Advisor Resources

Introducing the RIA Tech Suite Sep 29, 2022 12:00:00 AM The RIA Tech Suite brings together complementary technology platforms to help automate critical back-office tasks for advisors. The RIA Tech Suite brings together complementary technology platforms to help automate critical back-office tasks for advisors. Along with RIA in a Box®, RightCapital, and Wealthbox, Betterment for Advisors is excited to introduce the RIA Tech Suite: a set of services and tools that advisors can use to help automate and streamline back-office tasks.  Why should firms utilize the RIA Tech Suite? Together, these intuitive and complementary tech tools can streamline everyday practice management, giving you more time to acquire new business and to provide a better experience for your current clients. Additionally, the RIA Tech Suite includes discounted pricing for firms that adopt two or more of the services—a discount that could save the average RIA firm up to $3,100 in their first year.1 Here are the tools available on the RIA Tech Suite: Betterment for Advisors - A leading digital-first wealth management platform that leverages smart-tax technology. RIA in a Box® - Compliance, cybersecurity, and operational software for investment advisors. RightCapital - Wealth planning software that makes planning easier and more powerful for advisors and their clients. Wealthbox - A leading CRM software application that helps advisors manage their clients and collaborate with their team. The RIA Tech Suite can foster growth for tech-centric firms that are focused on efficient client service and expanding their books of business.  “Our goal at Betterment for Advisors is to empower advisors to grow their businesses and build deeper client relationships,” writes Jon Mauney, General Manager of Betterment for Advisors. “The four companies that are part of the RIA Tech Suite all share this objective with a common approach to their services: providing beautifully designed, easy-to-use, and powerful tools for advisors and their clients.” The RIA Tech Suite is now available to all registered investment advisors. You can learn more and sign up for this offering by visiting https://riatechsuite.com.     Betterment for Advisors is a member of the coalition known as RIA Tech Suite alongside three other platforms: RIA in a Box, RightCapital, and Wealthbox. The four companies are offering advisors who become new clients of two or more members of RIA Tech Suite, discounts on services provided by such participating companies. Betterment and aforementioned firms are not under common ownership or otherwise related entities, and no compensation has been exchanged between the members of RIA Tech Suite for the purposes of entering into this coalition. Terms subject to change. This offering is for investment professionals only and is not intended for use by private investors.  ¹ 3100 USD is an estimate of the maximum amount saved on the annual cost for combined subscription fees across all four services noted in this article. Calculation assumes the average of weighted monthly rates offered across all four services plus their onboarding fees, which are subject to change at each service providers’ discretion, and then applies a 15% discount from each. The discount rate of 15% per company is activated upon engagement of a minimum of two companies. Actual dollar amount saved may vary; Betterment makes no guarantee of the specific dollar amount your firm could save.

More Billing Flexibility For Advisors Sep 29, 2022 12:00:00 AM As part of our mission to make it easy for advisors to manage their practices, we offer a variety of billing plans to provide advisors more flexibility for charging clients. Our three Billing Plans allow advisors to set fee structures that fit the needs of both their advisory firm and their clients. Under each plan, advisory fees will accrue daily and be assessed on a monthly or quarterly basis as set by the firm. Advisors who have admin privileges can create new Billing Plans and set the default Plan for their firm, which will be used for new households moving forward. Any advisor can choose from the list of available Billing Plans—which are created by admin advisors—and assign any Plan to their clients. Below, we’ll outline how each Billing Plan works and give examples of how fees might look for households of varying asset ownership levels. Asset-Based Billing Fixed Fee Billing Tiered Billing Note that regardless of which Billing Plan is chosen, each advised client pays a percentage fee directly to Betterment for portfolio management. The fees represented in each Billing Plan below are additional fees (on top of Betterment's wrap fee) that are collected by Betterment on behalf of the advisor and sent to each advisory firm on a monthly or quarterly basis. Asset-Based Billing In the past, the only billing option for advisors was to charge basis points (bps) on a client’s assets, regardless of account balance. We’ll still be offering this asset-based billing option, however, it must now be applied to a total household rather than separately across a household’s legal accounts. As a reminder, legal accounts include individual taxable, joint taxable, trusts, and each type of IRA. A household consists of all legal accounts owned by one person, as well as all the accounts owned by anyone that person shares a joint account or trust with. Households can also be created by explicitly associating two or more people. Example of Asset-Based Billing Plan at 50 bps   Balance Annual Fee Approx. Quarterly Fee Household 1 $50,000 $250 $62.50 Household 2 $500,000 $2,500 $625 Household 3 $3,000,000 $15,000 $3,750   Fixed Fee Billing Advisors can set a fixed annual fee for their services, and apply it to households regardless of balance. The most important thing to know about this plan is that 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 $4,999 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. Since fees are assessed on a monthly or quarterly basis, the annual fee set by the firm will be prorated across each billing period. Tiered Billing Tiered billing allows for ranges to be set for both asset-based fees and fixed fees. The tiers work similar to tax brackets, in that only the assets held within each tier’s range are charged with that tier’s rate. Below is an example of what an asset-based tiered structure might look like. Example Tiered Billing Structure: Asset-Based Asset Range Rate $0 to $100,000 100 bps $100,001 to $500,000 75 bps Over $500,001 50 bps Households under the above tiered billing structure would be charged as follows:   Balance Annual Fee Approx. Quarterly Fee Household 1 $50,000 $500 $125 Household 2 $225,000 $1,937.50 $484 Household 3 $2,600,000 $14,500 $3,625 Setting A Minimum Fee Advisors can utilize the tiered structure to set a minimum fee by setting a fixed fee for the lowest asset tier, and then applying an asset-based fee for the higher subsequent tiers. Just like under the fixed fee plan, a household’s assets must be higher than the lowest fixed fee rate in order for fees to start accruing. Example Tiered Billing Structure: Fixed Fee + Asset-Based Asset Range Rate $0 to $100,000 $1,000 per year $100,001 to $500,000 75 bps Over $500,001 50 bps If you have any questions about how Billing Plans work, head to our FAQs to find answers to the most commonly asked questions. If you still need help, our Advisor Support Associates can help you find the right billing solution that works for your firm. 

6 Questions to Consider As You Evaluate Advisor Technology Platforms Sep 27, 2022 10:07:00 AM Use these six questions to help zero in on the best investment management technology for your needs—today and tomorrow. Considering adopting new technology designed to improve efficiency and enhance the client experience? Choosing the right tech for your advisory firm can be a matter of pure luck if you're not clear about what you're looking for. 1. Does this platform have the features that address my specific needs? Before you begin evaluating different technology solutions, identify the specific capabilities you need, then prioritize them based on which have potential for the greatest impact on your business. Some of the technology options available may include features you haven't identified as must-haves, but could contribute to overall efficiency improvements. Don't dismiss them offhand. It's important to involve staff members in this part of the process. Survey potential users and other stakeholders to find out their pain points so you can understand which current features they want to maintain, and where they feel gaps exist. 2. Does this platform address tomorrow's needs? Don't stop when you believe you have a solution that satisfies today's needs; look ahead to what you might need in the future. Your goal should be to adopt a platform that will serve you well today and in the years to come. The advisory industry and client needs are constantly evolving, and your technology should constantly adapt and align with the shifting landscape. 3. What technology solutions are my peers using? Another way to benchmark the technology solutions you may be considering is to check in with your financial advisor colleagues. Whether that's through informal conversations with peers during a conference, checking reviews in industry publications, or a forum question posed to an advisors-onlygroup you're involved in, you'll undoubtedly get some firsthand insights that can help inform your technology selection process. 4. How long before we're up and running? Depending on the scope and functionality of the technology being implemented, it may be a few weeks before you can fully rely on it to function as intended. Many, though, take just days. While your choice of platform should be primarily about its ability to deliver long-term value to you and your clients, finding one that starts improving productivity quickly can minimize distractions and optimize staff productivity. 5. How does the platform handle account opening and transitions? Account opening and transitions can be a definite pain point given the myriad of forms and potential systems required. When evaluating a tech solution, you'll want to understand how it might, or might not, ease this process. Will it make onboarding new clients more seamless and paperless though automated workflows? Or will multiple, time-consuming manual entries still be required? 6. How easy is the tool to use? Consider not only how intuitive and painless the technology in question is for you and your staff, but also for your clients. One study shows that 62% of millennials are getting their advice online or from social media. It's no secret that this generation, poised to inherit $68 trillion from the baby boomer generation, prefers more streamlined and intuitive user experiences. To better engage and reach clients in this younger set, you'll want to prioritize technologies that present an accessible interface and are enjoyable to use. Technology is an investment that can have significant impact on your business growth and how you serve your clients. Choose wisely, keeping in mind that you and your staff aren't the only ones who will benefit from it. Your clients' needs and experiences with your technology are equally important, and they should be top of mind as you evaluate your options.   To learn more about Betterment for Advisors, get in touch with a member of our team.

Betterment answers your tax season questions—from 401(k)s to HSAs Sep 27, 2022 12:00:00 AM A timely Q&A about tax management on the Betterment platform. It’s tax time! Read on as Eric Bronnenkant, Betterment’s Head of Tax, and Nick Holeman, Betterment’s Head of Financial Planning, discuss common tax queries. Which combination of retirement accounts will likely provide this particular client the most beneficial tax savings over their lifetime?  Nick: The words of this sentence were chosen very carefully because it's likely going to be that one retirement account alone is not enough to fully optimize things. It's going to be a combination, and it's going to depend on this particular client’s situation. We're not focused solely on minimizing taxes today. We want to try to minimize and control taxes over the client's lifetime to try and save them the most cumulative amount of taxes. And as we'll get into, that might not be the type of account that's going to give them the largest tax break today. So, we're going to dive in, but this is the underlying theme or question. The reason why this is so complicated is because there are so many factors and inputs to this decision—kind of this patchwork of special retirement accounts that Congress and the IRS have created over decades. This is why the question is so complicated for us advisors. It's also why it's so confusing for clients. And it's why there's so much bad advice out there. A lot of the clients that I work with have their own CPAs, and I can't tell you how many times I've had to correct them.  A lot of CPAs are experts in tax, but they're not experts in looking 20-30 years down the road when it comes to retirement planning. So today, we want to focus on some of the more common scenarios and questions.  Traditional IRA vs. Roth IRA? Eric: While this can also potentially be looked at in the Traditional 401(k) versus the Roth 401(k), there are some nuanced differences there, too.  For today, we're going to look at the Traditional IRA versus Roth IRA because this is something that typically the client has the most amount of control over in making their own decisions about what account type to choose. And there's a lot of uncertainty; as Nick pointed out, there's also a lot of information. Some of it's good, and some of it could use improvement.  So, thinking about someone who's 25, single, earning $50K: Should they be in the Traditional IRA or the Roth IRA? What’s better for them?  Eric: Nobody really knows the answer to that question today. You really only know the answer to that question after a whole lifetime. What are your initial thoughts, Nick? What jumps out at you when you look at this type of scenario? Nick: Yeah, I like that we're starting with the basics and we're going to build onto the more complex topics. This is one instance where I tend to agree with the standard advice I hear from other CFP® professionals: When you're younger, you're likely able to expect your income to grow. So paying taxes now is going to be better than paying taxes later. In general, without knowing too much about this client situation, I would probably recommend Roth if I had to give an answer. For someone who's age 40, married, and has earnings of $250K: What type of IRA do you think they might want to consider? Nick: This is where we start to get borderline on some of those tax rules. I don't know all of their adjustments or other things that might lower their modified AGI, but here we're probably going to be phased out of a Roth, so we might not have a choice. We would go with a Traditional IRA. Maybe that's when we start getting into the more advanced topics, like a backdoor Roth IRA. But yeah, probably Traditional. Eric: Right. Regardless of how much money you make, you can always contribute to a Traditional IRA. You just may not get a tax deduction for it if you're covered by a retirement plan at work and you make too much money. So the Roth income limit, you get phased out at about $208,000 for last year; $214,000 this year. It would be tough, even for married couples maxing out their 401(k),to potentially help them get below those thresholds. Tough to meet those MAGI limits. But you definitely brought up a great point as far as the backdoor Roth. So for people who make too much money to contribute to the Roth directly, they can contribute to the Traditional and then do the conversion over to Roth. Fun fact: the Roth conversion income limitation was eliminated permanently in 2010, and as of right now, there is nothing on the horizon that is going to change that. Obviously laws can always change, but it is not scheduled to return at this point. Nick: Backdoor Roths are super powerful potential strategies for high income earners. We talk about them a lot with our clients at Betterment. They're a little more complex, so they're not usually part of the baseline retirement plan that we're building up, but if they have a tax professional involved who’s keeping track of the Form 8606 so they're not getting double-taxed, then a backdoor Roth can be a super powerful strategy. Do contributions to a Traditional 401(k) help me qualify for a Traditional IRA deduction or a Roth IRA contribution? Eric: So let's say you have a married couple where one spouse is earning $214,000, and one spouse put in the $20,500 into their 401(k), now that $20,500 would put them below the Roth income limit. Then they'd go from a situation where they weren't able to make any Roth contribution directly to being able to make the full $6,000 or $7,000 Roth contribution directly. So a contribution to a Traditional 401(k) may help you qualify for other benefits, like a deduction on a Traditional or making direct contributions to a Roth or even other things, like child tax credits and any other AGI sensitive items. Do tax-free withdrawals from a Roth IRA impact social security benefits and Medicare premiums in retirement? Nick: Roth IRAs don't impact social security benefits. They don't impact Medicare premiums. Those are two big potential ways to optimize retirement down the road. It's not just looking at tax brackets, either. I know oftentimes when Eric and I will chat, we’re like, ‘Oh, it's current bracket versus future bracket, and you can kind of decide which one is best.’ And that's true, but that's a little bit too simplified. We know tax brackets fluctuate, and there are other things aside from taxation, as well: social security, Medicare premiums, things like that. So big shout out to Roths if they make sense for each client, but just a reminder not to only focus on tax brackets. Can I withdraw contributions from a Roth IRA without tax/penalties? Eric: The power of the Roth is that you're able to withdraw your regular contributions at any time — tax and penalty free — regardless of your age. Some people use it as an emergency fund; that is a possibility. If you can afford to have a Roth and an emergency fund, that's even better. Let's say you need to use your Roth as an emergency fund: it is potentially a tax-efficient way to withdraw those regular contributions tax and penalty free regardless of your age. I do want to point out that if you wanted to withdraw the earnings, which would come out second, those are subject to tax and penalty if you're under age 59-and-a-half. 401(k) vs. IRA? Eric: The first thing you should think about in this type of scenario is: Can I contribute to both my IRA and my 401(k)? I'm not sure where this rumor got started, but it's definitely been flying around the internet for a long time that if you contribute to a 401(k), you can't contribute to an IRA, which is not true. You can contribute to both. Now, what could potentially be impacted is that if you contribute to a 401(k), you may not get a deduction for your Traditional IRA contribution. So is there an interrelationship of the two? Yes. But it's not that you won't be able to make the Traditional IRA contribution, you just may not get a deduction for it. What are some other reasons why you might want to prioritize a 401(k) versus an IRA? Nick: I'll go with one of the less common ones to make this interesting. Behavioral benefits, right? A 401(k) contribution is going to come directly out of your paycheck before it even hits your account. At Betterment, we're big fans of automation. Out of sight out of mind. If it's so easy to spend your money, we want to try to make it just as easy to save your money. So 401(k)s or auto-deposits into an IRA, vice versa. Those are some great benefits that you can do with their 401(k).  Can I access 401(k) funds 10% penalty-free at age 55? Eric: Not everyone wants to work until age 59-and-a-half. Retiring early is on a lot of people's minds, and most people are pretty familiar with the fact that if you want to access 401(k) funds before 59-and-a-half, you have to pay a 10% penalty. IRA 10% penalty exceptions versus 401(k), 10% penalty exceptions are not symmetric. Some are the same, but some are not the same.  Nick: 401(k)s are great for age 55 early withdrawals. That's a big win, right? We're talking to more and more clients who are, I don’t know if 55 necessarily counts as FIRE (Financial Independence Retire Early), but we're talking to more and more clients who are getting really into that.  Can I borrow against an IRA? Nick: We don't love seeing that, but there's a little more flexibility with borrowing against the 401(k). Eric: Actually, a fun fact about the 55-or-later rule is that you don't even have to be 55, as long as you separate from service in the year you turn 55 or later. So you could potentially turn 55 on Christmas day and leave your job on January 1st of that year, and you still qualify for that 10% penalty exception. One thing you shouldn't do if you want to keep that exception is roll those funds over to an IRA, because you'll lose that 10% penalty exception, even though you're allowed to rollover. Nick: You want to make sure you've got enough funds to be able to bridge the gap between 55 and 59-and-a-half. So you might do a partial rollover, for example. Eric, I don't know what your thoughts are on that, but make sure you're not leaving them hanging out to dry in that little window there. Eric: Yeah. I mean, is the 401(k) penalty-free provision useful? Absolutely. Is it the best thing? Not necessarily. If, let's say, you don't like your 401(k) investment options, you could roll it over to your IRA and then do substantially equal periodic payments for five years, which is longer than 59-and-a-half, so that's more restrictive. If you were willing to give up some control on your payment timing, you still might find the IRA option more attractive.  I want to use a retirement plan to partially fund a new home purchase. Should I use my IRA or 401(k) first? Eric: There are a few different ways to fund that. Obviously if people have enough extra money in their non-retirement accounts, that's typically the first place they're looking to fund that first-time home purchase, but not everyone has a 20% down payment available in cash. People are always looking at other alternatives for funds, and that would include a 401(k) and an IRA. What are your thoughts on the 401(k) versus IRA in this scenario, Nick? Nick: My real thoughts would be neither. Typically if a client's asking me this question, it means that they either didn't plan or they're kind of feeling pressured out of a situation or going beyond their budget. So I know that's being a little judgmental, but typically I discourage both. Your IRA has that $10,000 first time-home exemption, 401(k), you may be able to take out a loan and the provisions are a little bit more flexible if that loan is for home purchase. Depending on the situation, I would probably go to my IRA because it has that smaller limit; it would prohibit them from dipping too much into their 401(k). But there are definitely pros and cons to each. Eric: Right. So you can do the Roth IRA. And now, obviously this is if you need the money, because Roth IRAs are such a powerful retirement savings tool, and the longer you hold the money in there, the better. But let's say you need the money: You could withdraw all of your regular contributions, first tax and penalty free. And then if you've had the account open for at least five years, you can withdraw up to $10,000 of earnings tax and penalty free, too. That can count as a qualified distribution. So an IRA may be useful, but some people have most of their money set aside in their 401(k). And that's where a loan with generous repayment terms, where you're able to push that out over a long period of time, may be attractive. Nick: True. Maybe this is me, but the whole benefit of Roth IRAs is tax-free growth. So if you're not getting a lot of tax-free growth, you're missing out on some of the benefits. It only makes sense to be invested aggressively if you're looking at a long-term time horizon. If you're planning on using a Roth IRA to buy a house next year, you shouldn't have had that money invested super aggressively anyways, which means you're probably looking at cash or more conservative investments, which means you're missing out on the single biggest benefit of Roth IRAs in general, which is tax-free growth. So again, I just don't understand why I see so many people talking about using your Roth IRA for this home purchase exemption or for your emergency fund. I don't understand it, unless it's an absolute emergency; not something I typically recommend. Eric: That's fair. When you're thinking about whether you should be buying a home in the first place, you do want to think about: ‘How is this going to impact my retirement, especially if I'm going to use some or all of my retirement funds?’ to fund that home purchase. HSA vs. 401(k)? Eric: I love HSAs, and I know Nick loves HSAs. You can put money in pre-tax, and it's pre-federal tax, pre-social security, pre-Medicare, pre-most state taxes, except for mine in New Jersey — and California. In general, it's pre-tax across the board and it grows tax deferred, and then the withdrawals come out tax-free in retirement or for qualified medical expenses. There are lower limits for the HSA than for the 401(k) and different rules about what you use the funds for along the way. You actually might be able to save more money in taxes on an HSA contribution than a Traditional 401(k), because the Traditional 401(k) doesn't save you on any social security or Medicare taxes. Those you're always contributing to after those taxes have been applied.  I want to maximize retirement savings. Can I use the HSA as a retirement savings vehicle and a medical savings vehicle? Nick: I've seen a lot of advisors get into some sticky situations when recommending using HSAs for retirement. They're not right for everyone. The two biggest rookie mistakes that I see are getting too excited and recommending an HSA without remembering that you need to pair an HSA with a high deductible healthcare plan. If the high deductible plan doesn't make sense for the client in the first place, then the HSA probably doesn't make sense. And the second is if you're going to be using your HSA for retirement, you're probably looking at investing it in more aggressive investments, which means they're going to be a lot more volatile. Whenever I recommend a client use an HSA for retirement, I pretty much tell them we're not going to do this until we have a fully funded emergency fund as well, separate from the HSA, because Murphy's law, worst-case scenario. If we're going to have your HSA be aggressive, I want to make sure that the client also has a separate, lower risk emergency fund just in case something happens. Eric: All great points. I do want to clarify: In New Jersey HSAs are not pre-tax; in Pennsylvania, 401(k)s are not pre-tax, but you do get the HSA deduction in Pennsylvania and you do get the 401(k) contribution in New Jersey. So you always want to look at state laws. They may not drive your decision, but they may be a factor in your ultimate decision. Nick: That's why I always caveat: Make sure to bring in your CPA if you have a client, and make sure that you're all working together. They might know something that you don't, that’s state-specific to your rules or something like that. I want to live a tax-free lifestyle in retirement. Is the trifecta to use an HSA with a Roth IRA and Roth 401(k)? Eric: I love talking about the tax-free lifestyle. How can you get to that point? Well, there are ways. Let's say you max out your Roth 401(k), $20,500, you're not getting any break upfront, but then all the earnings come out tax-free in retirement. Roth IRA for another 6,000 there, no tax break upfront, all the earnings are tax-free in retirement. And then the HSA, you're getting a tax break upfront and even if you're not using it for medical expenses, once you're over 65, then you'll pay taxes. You can also use what's called the shoe box rule, where if you keep track of all of your unreimbursed medical expenses since you opened your HSA, you can use that as an account to withdraw from based on all of those previous expenses. If you accumulated $50,000 worth of expenses since your HSA was opened, you'd still be able to withdraw $50,000 in retirement even though in that year, you may have had no medical expenses at all, because you're able to use that kind of look-back process. Nick: That's personally what I do. I'm looking forward to that. I don't have an actual shoe box, but I've got a spreadsheet — and it's a beautiful spreadsheet. So I'm excited for that. Eric: There are also a number of apps out there where you can save your receipts, whether it comes by email, you can just put that in the app, or you can take a picture if you're at the doctor's office. There are plenty of ways to track these receipts and expenses over time in an efficient way. SEP vs. Solo 401(k)? Eric: There are a lot of self-employed people out there, and they’re always asking, ‘Should I do the SEP or the Solo 401(k)?’ The answer, as with most tax questions, is it depends. It depends on if your goal is to maximize your savings, if your goal is to minimize regulatory filings, there are a variety of factors to consider. Your SEP contribution, you can do 20% of your net earnings from self-employment, up to $61,000. But that's still only 20%. There's no employee contribution — it's all employer contributions. Whereas the Solo 401(k) allows for employee contributions as well as employer contributions and generally still has the same overall limit as the SEP, except for people who are age 50 or older.  Let's say we had someone who's a self-employed, 50-year-old who has a business profit of $100,000. SEP or Solo 401(k)? Eric: That person can do just $20,000 into the SEP, but if they did the Solo 401(k), they'd be able to do the $20,000 employer contribution plus the $27,000 employee contribution because that's the $20,500 standard contribution, plus the $6,500 for being 50 or older. Obviously that would take up a significant portion of their $100,000, but at the end of the day, if they have extra money in savings elsewhere that they could use to help maximize their retirement savings, that's something they may want to consider. I prefer to minimize the possibility of regulatory filings. Should I make contributions to a SEP or Solo 401(k)? Nick: Oftentimes when I'm speaking with a small business owner, they might not be able to save that much. Last year, a lot of the entrepreneurs I was talking to had a little bit of a rough year, to say the least. And if you're looking at starting a retirement plan for your self-employed business, SEPs, you might not be able to contribute quite as much. Sometimes, for a lot of people starting out their business, that's not an issue. They wish contribution limits were something they had to worry about, but they're trying to get their business up and running. They’re also just trying to find time in the day to do everything. So for the SEP, if you're not even bumping up against the contribution limits and it requires less regulatory filing, and it's just a little bit easier, it's something to consider. You might be able to contribute more with a Solo 401(k), but on the SEP side, there are some other advantages as well. Eric: Why do people love the SEP? The SEP has no filings with the Department of Labor. As a Solo 401(k), there is a Form 5500 filing once the assets get over $250,000, whereas regardless of how much money is in the SEP, there are no Form 5500 filings. And while I don't think the Form 5500 is particularly burdensome, most people I know would prefer to file fewer forms with the government. I definitely appreciate the avoidance of filing any additional paperwork, even if it's not that burdensome. I want to make Roth type contributions. Should I make contributions to a SEP or a Solo 401K? Nick: I don't think so. Eric: No, there is no Roth SEP. Now what you could do is convert your SEP contribution into a Roth, because there aren't income limits on doing conversions. But if you want to make a regular Roth-type contribution, then it would have to be an employee contribution to a Solo 401(k) subject to the $20,500 or $27,000 annual limits. There are pros and cons on both sides here, and it's very client-specific on whether they prefer the SEP or the Solo 401(k). Which retirement plan should I make contributions to in order to make tax/penalty-free withdrawals before retirement? Nick: There's a few options. The easiest is just a plain old taxable brokerage account. There's no contribution limits, there's no age requirements, there's no early withdrawal penalties. They're a little bit easier to plan for; again, you might be missing out on some of the tax benefits, but that's one. HSAs are one as well; it doesn't have an age limit, as long as you've got qualified medical expenses. Roth IRAs, you can withdraw your contributions penalty free and tax free at any time. So there's lots of choices. Eric: Getting back to what we were discussing before, the 55-or-later exception is a powerful tool to access funds pre-59-and-a half without a 10% penalty and avoiding the substantially equal periodic payment option. Being able to withdraw those raw Roth contributions at any time is good too, but the closer that you get to 59-and-a-half, you also want to be particularly cautious. Let's say if you have a Roth IRA and you withdraw earnings before you're 59-and-a-half, those are typically subject to a regular income tax and a 10% penalty. So, whereas if you had made the five years plus 59-and-a-half, you would have gotten that tax free. The difference could potentially be if you're the day before 59-and-a-half. Then it's possible though that you would have to pay taxes and penalty on earnings, whereas once you make it to 59-and-a-half, and you've had the account open for five years, then you get it tax free. It's a very binary type of thing, and you always want to be cautious about where you are relative to that line in the sand. Can Roth conversions be part of an early retirement strategy? Eric: Early retirement is not for everyone. Some people are able to afford it. Some people try to fit their life into an early retirement strategy, and for some people, that works better than others. One thing you already mentioned was some of the five-year rules. If you do a Roth conversion of pre-tax money before you're 59-and-a-half and you want to withdraw those funds in the future before you're 59-and-a-half, there is a five-year holding period for each conversion to avoid the 10% penalty. This rule is designed to prevent people from converting and withdrawing immediately to avoid the 10% penalty. You can still do a conversion at age 45, age 46, age 47, age 48, let's say a rolling conversion strategy, which then you'll be able to access those converted amounts five years later, tax and penalty free. Again, those earnings would have to stay in the Roth until 59-and-a-half to avoid any tax or penalty. Nick: Good points. One thing I found practical to keep in my toolkit so to speak is to get familiar with the IRS website. That sounds like that's a terrifying task, but Google is your friend. “IRS gov Roth IRA,” for example, the first hit is likely going to be the contribution limits for that particular year. So if you forget, it's just something that’s good to be familiar with. Not everyone has an Eric that they can just Slack on demand. I'd say bookmark them, familiarize yourself with them. The IRS has some pretty good pages on Roth IRA, contribution limits, Traditional IRA deductibility limits. So if you can't remember them or keep track with them every year, just get used to Googling. Betterment is not a tax advisor, and all information is solely intended to be educational in nature. Please consult a qualified tax professional. Any links provided to other websites are offered as a matter of convenience and are not intended to imply that Betterment or its authors endorse, sponsor, promote, and/or are affiliated with the owners of or participants in those sites, or endorses any information contained on those sites, unless expressly stated otherwise. 

FAQ: Agreement Automation Process Sep 27, 2022 12:00:00 AM The Betterment for Advisors Client Agreement Automation function will make onboarding your new clients fast, easy, and completely paperless. Will my firm need to update our ADV and/or Customer Agreement to reflect the incorporation of Betterment for Advisors into my practice? Yes, you will need to update your Form ADV Part 2A and most likely your Customer Agreement to reflect the incorporation of Betterment for Advisors into your practice, including (among other things) how your firm uses Betterment’s sub-advisory and brokerage services, and Betterment’s fees. Since each situation is unique, please consult with your attorney or compliance officer. Can Betterment for Advisors automate the signing of my agreement with my client? Yes, you can provide PDF versions of your client agreement, Form ADV Part 2, and privacy policy to include as part of the electronic signup process a client undergoes with Betterment. We also provide reporting in your dashboard about which versions your clients have agreed to, and when. You can read more about our agreement automation feature, including legal disclosures, here. What relationship does the client have with Betterment? Betterment acts as the sub-advisor to your client. You still remain the primary advisor to your client. When your client goes through the new account opening process, they will sign an agreement with Betterment directly as the sub-advisor, and, if you wish, an agreement with your firm directly as the primary advisor. Describe the process your product uses to convert information provided by the client into a risk profile in the interview process. The platform automatically recommends investment goals and associated recommended allocations for each such goal for new accounts established on the platform using the client’s age, information provided by the client during account creation regarding a particular financial goal, and the type of legal account. Am I able to see an archive of electronically executed client agreements? If so, what does this look like? If you enable the agreement automation feature to deliver a paperless account opening process for your clients, an archive of the date/time stamp and the version of the agreement that each client electronically signed is housed on the “Agreements” tab of the advisor dashboard. To learn more about our agreement automation feature, please see here.

Getting started with Betterment for Advisors Sep 26, 2022 12:00:00 AM This guide is for investment professionals only. It is not intended for use by private investors. Your use of this website is governed by our Terms & Conditions. Welcome to Betterment for Advisors. Our solution aims to save you time so you can serve more clients, more efficiently, with technology designed to streamline investment management. This guide walks you through the basic steps to get started and contains various resources to help you take advantage of all of the great features available on the platform Part 1: Advisor signup Uploading documents Agreement Automation Feature: If you decide to use this feature, your clients will experience a paperless account opening process. To take advantage of the feature, you will need to provide us with your Form ADV Part 2, Client Agreement, and Privacy Policy (if available). You would upload these documents in the “Agreements” tab of the advisor dashboard so that when the client goes through the signup flow, they will be able to view these documents and electronically sign them. You can learn more about our agreement automation feature, including important disclosure information, here. If you decide to use the Agreement Automation feature, we will display the date and time stamp, as well as the version of the agreement that your client electronically executed on the “Agreements” tab of the advisor dashboard. Those at your firm with “Compliance” access enabled will be able to access the electronic agreements of the firm’s clients through the Compliance page, under “Agreements”. If your agreements change, you can upload them to your firm’s account under the ‘Agreements’ tab so that they can be used for new clients going forward. Please note that Betterment will not automatically send the new terms for your existing clients to agree to; you must send any updated documentation to existing clients outside of the Betterment for Advisors platform. Logos You upload your firm’s logo in the “Settings” tab of the advisor dashboard and this will be used to brand the Client and Advisor Platform, as well as email communications to clients. Please upload a 400 x 100 PNG file and include a knocked out (white version) if available.  Anyone with admin access can always update the logos by navigating to the Settings page and using the “Edit” button on the logos section. The default Betterment logo will be used until the firm’s logo is uploaded. Security You can view our security procedures here. Part 2: Fees and billing Betterment for Advisors combines a fixed monthly advisor fee with a platform fee based on your firm’s total AUM with us. The schedule is as follows: Fixed Fee:  $150 per funded advisor per month PLUS a tiered wrap fee: Asset Range Wrap Fee $0-$2MM 20bps $2-$10MM 18bps $10-$30MM 16bps $30-$100MM 14bps $100MM+ 12bps   NOTE: All of your Betterment assets will be charged the rate based on the tier your firm falls into. When a threshold is met, the wrap fee for your entire client base drops down to the reduced rate. We’ll assess your firm’s assets quarterly and make updates to the overall wrap fee based on where the firm falls at the end of each quarter. You have the ability to set a default advisory fee for your firm and then make adjustments to this fee for each client within your firm. Betterment provides you with the ability to charge an AUM-based fee, a flat fee, or a combined structure-based on tiers. For more information, please visit here. Clients are billed on a monthly or quarterly basis, and both your advisory fee and Betterment’s platform fee are taken directly out of the client’s Betterment account. Once the total fee has been taken out of the client’s account, we assess the amount of your firm’s fee and then initiate an ACH transfer to the firm’s bank account on file. To update the bank account on file, an admin of the firm may navigate to Settings > Fees > Edit. Fee calculation methodology Betterment accrues fees for the period beginning one day before the end of the prior month or quarter and ending two days prior to the end of the current month or quarter. Fees are calculated pursuant to this formula: [sum of the following for each day in the preceding month/quarter: (the balance in a client’s account at the end of the day) * (advisory fee applicable on that day)]. Fees will be realized by selling a portion of the client’s holdings on the last business day of the month or quarter to cover the accrued fee amount. This amount will then be deducted from the client’s account three business days after the transaction date, following the settlement of the resulting trade(s). Fees are billed in arrears and an ACH payment is sent to the advisory firm 2-3 weeks after the end of the month or quarter.   Part 3: Client signup and reviewing your clients’ accounts Onboarding a Client The onboarding process is housed in the “Clients” tab within your advisor dashboard. Pre-populated Form: Select “Complete on your client’s behalf.” This will allow you to select the account type, portfolio strategy, and optionally pre-populate some of your client’s personal information. Once you complete the steps, your client will receive a secure link to access the new account workflow via email. They’ll have the chance to correct any pre-filled information and provide missing information during this process. Please note that this link will only be live for 14 days after the time it is sent for security reasons. Blank Form: Select “Share a link with my client.” You will find a unique token link, and you can either copy and paste to a site of your choosing or use the interface to send an email directly. If you send the email using our site, your client will receive a secure link to access the blank new account workflow (live for 14 days for security reasons) via email. If the client does not receive the email, it can be resent to the client by going to the “Clients” tab and resending the invite link. Joint and Trust Account Setup Process: If you would like to set up a Joint account or a Trust account for your clients, one of the clients will need to have an individual account first. Once the client has signed up for an individual account, you can initiate the opening of a joint or trust account on their behalf afterwards. Joint Account Setup Process: If you’d like to open a joint account on behalf of your clients, at least one of the two clients involved must have a personal account before creating the joint account. The personal account does not need to be funded, nor does it need to be linked to a bank account. For detailed steps on getting the account open, please visit here. Trust Account Setup Process: Advisors are able to add a trust account for any existing client with just a few clicks. If you’d like to open a trust account for a prospect, you’ll first need to invite them to open an Individual Taxable or any of the three available IRA accounts. Once the client opens the account they’ll appear in the Clients tab of your Advisor Dashboard. Then follow the steps detailed here to complete the process. Reviewing your Clients’ Accounts From the Clients page, you will be able to view an overview of your clients’ accounts by clicking a specific client’s name. Once you have clicked on the specific client, you will be able to see an overview of their account(s). On this page, you can also take actions on a client’s behalf (such as initiating withdrawals or deposits and updating allocations), or log in as the client to see their view of the dashboard. If you go to the Settings tab, you will also be able to edit the firm billing plan assigned to the client’s household. This page will also provide you with a bit more detail on each client’s goal(s), their specific allocation(s) and investment returns. Part 4: Client funding Clients can fund their accounts in four different ways: (1) linking an active checking or savings account, (2) wiring cash, (3) rolling over an existing IRA account, 401(k) account or other similar plans, and (4) transferring in eligible securities and cash from existing accounts using the ACATS system. Linking an active checking/savings account This process must be initiated by the client. The client needs to login to their Betterment account and navigate to Settings > Funding accounts. They will then be guided to select a bank from our pre-populated list of common providers or by searching for their institution .If they select one of the listed providers, they will be prompted to enter their online banking username and password. If the client does not feel comfortable linking their account electronically or does not have an account with one of the providers listed, they may select the manual option and enter in the routing and account number for their bank account. Wiring cash Wire transfer instructions can be generated by the advisor and the client from the “Transfers” tab in the client portal. After you select the account, the instructions will be generated. The client will be able to do the same and have them emailed to themselves. Our support team can provide your firm with wiring instructions if you are unable to generate them or are having any issues. Rolling over and IRA account, 401(k), or other similar plan This process can be initiated by either the advisor or the client. We use the Direct Transfer method, which has no negative tax consequences. Advisors can generate paper rollover instructions by going to the client page in their advisor dashboard and clicking “Start a transfer.” Once generated, the rollover instructions will be emailed to the client with the advisor copied. The client can generate instructions by logging in to their account, and once logged on they will click on the “Transfer or Rollover” button and then “Rollover to Betterment.”.  They will be prompted for the type of account, the name of the provider for the account, the account number, and the approximate balance in the account. Finally, they will electronically agree to our IRA terms. IRA: If the client’s account is not able to be transferred electronically, Betterment will generate an IRA transfer form that will be emailed to the client, which they can also access from their account’s Activity tab. This form will need to be signed by the client and then sent to the institution they are rolling over from. 401(k) and other retirement plan types: Once a client has agreed to the terms, they will be emailed specific instructions on how the rollover check needs to be made out, as well as where the check needs to be sent. Once they receive these instructions they will need to reach out to their provider and provide them with these instructions. ACATS Transfers Betterment supports ACATS transfers of many ETFs and mutual funds, select single stocks, and all USD cash positions. We’ve created an automated account transfer flow, which will ask you a series of questions on behalf of your client and ultimately determine if the account is eligible for an automated transfer. It’s possible that some of your client’s holdings are not currently allowed to be moved via ACATS. When prompted to add your client’s specific tickers, if any search returns a “No match” or you receive a notice that says the ticker is not supported, unfortunately, you’ll only be able to submit a PARTIAL TRANSFER REQUEST on behalf of your client for the supported tickers. Any requests submitted for a full transfer will be rejected. For any holdings that we cannot move via ACATS, you can direct your client to liquidate and then transfer the cash proceeds to Betterment. Any related tax implications should be discussed prior to making this recommendation to your client. Part 5: Dashboard basics: Understanding your advisor dashboard  Summary Page This page provides a summary view of the advisor’s clients and their activities. It also includes a search field to access specific households. Weekly Net Deposits: This visual provides an overview of net inflows transacted into client’ accounts per week over the last 8 weeks. These values include withdrawals, deposits & transfers in, auto-deposits, and rollovers. Hover over each week’s bar to view a breakdown of amounts for each of the categories listed. Total Balance: This visual provides a historic view of the advisor’s book value over the last several months and is reflective of the previous market day’s close. Clients Tab This page is where you can invite clients and track all existing clients. The “Invite Client” button on the right-hand side of this page will allow you to invite the client with a pre-populated or blank form. There is also a unique link on this page which you can send to clients to establish an account. Any person who uses this link to set-up an account will automatically be associated with your firm so you can manage the account. You will also collect an advisory fee for this account. Impersonation Feature: When you select a client’s name from the list, you will see a “Login” button to the right hand side, which will allow you to log in as the client. This is great for a remote service model or to help easily answer questions over the phone. Billing Feature: On the “Settings” tab within each household’s overview page, you will find an Edit button next to where the client’s fees are listed, which will allow you to apply a different billing plan made available by your firm’s administrator(s). The assigned billing plan will apply to all investment goals within the household. Portfolio Strategy Adjustment Feature: A similar Edit button will be available next to the client’s designated “Portfolio Strategy” where you are able to adjust the portfolio strategy assigned to each goal as well as the asset allocation (stocks/bonds). Agreements Page This page will display each client you have onboarded via the agreement automation feature. It will also allow you to view the version of the agreement your client electronically signed. If you upload updated documentation, please note that Betterment does not re-send these to existing clients. You will have to send the updated documentation to clients outside of the Betterment for Advisors environment. Support Tab This will provide you with contact information for our Betterment for Advisors support team for both you and your clients. Part 6: Resources  We have a great FAQ section with more information and basic questions.