Robo Advisor Betterment Adds Human Touch

Convergence of traditional and digital financial advice continues.

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Reviewed by: Anna Irrera
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Edited by: Anna Irrera

New York (Reuters) – Betterment, one the earliest and largest online wealth managers known as robo advisors, is launching new services that will allow clients to receive financial advice from human advisors, as digital and traditional investment management models converge.

The New York-based firm said on Tuesday that it would launch two new plans, called Betterment Plus and Betterment Premium. Clients on the Plus account will receive one annual financial planning call with a team of advisors, while Premium clients will get unlimited access to human advice, the company said.

The company, which will continue to offer its signature all-digital service, has expanded its team of in-house advisors to implement the new plans.

Significant Shift In Strategy

The move marks a significant strategy shift for Betterment, a poster child for an emerging sector that has sought to upend the traditional financial advice market by using automation to capture clients who were previously seen as too expensive to service.

Robo advisors typically use computer algorithms to create and manage portfolios made up of low-cost exchange-traded funds for clients with as little as a few hundred dollars to invest.

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Alex Benke, vice president of financial advice and investing at Betterment, said the new plans aim to give more options to clients who preferr contact with human advisors.

"We've seen a growing need for this extra helping hand," Benke said.

While the robo-advice model has prompted incumbents, such as Charles Schwab, to launch similar services, some established firms have argued that a hybrid model combining digital and human advice will be more successful in the future.

Speaking on an earnings call earlier this month, Morgan Stanley Chairman and Chief Executive James Gorman said the "biggest opportunity" for the company around digital advice is "providing online capability to existing clients, who want a multichannel relationship with us."

Profitability Elusive

Betterment's new services also come as increased competition from established players raises questions about whether independent robo advisors can grow at a sufficient scale to become profitable.

"We think it should help us grow faster because it opens up additional parts of the market," Benke said.

Founded in 2008, Betterment has more than $7 billion in assets under management.

It will charge a 0.25% fee on assets under management for its purely digital plan, 0.40% for the Plus offering and 0.50% for the Premium offering. While its traditional digital plan has no minimum investment size, the plus and premium plans will require $100,000 and $250,000 minimums, respectively.