retirement income-planning tool it launched last year. Using a person’s Betterment portfolio, income, accounts at other financial institutions and spouse’s holdings, RetireGuide determines how much the investor should expect to spend annually during retirement, how they need to save to reach that goal, and whether or not they are on track.
Results are displayed in an interactive and customizable online display. For example, investors can quickly view how saving more or retiring earlier can affect the plan, and make adjustments to income sources like social security or pensions.
After the investor is satisfied with RetireGuide’s spending and savings plan, it will then advise what sort of investment account (an IRA, Roth IRA, taxable account or employee contribution plan) will help them and their spouse achieve their goals. The investor can then open, fund and schedule automatic deposits to the account directly through Betterment. Betterment will take the assets and invest them across a global portfolio of ETFs.
“We’re taking a holistic look at our customers’ financial lives, giving them a plan to reach a comfortable retirement, and then executing on the plan,” Alex Benke, Betterment’s director of advice products, said in a statement.
Benke said that because RetireGuide lives within Betterment accounts, it is always on and always updating. If a person’s financial situation suddenly changes, they don’t have to track down the same retirement calculator, they can simply input the new information and the plan will adjust.
Though some financial advisors may view RetireGuide as another move by a so-called “robo advisor” to erode their value offering, Benke repeated Betterment’s mantra that they are not trying to compete with traditional advisors. RetireGuide will be included on Betterment Institutional, and Benke (a certified financial planner) said the tool was built with feedback from advisors using the platform.
“We think advisors are going to be around forever,” Benke said. “We see the institutional products not as a competition but as a way they can save themselves time and money.”
“When there’s an advisor relationship, it’s a good conversation starter to talking about how to save extra money.”
Even so, Betterment has plans to introduce more advice-driven products for the more than 80,000 retail investors using the platform. In the future, Benke hopes Betterment can help investors with debt, emergency funds, and building a roadmap to their financial goals.
“There’s a ton of stuff we can do here,” Benke said. “Retirement planning we decided to bite off first because it’s such a tough problem.”
For now, Betterment wants to focus on improving its allocation algorithms and make it easier for users to incorporate their various accounts.
RetireGuide will roll out to Betterment users on Thursday and will be included as part of its standard management fees.