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Betterment Launches Robot Invasion of the 401(k) Market

September 15, 2015

The automated-advice provider Betterment has gone into the 401(k) market, with a new platform touting lower fees and better user experience, ThinkAdvisor writes.

Users of Betterment’s 401(k) platform will have a choice of diversified index-tracking ETFs and be able to have other accounts on the same platform, including IRAs and trust accounts. The 401(k) platform will issue advice on savings accounts and destination accounts, monitor progress, and encompass other income streams such as Social Security benefits and pensions. It may be viewed across various devices, according to the publication.

The new platform, called Betterment for Business, is expected to cost from 10 basis points for small plans to 60 basis points for large plans — and sponsors with more than $1 million in assets will get no up-front fee, compared to the 1.5% to 2% overall cost for typical plans, the company’s CEO, Jon Stein, tells the publication.

But there may be some confusion on this point at ThinkAdvisor. On its website, Betterment gives a more logical breakdown of pricing. Plans with $10 million or less will pay 60 basis points, and the price point of 10 basis points is reserved for plans with at least $1 billion.

Stein says the new platform will bring further savings through more efficient tax management, as users will be able to integrate all of their accounts on the Betterment platform for a comprehensive approach to their overall portfolio.

According to Stein, his competition in the 401(k) arena has been built on legacy systems, with outdated technology, that don’t take advantage of low-cost ETFs because they were constructed with mutual funds in mind. “It’s a really backward, fee-laden industry,” he said.

By Alex Padalka
  • To read the ThinkAdvisor article cited in this story, click here.