RIABiz

News, Vision & Voice for the Advisory Community

RIABiz

Tiburon CEO Summit extrudes big news: Betterment Institutional is born

Steve Lockshin lays out his plans for TAMP-like venture and how Michael Kitces, a public critic of the Betterment CEO, very much fits in

Author Brooke Southall April 8, 2014 at 9:39 PM
2 Comments
no description available
Steve Lockshin: I wrote a big check.

Conferences

|

Robo-Advisors

|

TAMPs


Rick Dude

Rick Dude

April 9, 2014 — 5:19 PM

This is an interesting move by Betterment. I find it particularly surprising as they had previously held tightly to passive ETFs and now are beginning to flirt with active management.

My firm, QuantAdvisor, has already started doing this as of February 2014. I think there is more than enough business for both firms to exist and thrive.

Stephen Winks

Stephen Winks

April 9, 2014 — 10:06 PM

Lockshin’s Betterment Institutional is interesting in that it is addressing institutionalized inefficiencies in advisory services with an emphasis on better managing custodial cost. Not many custodians are capable of serving as a master custodian in a fiduciary capacity. However to address the biggest institutionalized inefficiencies require a more modern approach to portfolio construction outside the use of terribly expensive packaged investment products made possible through inexpensive technological innovation. Not only in massive cost savings are achieved, but the degree of real time portfolio detail managed is greatly enhanced as is the advisor’s value proposition. Higher margins at the advisor level are achieved at a lower cost to the consumer. Further professional standing for the advisor and better compensation is accomplished. None of this is possible in a brokerage/custodial format (preoccupation with fiduciary liability and internal technical competency considerations) resulting in a self imposed barrier to entry for b/ds.

Robo advice will openly play the questions of (1) why brokers are not accountable or responsible for their recommendations, (2) why the best interests of the investing public are not allowed to be served by virtue of internal b/d compliance protocol and (3) why “retail investors” are accorded lesser consumer protections than all other investors. B/d and regulator push back on acknowledging and supporting the full fiduciary standing of the broker, creates troubling obsolescence in the brokerage/custodial format filled by next generation Robo advisors either used by advisors or consumer’s directly.

The advisor’s margins start looking more like that of a money manager, as the advisor is adding the value. Product vendors which by design can not be client specific become commodities.Broker/dealers are simply commodity product platforms that divorce themselves from client specific advice entailing fiduciary duty/responsibility.

Don’t discount Robo advice it is the route to scale, expert standing, lower cost, better compensation.

SCW


Related Moves

February 14, 2023 at 3:15 AM

Jon Stein ousts himself as Betterment CEO and taps Sarah Levy, who joins an exclusive club of top women executives, with a mission -- an IPO

The co-founder of the New York robo-advisor headhunted the ex-Viacom brass through Harvard professors on the down low to ostensibly scale operations.

December 8, 2020 at 5:27 PM

Betterment whistleblowers net $2.5 million • Wealthfront's big pivot leads to profits • Altruist launches tax service • CMOs in at Ascensus, Wealthspire & Joe Duran's Rise • Savvy bags four advisors as Mariner sues it for poaching • Jim Dickson launches RIA stake buyer

Betterment is also bending to RIA needs • Wealthfront is in the black, thanks to cash • Altruist reveals where it makes its money • Rise, Wealthspire and Ascensus each add two executives • Compound hits $2 billion of AUM • CAIS slashes alts prices • BlackRock ups private debt sales to RIAs, through GeoWealth.

June 29, 2024 at 3:00 AM

AdvicePay finds its 'rockstar' leader after 14-month process where external candidate fizzled; now in-house candidate is ready to sizzle

Kelsey Lewis takes charge in Bozeman as president with CEO-like day-to-day duties that include replacing herself as customer success officer.

May 16, 2024 at 1:56 AM

See more related moves

Mentioned in this article:

Kitces.com
Consulting Firm
Top Executive: Michael Kitces

Betterment, LLC
Financial Planning Software
Top Executive: Jon Stein



RIABiz Directory

The Industry Sourcebook for RIAs

   |    LISTING


RIABiz Directory sponsored by:

Directory Sponsor Logo

White Paper Postings


Common Tags


Recent Articles


Popular Writers


RIABiz logo

RIABiz

About Us

Directory

Archives

Connect

RIABiz, Mill Valley, California
Copyright © 2009-2024 RIABiz Inc. All rights reserved.