How-To Client billing guide

All billing configurations are annual and represent the total percentage or dollar amount over the course of a year. Client management fees are deducted on a quarterly or monthly cadence, depending on the firm’s designation.

The billing plan configurations below are collected by Betterment on behalf of the advisor. Please note that each advised client also pays an asset-based wrap fee directly to Betterment.

Advisors can choose from three billing plan configurations:

Asset based

This method charges clients a percentage of their total assets under management. Advisors can choose how many basis points (bps) to charge.

Example: 50 bps or .50%

Fixed fee

This is an annual fee charged regardless of the client’s asset balance. The fee applies to the entire client household and is divided proportionally among their accounts based on balances. The firm’s annual fee will be divided on a monthly or quarterly cadence.

Example: An annual fee of $5,000 is billed

• $1,250 quarterly, or
• $416.67 monthly

Fees accrue daily. These figures are not exact, since different months and quarters have different days.

A household’s balance must be above the fixed-fee amount in order for fees to accrue. For example, if the fixed fee is $5,000, a balance of $4,900 would not accrue fees. Because fees accrue daily, if a household’s balance is below the set fixed fee amount at the close of market on any given day, no fee will accrue on that day.

Tiered fees

A flexible approach, where different asset tiers are charged different rates. This works similar to tax brackets, in that only the assets held within each tier’s range are charged that tier’s rate. This allows for a combination of fixed and asset-based fees, catering to various client demographics.

Example:

Setting a minimum fee
To establish a minimum advisory fee, firms can use a tiered structure where the lowest tier has a fixed fee, and higher tiers charge an asset-based percentage.

Example:

In this example, the household would be charged at least $1,000 annually (as long as the household has a total balance of at least $1,000 at the close of each business day). Any assets over $100,000 will be charged at the 75 bps fee.

Cash Reserve
Client investment management fees are deducted from a client’s cash account (when possible). There are no fees for Cash Reserve accounts. Here’s how it works:

• Individual Cash Reserve accounts can pay fees for Individual Taxable, IRA (traditional, Roth, and SEP), and solo 401(k) accounts with the same owner.
• Joint Cash Reserve accounts can pay fees for Joint Taxable and Individual Taxable accounts with the same owner(s).
• Trust Cash Reserve accounts can pay fees for Trust Taxable accounts within the same legal account.
• If a client does not have a Cash Reserve account (or a sufficient balance to cover the fee), the fee will be deducted directly from the client’s investment accounts.
• If a client has multiple cash reserves within the same account registration, the fee will be deducted from the Cash Reserve with the highest balance.

Cash Reserve offered by Betterment LLC and requires a Betterment Securities brokerage account. Betterment is not a bank. FDIC insurance provided by "Program Banks", subject to certain conditions. Learn More.

Investing

• Client management fees are deducted from the investment account that they accrue in. When fees are assessed out of investing accounts, Betterments instructs its affiliated broker-dealer to sell securities in an amount that will generate cash proceeds to satisfy a client’s fee obligation.
• If a client’s account includes mutual funds, due to small price fluctuations in mutual funds that may occur on the day that Betterment charges fees, Betterment will accrue any fees over- or under-assessed and apply the difference to adjust the fees for the immediately following period (see below).
  

Calculating client management fees

Client management fees accrue daily and are billed in arrears. At the end of a billing cycle, Betterment deducts the total of your firm’s management fee and Betterment’s platform fee directly from client accounts. This is reflected on client statements as the “Advisory Fee”.

• Betterment does not use the billing period’s average daily balance or end of billing period balance as a basis for fee calculation. 
• Fees are calculated pursuant to the formula:
  Sum of [(end of day balance in a client's account) * (advisory fee applicable on that day)] for each day in the preceding month/quarter

When inviting a new client, advisors will be asked to select a client billing plan. The firm’s default plan will populate, but can be edited by the advisor in the client initiation flow.

To change the billing plan for an existing client:

Go to Clients in the advisor dashboard.

Search for and select the household.

Click Settings and then Edit under Household billing plan.

Choose an available billing plan and select Update plan.

The new plan will begin taking effect on the next business day.