Betterment Makes Big B2B Pitch to Advisors – Financial







LOS ANGELES – Betterment is betting financial advisors will make better partners than competitors — and is using a prominent wealth management exec to make the pitch.

Steve Lockshin, the chairman of Convergent Wealth Advisors and founder of platform services provider Fortigent, became an investor in Betterment last year; he says he is now devoting at least half his time to Betterment Institutional — a digital service that the so-called robo advisor will be offering to planners as of this fall.

“We want to shift advisors from thinking about digital advisors as ‘us versus them’ to ‘us and them,’ ” Lockshin says.

In fact, Lockshin believes that Betterment Institutional can reach $500 million in assets under management by the end of 2015. “I think it’s very attainable,” he maintains.

Lockshin is partnering with another industry heavyweight — Marty Bicknell, chief executive of Mariner Wealth Advisors — to distribute Betterment Institutional to RIAs through their jointly owned company, B+ Institutional Services.


The pitch to advisors is straightforward: For 25 basis points of AUM, Betterment Institutional provides advisory firms access to Betterment’s digital platform under the firm’s own brand. Clients get onboarded digitally and receive a selection of ETF portfolios, with asset allocation, automatic rebalancing and tax-loss harvesting. Billing and reporting are automated and there are no commission costs.

Betterment, which has more than $630 million in AUM through its consumer-facing operation, has no minimum account size. Lockshin says the offering will let advisors offer a service to younger clients who have fewer assets and have the potential to grow into larger accounts.

“Advisors don’t have to pay a custody fee or a transaction fee,” he says. The service’s low costs offers planners the ability to scale and segment a new client base, he argues — something that should help advisors to boost their margins and also give them a “technology hedge,” he says, as digital firms continue to ratchet up the competition.


The idea of partnering with digital firms drew mixed reactions from advisors. “It’s an intriguing proposition,” says Frank Pare, president of Oakland-based PF Wealth Management Group. “There’s a significant need to service individuals who are just starting out, and I would definitely want to look into it seriously. If collaboration is the way to go, then why not?”

John Wolff, chief executive of Capital Fiduciary Advisors in northern Virginia, says he is already in negotiations with Motif, another digital firm, to develop a white-label online-only platform for “emerging clients.”

But other wealth managers are less enthusiastic. Brock Moseley, managing director of Miracle Mile Advisors in Los Angeles, says he is concerned that a digital-only offering would diminish his firm’s reputation for providing “high touch” services.

Similarly, Jeffrey Roof, an advisor in Harrisburg, Pa., says that because his firm has built a reputation for its in-house active investment management strategy, aligning with a robo advisor could potentially “dilute” its brand.


Indeed, advisory firms who have built a successful business by specializing in a niche market may risk becoming “over-diversified” with a digital offering, warns Mark Tibergien, chief executive of Pershing Advisory Services.

“If you just sign on for the incremental revenue, you lose your reason for being,” Tibergien says.
But working with digital firms could be part of a smart business strategy, he concedes. “If you’re looking to accommodate clients by leveraging technology, it makes sense,” Tibergien says.

Lockshin, who last year wrote a book on the advisory business, is convinced that digital and traditional advisors will co-exist comfortably in the future. In fact, he launched a new Los Angeles wealth management firm, AdvicePeriod, specializing in tax and estate planning for ultrahigh-net-worth clients, just this spring.

“Brokers are still in business,” he notes. “It’s a very big market out there. RIAs can continue to do very well if they don’t get complacent. If they do, I have just one word: Kodak.”

Read more:

  • ‘Robo Advisors’? How to Fight Back
  • Marketing Tricks to Reach Gen Y
  • Robo Advisor Update: Schwab Plans Affect RIAs, Startups
  • Recruiting Millennials? 4 Things to Keep in Mind

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Monday, September 29th, 2014 EN

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