Betterment For Advisors Review: After Six Months

We've been using Betterment for Advisors now for over six months and we have a few new findings that we want to share with you. I'll start off with some of the things that aren't working as well as we hoped they would, but then I'll also share what we do like about it, and then give you the final review and what we're going to do next.

Initially, we signed up for Betterment so that we could have an offering for our clients’ kids or clients who are looking for just investment management and who aren’t in need of the comprehensive planning that we do for our private wealth clients. We really wanted Betterment so that we could allow a lot more people who are not private wealth clients to still have access to our investments, tax loss harvesting, diversification, asset location, and all the things that Betterment provides. Once a client is with Betterment, they definitely get that. However, this brings us up to the negative, which is just the process of getting them to Betterment.

Time-Consuming Set Up for Existing Investors

When we have clients or prospective clients who have a bunch of different accounts in different places––IRAs, Roths, TLDs, and things like that––it takes quite a bit of effort and time to actually roll over or transfer those accounts to Betterment. For each one that we've done, there's a lot of back and forth with the client and Betterment to ensure that everything makes it over. In some cases, it has taken over a month for the small accounts, from one custodian, to get into Betterment. We were hoping that Betterment's process would be more streamlined and more hands-off so it would not be such a large time investment from us.

There are some cases where Betterment can do a direct transfer, but that's usually only when the client has funds with Vanguard, because Betterment holds a lot of Vanguard funds. In most cases, clients have to liquidate their IRAs or non-qualified accounts before they're able to transfer into Betterment. So, if you have a client with an unrealized gain in a non-qualified account, then it might not make sense to move it to Betterment. Personally, I moved my own existing Roth IRA to Betterment. I had to liquidate it and then the check had to be mailed to Betterment. The whole process took over three weeks, which I understand that for 401k rollovers could take that long, but for an IRA, I was hoping they could have just done a transfer. Because they couldn’t, it took longer than I was expecting.

Also, No Automated Contributions

Another thing that's not been ideal is when clients have an existing contribution or distribution plan set up with their original investment and they want to continue that same schedule at Betterment. In this case, it's up to them to start the monthly contribution on their end. Now, as long as the client's motivated, then it hasn't been much of a problem. But it does require, for most people, a little bit of follow-up and tracking on our end to make sure that that gets set up. Ideally, it would be nice for us to be able to set that up for them. It's not the biggest thing, but it's just a small inconvenience we’ve had to adapt to.

Now, on to where Betterment has been working the best for us.

Easy Set-Up for New Investors

When we have a new client who doesn't have a bunch of pre-existing accounts, and they just want to start a new account and start to contribute money from their bank, it's super easy for them to set up the account within Betterment. They can link up the bank account themselves and then start the contributions because Betterment walks them through a step-by-step process. Most of the time, people have been able to do this with new accounts pretty easily.

We also really like the way that Betterment assigns goals to accounts. When clients are opening up a new account, it's really clear for clients and encourages them to continue to save for these future goals, whether it's retirement or an upcoming purchase.

One real-life example of where Betterment worked is with a daughter of one of our private wealth clients. Each year in the past, we've had a few questions from their daughter and we’ve talked about different decisions that she could make regarding her investments. When that meeting came up this year, we introduced Betterment. Now, she's 25 and she wanted to start contributing to a Roth. She had an existing Vanguard individual account, so we discussed an ongoing plan. Then, we sent her the link to our private link to Betterment for Advisors. From that link, she was able to set up a transfer from the individual account into Betterment, and then open up a Roth account on her own and start the auto-contributions herself. So, that's a case where it was great and it was easy and she was able to set it up and now it's on autopilot.

To summarize, if the client is motivated and they're on the ball, getting them set up in Betterment has worked great. And if they're at Vanguard, the transfers have been a lot easier from Vanguard to Betterment, since Betterment holds most of the Vanguard funds. But, if the client has a bunch of pre-existing account types and accounts at different places, then the process has taken a lot longer than we had initially planned, and it's a lot more work on our part. Maybe we just haven't figured it all out yet or gotten into the groove and maybe it'll get easier as we continue to use it. We'll see; and I'll be sure to update you as we keep moving forward.

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