What A Human Advisor Can Do At A Robo Shop

Betterment’s latest services offer access to human advisors beyond its flagship all-digital platform.

Reviewed by: Cinthia Murphy
Edited by: Cinthia Murphy

In a quest to become a one-stop-shop financial advice solution, Betterment has expanded its all-digital offering to include two new services centered on human advisors. As a Betterment client, you now can get automated portfolio management in an all-digital platform, or you can pick up the phone and talk to an actual advisor. Alex Benke, VP of financial advice and planning at Betterment, tells us why the well-known robo advisor with some $7 billion in assets is now going the human route.c

ETF.com: What drove Betterment to add human advisors to its lineup of services? Is this about doing what advisors do, but better? Or does this decision have anything to do with meeting fiduciary duty under the DoL rule?

Alex Benke: Since the beginning of Betterment, we have offered consultations with customers of high-enough balances. This was just to deal with the questions they had above and beyond the advice we gave through our digital tools. The new offerings are basically a version of that, with lower balance requirements, so anyone can get access to an additional helping hand if they want.

This had nothing to do with the fiduciary rule. All of our plans, whether they’re digital or advice from a person, are fiduciary advice and qualify under the rule. That's always been the case.

ETF.com: Walk me through details of these “Plus” and “Premium” plans. They’ll have account minimums of $100,000 and $250,000, and cost 0.40% and 0.50%, respectively. That compares to 0.25% for the all-digital platform, right?

Benke: That's right. Anyone can get access to our digital tools. The advice provided through those tools handles most situations. Unlike competitors that just provide a portfolio, we also provide financial-planning-type advice.

For example, RetireGuide will take a look at all of the accounts you have—both at Betterment and outside—and make recommendations as to how much you should be saving across those accounts, and in which accounts you should be saving in, in order to have the best tax outcome. It's personalized advice that takes in that full picture.

The additional plans are for people who either have more advanced questions they can't get answers to, or there's someone who really just needs confirmation from a person that they're doing the right thing and acting in the right way.


ETF.com: A lot of folks say the all-digital robo-advisor business model is unlikely to survive. It’s done wonders to commoditize asset allocation, but getting scale is difficult. Is adding a human element a way to survive? Is it really a challenging business model, to be purely a digital platform?

Benke: We've been very happy with the growth of our digital offering, and we expect it to grow exactly the same way or hopefully more in the future.

We feel the majority of our customers will use the digital offering only. The additional offerings are to basically expand our addressable market size to allow us to work for anybody who wants financial advice, including those who might not have wanted to do a digital-only, nonhuman-based service before that. So yes, we expect this will increase our growth, but it's definitely not an indication that the digital-only offering wasn't working.

ETF.com: Does this new offering shift in any way the core purpose of the company, which came to be in 2008 as a digital advice platform?

Benke: If anything, it's a deepening of our mission to help provide financial advice to anyone.

We felt strongly about the fact that we had no minimum balance and have never had a minimum balance in our digital offering. We'll continue that practice in the future. But we, even with that offering, still could not serve folks who really wanted advice from a person on top of it. Now we've expanded that, effectively expanding the scope of types of people that we can provide advice to.

ETF.com: So this human advisor service is going to target a different demographic? Who is the Betterment client today?

Benke: It's not as much about the demographics as it is about the fact that wealth tends to bring more complex questions. I'd expect wealthier people to want to have this extra coverage, or backup. No matter what your wealth, some people just want to talk to a person.

This is a very flexible offering. You can be in the digital offering for years and then upgrade at the point you need help; your money doesn't have to move providers.

ETF.com: Do you agree that customization is the future for digital advice platforms? And this reflects that trend?

Benke: I think that personalization is key to good advice. And Betterment is incredibly personalized, even in its general offerings. We actually offer technically 101 different portfolios, because you can be at any stop on our slider, from 100% bonds all the way to 100% stocks.

When you tell us about your goals, we give you specific allocation recommendations for that goal. So whatever your age is, whatever your goal's time horizon is, we take that into account. It's a very personalized view.

On top of that, we give savings advice and account-type advice. There are competitors of ours that are going with the cookie-cutter rule of thumb-type of advice. That is not what Betterment is about.


ETF.com: You have a platform designed specifically for advisors. How do the new human-advice offerings compete with your advisor clients?

Benke: When we launched our digital offering, some felt it was competitive, and it certainly was to people who were only doing asset allocations as a business model. But advisors who are doing a much more personalized, higher-touch kind of business are not seeing this type of offering as a competitor. In fact, if someone is operating a business like that and using Betterment to manage the money, we'll even refer customers to that advisor if the customer wants that type of relationship.

The Plus and Premium offerings are kind of the in-between. It’s a team-based approach, so you're not getting that personal relationship necessarily. You can get your questions answered when you need them.

But we're not delivering you a financial plan in the traditional sense that a more traditional advisor would be doing. We're not coordinating with your other financial professionals, like your estate planning attorney and your accountant. All those things are higher-value-add things that a traditional advisor would do to earn their 1% or 1.5% fee.

ETF.com: What's the process to partnering up an investor with an advisor in this new offering? Does Betterment try to match philosophies in any way, or is this more of a setup where anybody who answers the phone can provide the answers you need?

Benke: It's a team-based approach. You can't call into a specific phone line. What you do is when you upgrade your account to Plus or Premium, you get access to a button that will allow you to schedule a call with someone on the team. You could get the same person, or you might get a different person on the team.

We keep very good notes inside the records for our customers who have spoken with the team. That helps the continuity between different people. And because it’s a team-based approach, if there was a question that one particular advisor couldn't answer, we make sure we get that answer for you from someone else on the team.


ETF.com: Are there any misconceptions about Betterment, or about robo advice in general, you’d like to debunk?

Benke: The biggest misconception is that all robo advisors are the same. That is not true. The types of portfolio management algorithms that we use are very different and much more sophisticated than any of our competitors.

For example, asset location—or what we call tax-coordinated portfolios—is done continuously in your account with every single cash flow in and out. No other competitor does that to that level of detail or frequency. And it matters in terms of the after-tax returns.

People are quick to group all robos into one single category. But the offerings are very different.

ETF.com: How do you recommend an investor go about discerning these differences between platforms? Is there an easy approach?

Benke: Honestly, this is our hardest problem with marketing—properly explaining to anyone exactly the sophistication we offer. We have a ton of content out there that talks about each of these features, and our externally facing sites attempt to do that.

There are also independent sources that look and compare across the different robo advisors, and we work with them to try to make sure they're telling the correct story when they evaluate our services.

But it’s a hard challenge, and a constant one at that.

Contact Cinthia Murphy at [email protected]


Cinthia Murphy is head of digital experience, advocating for the user in all that etf.com does. She previously served as managing editor and writer for etf.com, specializing in ETF content and multimedia. Cinthia’s experience includes time at Dow Jones and former BridgeNews, covering commodity futures markets in Chicago and Brazil equities in Sao Paulo. She has a bachelor’s degree in journalism from the University of Missouri-Columbia.