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With eMoney in its back pocket, Fidelity Investments won't exercise its option to continue Betterment deal as it nears launch of its own robo

The one-year semi-exclusive alliance never caught fire with Fidelity RIAs and the Boston giant will now use eMoney as kindling for a new digital-for-RIA launch

Author Brooke Southall November 19, 2015 at 11:47 PM
4 Comments
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David Canter [With Jon Stein, l., at June InVest event]: For an RIA firm, this isn't simply a technology play. [Photo by Julio Gomez of Knowledgent]

RIA Custodians

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Robo-Advisors


Bill Winterberg

Bill Winterberg

November 20, 2015 — 4:08 PM

Why should RIAs commit assets to Betterment Institutional?

RIAs are fiduciaries.

Betterment Institutional charges, at a minimum, 25bps. RIAs can add, and most often do, a fee on top of that.

Betterment (retail) charges 15bps to 35bps, with 15bps charged on assets over $100k (as of November 20, 2015).

So why would a fiduciary advisor commit assets to BI @ a minimum of 25bps and not recommend clients with >$100k go direct to Betterment retail to pay lower fees?

As I understand, for advisors with <$50 million custodied at BI, there is no material difference in the investment advisory services rendered to the investor. Only above $50 million can advisors begin to offer customized model portfolio allocations to clients in BI.

Please correct me if I’m wrong about “no material difference in the investment advisory services” between Betterment (retail) and BI.

Thank you to Matt @ Saverocity for his thoughts: https://saverocity.com/forum/threads/how-betterment4rias-makes-suckers-out-of-fiduciaries.335343/

Stephen Winks

Stephen Winks

November 20, 2015 — 5:55 PM

There are highly advanced technologies here and in Europe which will be priced in the single bps which support “individualized” advice that are directly managed by advisors that preempt the Betterment model. Money managers who desire the use of their investment vehicles by advisors in portfolio construction will give away prudent (fiduciary) process and professional standing (if properly used) for free. We are entering an era of transparency and expert delineation of fiduciary duty which outdates the simple sale of advice products with the advancement of individualized advice in accord with fiduciary duty with an audit path back to statute to prove it. Brokers can no longer just say off hand they are acting in a fiduciary capacity without consequence. There are a lot of brokers whose firms do not acknowledge or support fiduciary duty (and their professional standing), who will be disappointed in their firms inability to support their client’s best interest. RIAs are the solution.

SCW
Stephen Winks

anonymous

anonymous

November 20, 2015 — 10:26 PM

Good point Mr. Winterberg and Matt @ Saverocity. I wonder just how many of the 200 RIA’s Betterment serves on the Institutional side (see previous RIABiz article) fall below this $50MM threshold? Looks like a nice regulatory nugget for State and SEC regulators should they become wise to this.

It’s funny, Betterment touts the low fee game to it’s consumers and competitors but it will eat from whatever side of the table the food comes. You can’t have it all! A bit of a moral chink in the armor if you ask me. You see their business model change almost weekly now. It will be interesting to see where this all ends up when the dust settles.

Anybody read… “Where are the Customers Yachts’?” It’s comes to mind here after reading Mr. Winterberg’s comments.

Stephen Winks

Stephen Winks

November 24, 2015 — 6:50 PM

Money managers will own the ROBO space. It is like giving away the razor (fiduciary-individualized prudent process) in return for the utilization of their money management services with ETFs being a core holding.

SCW


Related Moves

July 16, 2022 at 1:35 AM

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

Christa Carone, an ex-Fidelity and Xerox marketing whiz, steps onto a slippery slope at LPL with a daunting task -- to consolidate a NASCAR size brand portfolio... or not?

With no CMO since August, the chief marketing officer will play catch up for a company still hungry to buy more branded B2B and B2C players.

April 2, 2024 at 1:28 AM

Joanna Rotenberg is departing Fidelity Investments after only two years, writing that she traveled 20,000 miles and successfully split her retail division into wealth and brokerage units

At her hire, analysts were adamant the head of Fidelity retail had 'big shoes to fill' to replace legendary Kathleen Murphy and her task of 'digitiizing' retail was no small ask

December 16, 2023 at 2:22 AM

See more related moves

Mentioned in this article:

eMoney Advisor LLC
Financial Planning Software
Top Executive: Edward O’Brien

Nexus Strategy
Consulting Firm
Top Executive: Timothy D. Welsh

Betterment, LLC
Financial Planning Software
Top Executive: Jon Stein

Upside
TAMP
Top Executive: Tom Kimberly



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