Are robo-advisors a threat or potential partners for plan advisors looking to serve the mass affluent and Millennials? With the recent partnership between Fidelity’s IWS division, which provides custodial services to RIAs, and Betterment, a four-year-old robo-advisor with 50,000 clients, the answer seems to be “partner.”
Fidelity is creating an advisor-branded version of Betterment, with emails going directly to advisors and statements coming from them.
Betterment charges 25 BPs and the advisor can add on any additional fees that help clients to harvest tax losses, rebalance and reinvest dividend among other services. Betterment bills and collects fees on behalf of the advisor. Currently there is a document library and the ability for clients to transfer funds electronically from other accounts; integration with an advisor’s CRM is underway.
The implicit approval of Fidelity should help quell some of the fears that advisors might have working with robo-advisors, and will certainly help with branding for clients and prospects.
While many plan advisors work with individual investors within their qualified plans, most focus on wealthier clients to make it worth their time and effort. The average account on Betterment is just $20,000 for clients age 36, making the robo-advisor a way to reach more clients within an advisor’s book of business.
But some advisors prefer to stay with a B-to-B model because they think their corporate clients prefer it. Meanwhile, B-to-C advisors are wondering what effect the DOL’s fiduciary rule might have on their ability to serve less affluent clients.
