Complement or competition—it’s a hotly-debated topic every time the phrase ‘robo advisor’ is uttered, and now 401(k) advisors can enter the fray.
Robo-advice provider Betterment announced on Friday that it will soon Betterment for Business, a new 401(k) platform that “will use smarter technology to offer personalized investment advice for all participants.” For plan sponsors, it will “provide streamlined administration and fiduciary support” and will launch in Q1 2016.
“Based on our findings, Betterment for Business is the only full-stack, bundled 401(k) provider to launch in the last three decades—virtually since ERISA laid the groundwork for 401(k)s in the marketplace,” said Jon Stein, Betterment’s CEO and founder, in a statement. “As such, Betterment’s technology and user experience advantages over incumbents leave it well positioned to provide a best-in-class experience for plan sponsors and participants.”
According to the company, plan administrators will have automated, easy-to-use tools and, importantly, peace of mind—so they can worry about their day-to-day responsibilities instead of whether their 401(k) is compliant. Plan participants will be more prepared for retirement and empowered to achieve better investment outcomes with personalized investment advice across all of their assets.
Employers will be able to enroll new participants through a seamless, paperless onboarding process. The employer dashboard will enable companies to administer plans and assist them in meeting their fiduciary and regulatory compliance responsibilities.
“Current 401(k) offerings—and we have examined them all—have poor user experiences, high costs, and a clear lack of advice. Not anymore. Betterment for Business will bring our smarter technology to the workplace and the millions of Americans who badly need it to meet their retirement needs,” Stein added. “It’s time that all Americans have low-cost, unconflicted advice and smarter technology for retirement planning.”
Earnest, a San Francisco-based lending startup, has signed on as a charter customer.
“At Earnest, we pride ourselves on providing our employees with important ways to promote financial health and responsibility as part of our benefits package,” said Louis Beryl, CEO and Founder of Earnest. “We’ve offered 401(k) options to employees since early stages in our company development and are excited to grow into a smarter offering from a respected and philosophically aligned innovator like Betterment.”
Participants enrolled on the platform will receive a globally diversified portfolio of index-tracking exchange-traded funds (ETFs) with personalized advice in a goal-based investing framework that currently serves more than 100,000 retail customers. Participants will also be able to open and customize taxable investment accounts, traditional and Roth IRAs, and trust accounts—and view all side-by-side with their 401(k) accounts. The accounts will be tax-managed, together—a service the company claims no other provider in the market provides.
Earlier this year, Betterment announced a partnership with the Social Security Administration in order to integrate participants’ Social Security benefits into their retirement planning.
Consistent with Betterment’s retail service, Betterment for Business aims to lower costs and offers a “simple, easy-to-understand fee structure,” with no upfront fee for plan sponsors with more than $1 million in assets, and an assets under management-based fee ranging from 10 to 60bps.