Advisor Resources

Advisor Spotlight: Katelyn Bombardiere, Commas Jan 25, 2022 8:58:06 AM For this Advisor Spotlight, we welcome Katelyn Bombardiere, CFP®, a Financial Planner at Commas, to chat about her passion for helping the everyday investor. Advisor: Katelyn Bombardiere Firm: Commas Bio: Katelyn Bombardiere, CFP®, is a Financial Planner at Commas, a fee-only financial planning firm based in Cincinnati. Katelyn started her career in the high-net-worth wealth management industry where she quickly realized her passion for helping the "everyday" investor. She sought a different approach to help people (like her friends, family and peers) without worrying about asset minimums. Firm Bio: We all don't have millions of dollars—but we all have goals. Commas is a financial advisory that provides fee-only service to the EveryInvestor: those who might not fit the standards set by traditional high-net-worth advisories but still deserve personalized financial guidance to meet their goals. We offer services with no account minimums, working with our clients at every step of the process and empowering them to create, plan, and achieve their desired money goals. We Are: Encouraging: 0% Judgment Trustworthy: Certified, Not Stuffy Purposeful: Fee-only for All Approachable: We Wear Jeans Why did you decide to become an advisor? As a sophomore in college, I was fortunate enough to go on a trip through the Leeds School of Business at The University of Colorado at Boulder. This trip took a group of students to over 10 different financial firms to introduce them to the possibilities of careers in finance. It was on this trip that I declared my major as finance and figured out that I wanted to be a wealth advisor. From there, I pivoted my internship and career choices to pursue my goal of becoming an advisor. What are some questions that you wish more clients would ask, and why? I think it is important for people who are looking for an advisor to know: if the advisor they are talking to is a fiduciary how that advisor is getting paid the investment philosophy and financial planning process the advisor follows what the advisor's qualifications are. I think gauging a sense of the advisor's passion is important too. You want to work with someone who is passionate about what they do, continues to learn, and shows an interest in you. What do you think is the biggest mistake people make with their money? Either they don't save enough, or they save but don't invest. Another big mistake is not understanding the difference between long-term investing in well-diversified funds and day trading. What does your firm's current tech stack look like? How has technology impacted your work? We utilize Betterment for Advisors as our custodian and Right Capital as our financial planning software. We have created our own CRM platform using Airtable which is a zero code cloud spreadsheet database. This tool allows us to customize our own portal where we house client data, tasks, meeting notes, and the client ledger (types of accounts, where they are held, contributions, notes, etc.). What makes Commas unique, however, is our internal automations through Zapier. For example, after our introduction meeting, the prospect is automatically sent an email with the next steps (signing up for our fee, completing a questionnaire and opening a Betterment account with our client agreements). Once they complete that step they are automatically sent another email asking them to upload documents to our secure portal. Those documents then file themselves into the correct client folder. The clients are then prompted to schedule our discovery meeting. This process continues all the way through the client onboarding process, and even when it comes time for generating annual reviews. These automations are what allows us to service our clients more successfully. They decrease the time we spend on busy work—account opening paperwork, filing documents, creating review outlines, sending template emails, etc.—and increase the amount of time we get to meet with clients and work on their financial plans. How have the recent trends toward remote and hybrid work impacted your relationship with clients? The remote work trend has only strengthened our client relationships as we were already well equipped from a technology standpoint. Our client meetings are generally 30 minutes to an hour, which is on the shorter side when looking at some other wealth management firms. I think our clients like the ability to have a quick meeting and get back to their day. They are just as busy as we are! This also allows us to work with clients all across the country. What do you think is the biggest opportunity for advisors today? To work with the everyday investors and show them that they are qualified to work with an advisor. You don't have to have thousands or millions of dollars to get good financial advice from a trustworthy source. This is also an opportunity to prove that fiduciary financial advisors are trustworthy professionals, not shifty sales people. If you won the lottery, what would you do with the money? Treat myself to a nice international vacation, set aside some funds for my closest friends and family (as long as they invest it for their futures), and invest the rest to ensure that I can attain all of my goals and retire comfortably. If you could only give one piece of financial advice, what would it be? If you are young, start investing today—even if it is $10/m! If you are older, still get started today! I also can't help but advise that you talk to a financial advisor (fiduciary!). Every single person's financial situation is different, and having the peace of mind that you are on track is so powerful. Yes, you can absolutely do this on your own, but do you have the time or passion to do it? Will you be 100% confident in your choices? If you are sick, you go to the doctor. If you have a toothache, you go to the dentist. If you have finances to manage (spoiler alert we all do), why not talk to a financial advisor?

Webinar Recording: How Custom Portfolios for Advisors Can Help Scale Your Business Nov 2, 2021 12:00:00 AM Custom portfolios for advisors can help growing firms set a new standard for business efficiency.   Introducing custom portfolios for advisors: the latest tooling from Betterment for Advisors that can help growing firms set a new standard for business efficiency. Betterment for Advisors’ powerful automation tools make it simple to onboard and service your clients. With custom portfolios, you can leverage automation for back-office tasks and personalize client portfolios to showcase your investment philosophy—all in one unified tech solution. Watch experts from Betterment for Advisors discuss the advantages of using custom portfolios, from tax-loss harvesting to streamlined account transfers and more. Ready to learn more about using custom portfolios at your firm? Get in touch today.

Getting started with Betterment for Advisors Oct 8, 2021 11:10:36 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 is here to save you time so you can serve more clients, more efficiently. With technology designed to streamline investment management and accelerate your ability to serve your clientele, Betterment for Advisors is the leading digital platform for you and your practice. 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). We then upload these documents to your firm’s account 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 decided 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 When you sign-up for the platform, you upload your firm’s logo 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. If logo files are not uploaded during sign up, 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 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 quarter and ending two days prior to the end of the current quarter. Fees are calculated pursuant to this formula: [sum of the following for each day in the preceding 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 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 a check is sent to the advisory firm 2-3 weeks after the end of the quarter.   Part 3: Client signup and reviewing your clients’ accounts On-boarding a Client The on-boarding 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 at the individual client level. This page will also provide you with a bit more detail on each client’s goal, their specific allocation 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 once they are in their account will see the option on the front page to link an account. They will then be guided to select a bank account. If they do not have an account at the banks on the list, they can select the manual option (which we verify by having the client confirm the amounts of two small deposits made in the account). 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, they may select the manual option and enter in the routing and account number for their bank account. Wiring cash Instructions can also be generated by the advisor and the clients from the “Transfer” tab. 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 must be initiated by the client. We use the Direct Transfer method, which has no negative tax consequences. The client will login to their account, and once logged on they will click on the “Rollover” button on the right hand side of the “Transfer” page.  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: Betterment generates an IRA transfer form that will be emailed to the client, they will also have access to this PDF from their 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 nearly all ETFs, many mutual funds, some 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 advisors clients, prospects 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 clients 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 advisors book value over the last several months and is reflective of the previous market days close. Pending Actions:  Here you’ll find a list of the most recent actions taken on a client or prospects behalf and its current status. These actions include, but are not limited to, custom invites, rollovers initiated by advisor, and invites to establish Joint Account for existing clients. Before any of these actions expire, the advisor will have access to a “Send Reminder” button which will resend the email requesting client authorization. Clients Tab This page is where you can invite clients, and track new client sign-ups and invitations sent. 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 at the bottom of 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 tagged on your advisor dashboard, so you can manage the account. You will also collect an advisory fee for this account (if this feature is already set-up). Impersonation Feature: Across from a client’s name, you will see a “Login” button to the right hand side, which will allow you to login 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 pagepage, 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 their asset allocation (stocks/bonds). Agreements Page This page will display each client you have onboard via the agreement automation feature. It will also allow you to view the version of the agreement your client electronically signed. If you sent us updated documentation, please note that Betterment does not 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

Q&A with Paul Sydlansky of Lake Road Advisors Sep 22, 2021 12:00:00 AM A conversation about how to scale your business using the Betterment for Advisors platform. <span data-mce-type="bookmark" style="display: inline-block; width: 0px; overflow: hidden; line-height: 0;" class="mce_SELRES_start"></span><span data-mce-type="bookmark" style="display: inline-block; width: 0px; overflow: hidden; line-height: 0;" class="mce_SELRES_start"></span><span data-mce-type="bookmark" style="display: inline-block; width: 0px; overflow: hidden; line-height: 0;" class="mce_SELRES_start"></span>

Introducing the RIA Tech Suite Jun 28, 2021 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 can save an 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. Calculation assumes the average of weighted monthly rates offered across all four services, inclusive of onboarding fees and then applies a 15% discount from each. Discount rate of 15% per company is activated upon engagement of a minimum of two companies. Actual dollar amount saved may vary.

Betterment answers your tax season questions—from 401(k)s to HSAs Apr 20, 2021 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 $206,000 for last year; $208,000 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 $210,000, and one spouse put in the $19,500, now that $19,500 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 401k, 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 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 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 can 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 Pennsylvania. 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've 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), $19,500, 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, it'd 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 $58,000. 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 $26,000 employee contribution because that's the $19,500, 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 $19,500 or $26,000 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? Nick: There's an excellent Kitces article about the various five-year rules that go along with Roth on contributions, on conversions, on Roth 401(k)s. We can definitely get into some of those, but just so everyone knows, there is a really solid article on kitces.com. 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. 

Tax-Aware Migration Strategies Mar 10, 2021 12:00:00 AM Betterment for Advisors allows advisors to specify trading migration strategies to easily transition their clients’ portfolios or investment allocations. Betterment for Advisors allows advisors to specify trading migration strategies to easily transition their clients’ portfolios or investment allocations. Advisors have three options when migrating a client to a different portfolio or changing their allocation -- each with its own tax-optimization strategy. Advisors can preview the tax-impact effects of their elections before submitting the change.  Three options are available, each with its own approach to managing the transition. Minimize short-term capital gains and wash sales When this strategy is selected, the client’s goal will be migrated in a tax-optimized way. For taxable accounts, we’ll seek to sell tax lots that are at a loss or have experienced long-term capital gains, but will continue to hold, when possible, tax lots with short-term gains until they either become long-term gains or become losses. For tax-deferred accounts, we will migrate without regard to embedded capital gains. Regardless of account type, we will prioritize avoiding wash sales that could lead to permanently disallowed losses for securities held at Betterment. For this strategy, it is important to remember that the account may weather high drift in the short run, but Betterment’s algorithms will typically rebalance available losses or long-term gains as they arise, as long as the security sales involved will not cause any permanently disallowed losses. Drift goal to target portfolio For this migration strategy, the client’s goal will be gradually drifted to the target portfolio by buying underweight securities with inflows / deposits through dividend reinvestments, and selling overweight securities to fund withdrawals. No securities will be sold as a result of this change.  This election will often result in high drift, especially if the portfolio or allocation change involves a significant change in composition of the portfolio’s holdings. When “Drift goal to target portfolio” is selected, an additional election must be made to choose whether or not to turn off automated rebalancing. This is necessary because Betterment’s standard rebalancing algorithms operate independently of the migration strategy election. Choosing to disable automated rebalancing for the goals will ensure that a rebalance will not be triggered due to high drift that can be caused by selecting “Drift goal to target portfolio.” If the advisor elects to leave rebalancing on, Betterment’s automated rebalancing algorithm may take the opportunity to rebalance the goal shortly after the portfolio or allocation change is complete. The rebalancing algorithm avoids sales that realize short-term capital gains or would result in permanently disallowed losses for securities held at Betterment. Rebalance with no tax-impact constraints For this migration strategy, the client’s goal will be rebalanced as soon as possible to the target portfolio. Betterment will perform this rebalance in a tax-optimized way to the extent possible, but we will not delay selling shares even if doing so could lead to a more optimal tax outcome. Choosing this option could lead to the realization of wash sales for securities that have been recently sold. After trading is complete on the change, the account will typically be 100% in balance with the target portfolio. After any of these changes are applied, the strategy election remains active until a subsequent change is made. For each of these migration strategy options, Betterment’s Tax-Impact Preview feature is available so that the advisor may see an estimation of the effects of the selection.

Advisor Insights from Lewer Financial Mar 5, 2021 12:00:00 AM We recently sat down with the VP and Partner at Lewer Financial Advisors to understand more about his firm, his 401(k) practice, and how he came to work with Betterment. Nick Jenkins, VP & Partner at Lewer Financial Advisors, partners with Betterment for Business to provide high-tech, low-cost 401(k) solutions to his clients. Can you briefly describe your advisory practice and the kinds of clients you serve? Nick: Lewer Financial Advisors is a part of Lewer Companies, a group of companies serving business owners, families, and individuals. We’re located in the Kansas City area, but we’re licensed in every state and do business across the country and in Canada. We aim to be a full-service, one-stop shop advisor for business owners often associated with franchise organizations, building relationships at the corporate level and becoming a preferred business services advisor to franchise owners—as individuals as well as employers. The services we provide can include individual wealth management, life insurance (both individual and employer-provided), estate planning, business succession planning, and health and wealth employee benefits. Lewer Benefits Group, LBG, focuses on the medical, dental, vision, and wellness benefits while Lewer Financial Advisors, LFA, focuses on the wealth side of the house, primarily retirement plans with an emphasis on 401(k)s. What motivated you to enter the 401(k) space? Nick: From the business standpoint, 401(k)s complement the other services that we're already providing to the franchise or business owner. Within our health and wealth benefit offering, the 401(k) plan is the largest component. We’re focused on business owners that are determined to grow their businesses and recognize the importance of recruiting and retaining their key employees.  When you get in front of the right business owners, a 401(k) plan can represent significant assets, and the plan participants can represent dozens of prospective clients for insurance or other advisory services. We see the 401(k) as a great foundation to building a longer-term, multifaceted relationship. So do you actively prospect for 401(k) clients? Nick: No. We build the relationship first, then broach the topic of a 401(k) if and when it’s right for the client. We’ve had more success with this approach than by trying to peel clients away from someone else. How would you describe your role with respect to the employer and employees? Nick: It’s critical for us to maintain that relationship, so we are the main point of contact for employers and employees. We tell them we are their one-stop shop, their go-to expert on any topic related to their 401(k) plan. We want them to call us first, whether it’s the employee who needs help signing up online or downloading the app, choosing an investment, using the platform; or the business owner who needs help on plan design decisions such as which type of 401(k) plan to create, what vesting schedule to adopt, whether they should make matching or profit-sharing contributions. Anything like that.  And of course we help employers understand compliance and regulatory requirements, including how to remedy any violations that may occur. Actually, many of those conversations start with the very first meeting once they express interest in offering a 401(k) plan. In just 30 minutes, we go over different plan types, matching, vesting, non-discriminatory testing, etc. We do this early in the process for two reasons: to demonstrate that we are experts in this area and to really expedite the process later on. And because of our relationship with them, we’re able to help guide them through these decisions. We already know a lot about their company, their culture, and their business objectives. So turning now to how you came upon Betterment, can you talk about that for a bit? Nick: I believe that we were one of the early Advisors working with Betterment through our growing list of individual clients on the Betterment for Advisors platform, but we’re fairly new to offering the Betterment 401(k). We looked at several providers before determining Betterment was the right 401(k) solution for our clients based on two main factors: the tech-forward platform and competitive pricing. When talking to business owners, I essentially tell them what Betterment for Business tells everyone: “We use the Betterment 401(k) platform to give you a tech-forward product at a good price — lower than what you’re going to find out there in the traditional market. Lower fees mean that employees get to keep more of their investment return. Oh, and by the way, Betterment’s other tools, such as the financial aggregation feature, lets you link all of your financial accounts to a single platform.” We let clients know that they may “just” be looking to provide a 401(k) to their employees, but that a 401(k) platform can be   so much more in terms of total financial planning and having everything in an app on their phone. Advanced technology and accessibility are really cool. We haven’t looked back since starting to work with Betterment. Disclaimer: This case study was conducted as a Q&A in 2021 and is not reflective of all client experience, which may vary depending on individual circumstances not considered herein, and is not indicative of future or similar outcomes.

Questions about Using Dimensional Funds through Betterment for Advisors Feb 9, 2021 12:00:00 AM Advisors using Dimensional Funds through Betterment can create their own models from scratch or select from a range of pre-built models What is the process for becoming approved for access to Dimensional Funds on the Betterment for Advisors platform? Generally, you will go through an introductory and educational meeting with Dimensional Fund Advisors, after which you should be approved to access Dimensional Funds on our platform. This process can be accomplished in as few as 2 to 3 days. Please email bettermentforadvisors@betterment.com to kick-off the approval process. If I am an advisor with access to Dimensional Funds, can I also access them on Betterment for Advisors? Yes, if you are already an advisor with access to Dimensional Funds, you will also be able to access them on the Betterment for Advisors platform. Please contact us at support@bettermentforadvisors.com and we will enable access upon verification from Dimensional Funds. If I already use Betterment for Advisors and have been approved by Dimensional, how long will it take me to get access to create and use Dimensional portfolios once I've made the request? Once you’ve notified us via a message to support, we’ll update your Dimensional Funds status in the Betterment for Advisors platform within 2-3 business days. You’ll receive a confirmation email from us at that time. If I'm new to Betterment for Advisors, how long will it take me to get access to Dimensional Funds once I've completed the process? We typically review new firms on the platform within 5 business days. Please notify us during this time that you are approved to sell Dimensional Funds by sending a message to support@bettermentforadvisors.com. This will allow us to provide access to the Betterment for Advisors platform + Dimensional Funds as soon as your firm’s application is approved. Will there be model portfolio templates available for me to use? We have several templates available for administrators to use as a starting point. Each Dimensional Funds template portfolio corresponds to a specific allocation between equities and bonds and is intended to be broadly diversified. You can use these templates as a starting point. The colleague(s) who have administrator access to Betterment for Advisors will be able to create custom model portfolios using Dimensional Funds. This allows for adjustment of the funds included in the portfolio and their weights. How do I create my own portfolio once approved? Once your firm is approved for access to Dimensional Funds via Betterment for Advisors, your firm's admin person will be able to create model portfolios with Dimensional Funds. It’s easy to create and brand your own custom portfolios from scratch. Firm admins can create client portfolios directly from their Advisor Dashboard through 3 easy steps: Select the “Portfolios” tab on the left Choose the tab labeled “Dimensional Portfolios” Select “Create Portfolio” If additional members of your team need administrative access to the platform, simply have your firm’s primary contact notify us at support@bettermentforadvisors.com. Contact us if you want to become approved with Dimensional Fund Advisors or learn more about Dimensional Funds on the Betterment platform. If you click the link above, Betterment may share your firm name with Dimensional in order to determine firm eligibility to use Dimensional Funds.

FAQ: Integration Partners Feb 9, 2021 12:00:00 AM Betterment has integrations set up with several third-party platforms across financial planning, CRM, and performance reporting tools. Do you integrate with portfolio management systems? Yes, we currently integrate with Orion, BlackDiamond, and Addepar. Our integrations with portfolio management systems are at the firm level and include detailed account information for all clients across the firm, such as tax lots and cost basis. Do you integrate with any CRMs? Yes, firms using Redtail or Wealthbox CRM software can see Betterment client account information within the CRM interface once you enable the integration. To enable Redtail integration, please email support@bettermentforadvisors.com with your Redtail username. Once you receive confirmation that the integration is enabled via email, you will be able to see client account information and balances in Redtail. This can take several days. To enable Wealthbox, first login to Wealthbox.Visit the Applications area, select Betterment For Advisors, choose Enable and click “Request Betterment integration”. Once you receive confirmation that the integration is enabled via email, you will be able to see client account information, balances, recent transactions and tax lots in Wealthbox’s Betterment tab. This can take several days. Do you integrate with any financial planning tools? Yes, we currently integrate with RightCapital,  eMoney Advisor and MoneyGuidePro. Our integration with RightCapital is at the firm level and at the client-level for eMoney and MoneyGuidePro. Client-level integrations require your clients to link their Betterment accounts using their username and password. Our planning integrations do not include tax lots and cost basis data. Can my firm access our raw data feed? Yes, in addition to publishing your firm’s data to our integration partners, we can also provide your firm with the raw files via SFTP. If you would like to receive the raw files please contact us at data@bettermentforadvisors.com*. How long does it take to enable my data feed? It can take up to 4-5 business days. How do I get my data into my portfolio management system? If your firm uses a system we integrate with, please email support@bettermentforadvisors.com and let us know if you’d like integration enabled. Once the integration is enabled we will email you to confirm. Please note it can take several days for the integration to be completed after your request. How do clients automatically import their tax information into tax preparation software? Betterment has connected with TurboTax, H&R Block, and TaxACT tax preparation software to allow automatic import of your tax information. You or your clients will need to search for “Betterment” in order to import their tax information. Please refer to each provider’s documentation about the steps necessary to import data. Important: If clients have multiple accounts, e.g. personal account and a trust, they will not be able to use TaxACT’s automatic import tool. However, clients can download and import their tax statement CSV, found on the Activity page of their accounts, directly into TaxACT. Please note that while Betterment has provided the tax information in the format specified by the tax preparation software providers, we do not manage the software itself. If you or your clients are experiencing issues with the tax import software of one of these providers, we encourage you or your clients to contact the providers directly. My clients’ tax preparation software has a limit on the number of transactions it supports. How can I use it to report all transactions? Certain versions of tax preparation software have a limit on the number of transaction lines they support for automatic upload. If clients encounter this scenario and are unable to automatically import tax forms, the IRS allows clients to report the summary information on their electronic tax return and send a paper copy of their statement with Form 8453 to the IRS after the tax return has been accepted. For more information, see www.irs.gov/uac/About-Form-8453. Please note that Betterment is not a tax advisor and the information provided should not be construed as tax advice but should be used for informational purposes only. Please consult a qualified tax professional or the IRS to determine the rules that apply to your individual tax situation.

FAQ: Advisor Dashboard & Reporting Feb 9, 2021 12:00:00 AM Frequently asked questions about the Advisor Dashboard and Reporting Does each advisor have their own dashboard? Yes, each advisor within your firm has their own account and dashboard that provides access to manage their clients’ accounts. Each client that signs up for an account is linked to one advisor within your firm. Can advisors share a household or client with other advisors? Yes, an advisor can assign secondary advisors to any of their households that contain one or many accounts. Secondary advisors have full access to those households, and can be removed at anytime from a household’s sharing settings. Here are the steps you'll need to follow when adding a fellow advisor to one of your households: Log onto the Advisor Dashboard On the left, click "Clients" Select the client or household name from the list Select the "Settings" tab On the right, choose "+ Add Secondary Advisor" and enter the first or last name of the advisor you'd like to add. Click the name in the dropdown to complete. The page will load and if successful you'll see a banner with this description "Successfully added (name of advisor) as a secondary advisor to (name of client/household) " What actions can I take on behalf of my client? Advisors can securely co-browse into the client experience to manage individual client accounts. As the advisor, you can take the following actions on behalf of your clients: Add taxable goals Add joint taxable goals Access information on account balances and returns Create ad hoc deposits or withdrawals Schedule automatic deposits or withdrawals View portfolio details View portfolio performance Adjust allocations Adjust portfolio strategy Access account activity, statements, and tax forms Currently, advisors are able to invite their existing clients to open new legal accounts from within the advisor dashboard by selecting the client's name and clicking "Add account". These accounts include new IRAs, trusts, and joint accounts. Can I add a new IRA or taxable goal for a joint account on behalf of my clients? Yes, we have instructions for opening joint accounts. Follow the same steps for new IRA accounts except on #4. Here you'll need to select the IRA type desired for this client. Can I add a trust account on behalf of my client? 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. Follow the steps below to invite them to a trust account. Select the client's name from Clients Click Add Account Select the radio dial next to “ Trust” for the Account type screen and continue Confirm that this is a US domestic trust and continue The site will give you a chance to provide the trust name, information and documents. This is optional. If you do not provide either the client will have a chance to do so. Enter the account details, define the account purpose, choose the Portfolio Strategy and continue Set the portfolio allocation and continue Confirm the new account details and click send agreements when ready Be sure to review the Trust document requirements and advise the client to submit the correct items. The account will not be approved until these are provided and successfully reviewed. Note: The trust will not be visible in your advisor dashboard until your client consents to the agreements. Once required information and documents have been submitted, trust approval can take up to five business days to complete. You and the client be notified of the reviews outcome via email, please let us know if you'd like any named trustees added to the account. How do I set a portfolio strategy for my client? For a new client: To define the initial account type and portfolio strategy please choose Invite Client > Complete on client's behalf Select the account type and purpose and continue Select your preferred portfolio strategy from the dropdown then set the target allocation Confirm your client’s details and send. For an existing, funded client on the platform: On the Client page of the advisor dashboard, click into the household (or client) in which you would like to make a portfolio strategy change. Scroll down to the goal on which you'd like to change the portfolio strategy and click the Edit button that corresponds to the portfolio as shown in the image below Select the portfolio strategy and the asset allocation. You can also view a tax impact preview of the change before implementing here. Confirm the portfolio strategy change. The system will automatically execute trades in a tax minimizing manner to reach the new target allocation. Am I able to access information related to my clients’ accounts on the platform? Yes, you are able to access information related to your clients’ accounts--including, holdings, balances, and performance information--via the advisor dashboard. How do I remove a client's accounts from my firm? Please follow the steps below to remove the client from your firm's client list: Log onto the advisor dashboard Select the client from the Clients list Click Settings and scroll down to "Household Actions" Click "Remove this household" and complete the confirmation modal by checking the box and clicking "Remove Household" Reporting How do you calculate returns? We use a standard time-weighted return to calculate percentage returns for each goal on the Summary page, and to display returns over time on the Performance page. This return can be thought of as the amount one dollar would have changed if it was invested at the same time as a first deposit. The time-weighted return is unaffected by deposits to and withdrawals from an account, and allows for easy assessment of clients’ investments, and a fair comparison with other investments. Is performance data generated on the platform? Yes, performance reporting is embedded on the client interface. Performance reporting for all client portfolios on the platform is available and the user can select the period of time in question. Additionally, daily performance is also included. Advisors are able to view performance data for all client accounts through the impersonation feature on the advisor dashboard. How are statements sent to my clients? Can I access these statements as well? If so, how? Statements are automatically loaded to your clients’ portals. We also send your clients an email once their statements are ready. You can access your clients’ statements via the impersonation feature on the advisor dashboard. On the “Summary” page, select the “Log in” button next to the client that you want to view statements for. Once logged in as the client, select the “Activity” tab. A full archive of your client’s statements is available on the “Statements” sub-tab. Where do clients find tax forms if they have multiple accounts, e.g. a personal account and a trust account? Tax forms are available on the Activity page for each account a client holds. If clients have multiple accounts, they will need to visit the Activity page for each separate account in order to download their respective tax forms. Where can I find my clients’ 5498 tax forms? When will they be available? Your clients will receive a 5498 form if they had an IRA with a non-zero balance in the tax year that just concluded. This form reports all of the IRA contributions for the previous tax year, including rollovers. The information on the 5498 form will also be reported to the IRS. The 5498 tax form can be found on the Taxes page within the Advisor Dashboard. Select your client's name then click "Taxes". You may also access it via the Document page in the client portal. Generally this form will be made available each May for the prior year, after the April 15 tax filing deadline. When will clients tax forms be available? Your clients’ 1099 tax forms are automatically imported to their client portals in mid-February, in both CSV and PDF formats. We will notify them via email when these are ready. The forms are not available prior to February due to the 30-day window related to certain TLH+ requirements, which carry through the end of January. Additionally, we need final confirmations on distributions from fund providers regarding their dividend payout classifications. Betterment strives to provide tax forms well in advance of the deadline when possible. Does Betterment for Advisors generate the tax forms for my clients’ accounts? Yes, tax forms for your clients are automatically imported to their client portals. We will also notify your clients via email when these are ready. Are the quarterly statements co-branded with my firm’s brand? Yes, quarterly statements are co-branded with your firm’s brand. What information appears on my clients’ statements? Holdings, balances, and transactions related to your clients’ accounts appear on your clients’ statements. Does Betterment for Advisors generate the statements for my client’s accounts? Yes, statements are automatically loaded to your clients’ portals. We also send your clients an email once their statements are ready.

Common Questions about Billing Your Clients Feb 9, 2021 12:00:00 AM Get answers to your key questions about billing clients. What billing options are available to my firm? The Betterment for Advisors platform includes a “Billing” page visible to the admin(s) of your firm. This page offers three billing options: Asset-Based Billing, Fixed Fee Billing, Tiered Billing. Learn more about each in our article about billing. How often are my clients billed? Firm admins can select whether to bill clients on a monthly or a quarterly basis.  Any changes made will take effect at the start of the next quarter, though a pending change can be cancelled or modified up until that date.  All advisors of the firm will be sent a reminder that their firm’s billing frequency is about to change about one week before it goes into effect. How often does Betterment pay me the fees collected on my behalf? Betterment will remit payment to your firm on the same frequency that we collect from your clients, per your discretion.  If your firm has elected to bill clients monthly, Betterment will send payment in the first two weeks of each month.  If your firm has elected to bill clients quarterly, Betterment will send payment in the first two weeks of each quarter.  Firm admins must supply bank account information in Firm settings to receive payments. How are billing plans created? Any admin(s) of your firm will be able to create a new billing plan by following the steps below: Log onto the advisor dashboard Click Billing, located in the menu on the left In the top right, select “Create a billing plan” Enter a unique name for the new billing plan and select the billing plan type. (See below for specific billing plan types) How are billing plans applied? The advisor of a household will be able to do this by following the steps below: Log onto the advisor dashboard  Click Clients, located in the menu on the left Search for and click the name of the household whose pricing should be updated Select Settings and click the “Edit” button corresponding to “Household Billing Plan” Choose one plan from the list displayed and click Update Plan If a different pricing plan is needed contact an admin of the firm so they may create it How is the default billing plan of the firm updated? Any admin(s) of your firm will be able to update the default billing plan of the firm by following the steps below: Log onto the advisor dashboard  Click Billing, located in the menu on the left The current default billing plan will be at the top of the list, click Edit to make changes If needed, modify the name for the plan and select the billing plan type. (See below for specific billing plan types) How to create or edit Tiered Billing Plans: Once on the “Tiered billing plan” page, use the “Firm fee” column and click on “Asset based” or “Fixed” to switch between the two. Enter the number of basis points (bps) or dollars that should be charged for the first tier of invested assets. If more than one tier is needed, click “+ Add tier” then enter the high range value for the previous tied. Repeat these steps for each tier needed. If this is not a new billing plan, the next page will display the households that will be impacted. Scroll to the bottom to click “Update billing plan.” How to create or edit Fixed Billing Plans: Once on the “Fixed Billing Plan” page, use the “Firm fee” field to type in the dollar value you’d like this plan to assess on client accounts annually. No need to type in a dollar sign, only enter the digits and a decimal if you will be charging in cents as well. If this is not a new billing plan, the next page will display the households that will be impacted. Scroll to the bottom to click “Update billing plan.” How to create or edit Asset Based Billing Plans: Once on the “Edit Asset Based Billing Plan” page, use the “Spread bps” field to type in number of basis points you’d like charged by this billing plan. For example, for a fee of %0.50 type in 50. When satisfied with the new spread, click Save changes. If this is not a new billing plan, the next page will display the households that will be impacted. Scroll to the bottom to click “Update billing plan.” How to change the Billing Plan for groups of clients: The Billing page, accessible  to admins of your firm, will display one row per existing billing plan. The row includes an “Assigned to” column. This displays the numbers of clients on this billing plan. To adjust the billing plan applicable to this group of clients the admin of your firm will be able to follow the steps below: Click Edit to make changes If needed, modify the name for the plan and select the billing plan type then click continue. How do I update a client's fees? To edit the fee for any existing clients advisors will need to follow the steps below: Log onto the Advisor Dashboard Select "Clients", on the left side of the window Locate the client and click their name Select "Settings" Locate and click the "Edit" button corresponding to the Fee column Select the billing plan you'd like to apply then click "Update plan" The new billing plan will appear under "Household Billing Plan" Please keep in mind, if a new billing plan needs to be created the admin(s) of the firm will need to create the plan before you are able apply it to any clients' household. How do I get paid for the client accounts that I manage on the platform? Betterment for Advisors operates a fee-only platform. Firm admins may create multiple billing plans using Asset Based Billing, Fixed Billing, or Tiered Billing. The billing plan applied to a client's household will, by default, include Betterment's platform fee. Aggregate fees are billed automatically by Betterment from the client’s account quarterly or monthly in arrears, and Betterment subsequently remits the advisor’s fee. Can I set custom level fees for individual households? Yes, you may utilize Billing Plans to set custom fees for a client's household. If any of the available Billing Plans do not fit your needs, an admin of your firm may create a new customized billing plan that is either Asset Based, Fixed, or Tiered. How are the fees calculated? We accrue fees beginning one day before the end of the prior quarter and the accrual of fees ends two days prior to the end of the current quarter. The fee is calculated pursuant to the formula [sum of the following for each day in the preceding quarter: (the balance in a client’s account at the end of the day) * (advisory fee applicable on that day)] and will be deducted from the account three days after the transaction date, following the settlement of the trade(s) made to fund the fee. Fees are billed in arrears and the advisor’s portion of the fee is sent to the advisory firm shortly after the end of the quarter via ACH. Are fee tiers supported? Yes, we do support fee tiers. Anyone with admin level access to the advisor dashboard may create new billing plan types, including Tiered Billing. Once the plan is created you may apply it at the household level. How are fees reported to my clients? Your clients see the total fee (platform fee + billing plan applied to the household) in their client portal and on quarterly statements. You are responsible for providing the fee breakdown between the Betterment platform fee and your advisory firm fee to your clients. Are there any trading or transacting costs associated with the Betterment for Advisors platform? No, there are no trading or transaction costs associated with the Betterment for Advisors platform.

Key Questions about Getting Started as an Advisor Feb 9, 2021 12:00:00 AM Explore our rundown of the most common questions asked by advisors who are new to Betterment. What are the requirements for partnering with Betterment for Advisors? In order to partner with Betterment for Advisors, you must be affiliated with a registered investment advisor. What does a partnership with Betterment for Advisors entail? Betterment for Advisors typically partners with registered investment advisors through a shared fiduciary oversight model.  Betterment LLC, a registered investment advisor, acts as a sub-advisor to each advisor’s client accounts, and contracts separately with each advisor and each underlying client. How do I get started and how long does it take to implement the platform in my practice? The sign-up process for Betterment for Advisors is entirely digital and typically takes a few business days to implement. So long as your firm is registered with the SEC or with a state and has a CRD number, please follow this link to get started. Once we receive your application, we will process it in approximately five to seven business days. Please note that the due diligence process may take longer for newly established firms. Once your firm has been activated on the platform, we will send you a welcome package and you can begin managing accounts on the platform. What is Betterment for Advisors? Betterment for Advisors is a new solution for advisors and clients alike. Betterment for Advisors is designed to streamline the investment process and accelerate an advisor’s ability to serve its clientele. Betterment for Advisors is a leading digital, wealth management platform for advisors. Betterment for Advisors gives advisors the tools they need to change the experience for all parties in wealth advisory, and helps take care of front- and back-office operations. Advisor practices will become more productive, more efficient, and provide a next-generation interface for clients. With Betterment for Advisors, advisors can bring cutting edge digital technology to their clients, automate their workflows, and spend time in front of customers, building new business and strengthening existing relationships.

FAQ: Security & Privacy Jan 1, 2021 12:00:00 AM Learn more about Betterment's security and privacy policies. How does Betterment’s data aggregation functionality relate to the SEC’s custody rule? Advisers may have access to clients’ financial account login and password information for various reasons, including to rebalance the holdings in those accounts, to pay bills for the client, or to facilitate the aggregation of financial information from multiple accounts. Betterment for Advisors provides the ability for advisers to aggregate client financial accounts on the Betterment platform by entering client login and password information via the impersonation function. Advisers, however, should be aware that possessing client login and password information can, under certain circumstances, be deemed to trigger custody over the assets in those accounts. One way a registered investment adviser could be deemed to have custody of a client’s assets is when the adviser has any authority to obtain possession of those assets. An adviser may decide that it is appropriate to have custody over client assets, but doing so gives rise to additional SEC oversight, including a requirement for an annual surprise audit by an independent accountant at the adviser’s expense. Advisers wishing to help avoid triggering inadvertent custody by using impersonation to aggregate client accounts might wish to consider asking clients to sign written instructions limiting the adviser’s authority to make withdrawals from the accounts before the client provides the adviser with login and password information. There may be other ways to avoid triggering inadvertent custody as well. *Note: No information above is, or should be considered, legal advice. If you believe you need legal advice on the subject above, please consult a lawyer. Can my client add a 'trusted contact' for their account? Your client may want to designate a close friend, family member, or other party 18 years or older who we can contact in the unlikely scenario that we suspect your client is a victim of financial exploitation. If your client chooses to designate a trusted contact, they authorize Betterment Securities to contact the individual to disclose information about their account to address possible financial exploitation, to confirm the specifics of their contact information, health status, or identity of any legal guardian, executor, trustee or holder of a power of attorney, or as otherwise permitted by FINRA Rules 2165 & 4512. Your clients can add this information by clicking on their name in the top right hand corner of their account and selecting "Settings" from the drop down. Once on this page, they will be able to scroll down to the bottom of the Trusted Contacts section and input the information. Betterment Securities, as a FINRA registered broker-dealer, is required to provide customers this opportunity" How do you maintain security and privacy? We use industry-standard encryption, store all of our data on servers in secure off-site facilities, and implement systematic processes and procedures for securing and storing data. And because we value your trust, we will protect the privacy of information and will never rent or sell your data or your client’s data with any third party for any purpose without your client’s permission.

FAQ: White-labeled ETF Model Portfolios Jan 1, 2021 12:00:00 AM Build your own customized portfolios by selecting from funds in the Betterment Core Strategy. What are Model Portfolios with Betterment for Advisors? Model Portfolios allow advisors to create white-labeled portfolios, which gives you even more control in personalizing your clients’ investments. It allows you to further modify the Betterment portfolio strategy by adjusting the individual asset class weights and accessing additional asset classes. We’ll give you a risk and diversification assessment of your changes, and as with all of our portfolios, your clients will continue to have access to the same automated features available on the Betterment portfolios. How do I create my own portfolios? Firm admins can create portfolios for your clients via the advisor dashboard. You can go to the dashboard and select the Portfolios tab on the left. From there, you'll see both the Betterment Portfolios as well as your Firm's own portfolios. Firm Admins will find "Create Portfolio" on the Firm's portfolios page. If additional members of your team need admin level access on the platform, please have your firm's primary contact on file notify us via support@bettermentforadvisors.com. Can the name for each Model Portfolio be customized? Yes, the model portfolios can be completely white-labeled and named whatever the firm admin deems appropriate. How do I assign my firm’s Model Portfolios to clients? To use one of your firm’s model portfolios for an existing goal, you can select the client’s goal and click edit on the current portfolio strategy. From there, select your custom portfolio from the dropdown. How do I update my firm’s Model Portfolios? Firm admins can update model portfolios on the Portfolios tab located in the left sidebar. How will adjusting my clients’ portfolios impact their fees? The fees Betterment collects from the client do not change based on the portfolio strategy assigned to each client’s goal(s). The average expense ratio associated with a Model Portfolio depends on the portfolio’s underlying ETFs. Any saved adjustments could impact your client’s average fund fees. Will rebalancing and auto-adjust work the same? Rebalancing will operate in the same fashion as the other Betterment model portfolios, but auto-adjust will not be available on Model Portfolios. What other impacts should my clients and I expect when adjusting their funded goal to a Model Portfolio strategy created by my firm? Changing portfolio strategies will bring the goal to a new target allocation based on the Model Portfolio. This sells securities and could possibly realize capital gains. Moreover, the goal will be rebalanced entirely to match the new desired target allocation, regardless of tax consequences. As with all sell trades, we will utilize TaxMin to reduce the tax impact as much as possible. Once the portfolio change is submitted, please allow 2-3 business days for the change to execute. This allows for the 2-day settlement required on ETF sale transactions. Will Tax Loss Harvesting + (TLH+) and Tax Coordination work with these new Model Portfolios holding ETFs? Yes, the TLH+ feature will be available on Model Portfolios holding ETFs in taxable accounts. TCP is not yet available on goals with a Model Portfolio holding ETFs. The availability of a model portfolio offered by an independent third party on the Betterment for Advisors platform should not be construed as, and is not, a recommendation as to the advisability of utilizing such a model portfolio strategy. In addition, advisors should conduct their own due diligence on the underlying exchange-traded funds for any particular model portfolio. No third-party provider of a model portfolio strategy is providing investment advice to any advisor or client.

Client Agreement Automation Jan 1, 2021 12:00:00 AM Everything you need to know about this great feature. Scroll down to learn more and read our legal disclosures. The Betterment for Advisors Client Agreement Automation function will make onboarding your new clients fast, easy, and completely paperless. By permitting your clients to execute your firm’s advisory agreement as part of the white-labeled Betterment for Advisors signup experience, you automate a manual process, giving you more time to focus on your business while providing your clients with a better experience. How to Get Started To get started, have a firm admin navigate to the Agreements page to upload the following documents: a PDF of the advisory agreement between your firm and your clients, signed by an authorized party at your firm a PDF of your firm’s Form ADV Part 2A a PDF of the advisor’s relevant Form ADV Part 2B, if applicable (see below) a PDF of your firm’s Form CRS a PDF of your firm’s privacy policy Note that an executed advisory agreement is required to use the Client Agreement Automation function, but the Form ADV Part 2A, Form CRS, and Privacy Policy are all optional. Any advisor may upload their ADV Part 2B, independent of the presence of firm-level documents. About the Client Agreement Automation Function The Client Agreement Automation function gives you the option to have your clients electronically execute your firm’s advisory agreement as part of the white-labelled onboarding experience. It also will permit you to provide your Form ADV Part 2A, Form CRS, and privacy policy to your clients at the time of onboarding. Additionally, each advisor on the platform may supply their Form ADV Part 2B if they choose to do so.  This will be presented to their clients at the time of onboarding alongside the other documents that may be supplied at the firm level. Provision of the Form ADV Part 2B is optional, and can be implemented even if your firm does not supply any of the other agreements or disclosures. Use of the Client Agreement Automation function is optional. If you choose not to use the function or to provide only a subset of your firm documents, you will need to separately execute your agreements between your firm and your clients and deliver firm disclosures in a manner determined by you outside of the Betterment for Advisors platform. The Client Agreement Automation function is only intended to assist firms in presenting agreements and disclosures associated with account openings. Subsequent updates to these documents are not re-delivered to existing clients; the firm must make their own arrangements to deliver any such updates. Contact us with questions at support@bettermentforadvisors.com. How It Works Overview: The Client Agreement Automation allows your firm to provide a form advisor agreement, Form ADV Part 2A, Form ADV Part 2B, Form CRS and privacy policy to Betterment, which Betterment will then host. As part of the Betterment for Advisors client signup, Betterment will electronically deliver these documents to your clients and permit your clients to execute your firm’s form advisory agreement.  You have the option of providing only a subset of the documents listed above, though you must provide an advisory agreement to use this function.  Only those documents which you upload to your firm dashboard will be provided to clients. Signup: As part of the Betterment for Advisors electronic signup process, your clients are presented with agreements between them and Betterment, and acknowledge receipt of Betterment’s disclosure documents. If you elect to use the Client Agreement Automation function, your clients are also presented with your firm’s advisory agreement and any disclosure documents you have uploaded as of the date each client signs up. This allows the client to execute and/or acknowledge these documents all at once, rather than separately. Your client electronically consents to the terms of these agreements by checking a checkbox and clicking a button to agree to create their account.  Please note that Betterment does not collect traditional handwritten signatures for either your agreement or the Betterment for Advisors agreements. Instead, consent is indicated via mouse click or other electronic method of input, and the date and time of such consent is recorded and stored. Records: In the advisor dashboard, under the “Agreements” tab, each advisor can view which of their clients executed the firm’s agreement electronically, the date and time at which they executed the agreement, and a digital copy of the version they executed (along with the versions of the firm’s Form ADV Part 2A, Form CRS and privacy policy, and the advisor’s Form ADV Part 2B, provided these documents were uploaded at the time the client was onboarded). This table is your record that your client executed your agreement electronically. Note that you can view and download the agreement by clicking the “Agreements Package” button on the right of the table. Copies of Form ADV Part 2B will appear alongside the agreements package if one was present at time of signup. A similar page is provided to Compliance users in the Compliance page in the Betterment for Advisors platform, allowing those with the Compliance permissions to view all of the firm’s clients and their agreements. Important Considerations for Your Firm Please review these items carefully before deciding whether or not to use the Client Agreement Automation function. One of each type of document per firm: The Client Agreement Automation function only supports one of each type of document per firm at a time, meaning one advisory agreement, one Form ADV Part 2A, one Form CRS, and one privacy policy at a time. You may change that agreement by having a firm admin upload a new copy of the agreement via the Agreements section of the Betterment for Advisors web portal. Once a new form of agreement is uploaded, this new form will be presented to all new clients who sign up in the future, but it will not be presented or distributed to existing clients. Form ADV Part 2B: Each individual advisor on the platform may upload their own ADV Part 2B if they choose or if their firm directs them to do so. If a Form ADV Part 2B is present when a client signs up, a record of the acknowledgement of receipt of the Form ADV Part 2B and a copy thereof will be presented on the Agreements page as well as in the Compliance view, alongside firm-level agreements (if supplied). Form CRS: When present, the Firm’s Form CRS will be shown as the first disclosure alongside the other documents and disclosures during client onboarding that are a part of the Agreements Automation Service. In addition to client onboarding, the Firm’s Form CRS is presented to clients when adding additional services. Additional services when the Firm’s Form CRS will be presented include when the client opens a new type of account, on the client consent form when the advisor initiates the opening of a new type of account, when a rollover is initiated by a client, on the client consent form when the advisor initiates a rollover, on quarterly statement notifications, and when a user logs in for the first time since the Firm has uploaded or updated their Form CRS. Examples of opening a new type of account include, when a client with a taxable investing account opens an individual retirement account or when a client with an individual retirement account opens a joint account. Fee changes: When considering whether to use the Client Agreement Automation function, you should take into account that advisors have the ability to change the fees they charge specific clients in the advisor dashboard (subject to available Billing Plans, which can only be created by firm admins.) Before using the function, you should determine how, if at all, this impacts the structure of your agreements. Always on: If you decide to use the Client Agreement Automation function, it will be turned on for all of the clients that you bring to Betterment for Advisors. This means that all clients you bring to Betterment for Advisors will have to execute the agreement you provided to Betterment as part of the signup process. Multiple signatories: Currently, the Client Agreement Automation function does not support accounts with multiple signatories, such as trusts with multiple trustees and joint accounts. Agreement amendments: While agreements can be updated and will go live for future client onboarding, we do not support amendments to your agreements with existing clients on our system. If you would like to amend your agreement with some of your clients, you will need to do so yourself, using whatever non-Betterment mechanism and recordkeeping system you deem appropriate. Form ADV Part 2A, Form CRS and privacy disclosure updates: While Form ADV Part 2A and Form CRS can be updated and will go live for subsequent client onboarding, we will not send any updates to your Form ADV Part 2A, Form CRS, or privacy disclosures to your existing clients. You are responsible for complying with SEC rules governing when and how to deliver any required disclosures and amendments to these documents to your clients.

FAQ: Agreement Automation Process Jan 1, 2021 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. 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 statement 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.

Betterment for Advisors Case Study Q&A: How AdvicePeriod creates space and time to better serve clients Sep 3, 2020 12:00:00 AM We recently sat down with Steve Lockshin, Founder of AdvicePeriod, to hear more about his firm and his perspectives on the benefits of working with Betterment for Advisors. AdvicePeriod is dedicated to focusing clients on the important decisions necessary to manage their wealth. With billions of dollars under management, the firm has repeatedly been recognized as one of the best places to work. In 2019 AdvicePeriod was named "Thought Leader of the Year" and in 2020 Steve Lockshin was named “Innovator of the Year” by WealthManagement.com. We recently sat down with Steve Lockshin, Founder of AdvicePeriod, to hear more about his firm and his perspectives on the benefits of working with Betterment for Advisors.  Could you give us a little summary of AdvicePeriod?  We're an RIA that believes most investments are a commodity and what matters most is planning and taxes. Our focus is on tangible results and leveraging technology.  What have been some of the biggest hurdles or challenges that your firm has faced?  I think it always comes down to people: getting the right people in the right seats. At the end of the day, this is still a service business. What are the key traits you look for in partner firms?  Our partners are not firms but individual advisors at firms that often aren’t keeping up with technology or who don’t believe in active investing anymore. But the number one trait is they believe what we believe. They opt into our philosophy that investing is becoming more commoditized, with planning and taxes being more important. And then culturally, it’s important that they're a fit.  How have you been able to use technology to help streamline your operations?  For clients where Betterment fits, it’s super simple: account opening is simple, all the rebalancing is done, the tax loss harvesting is done. Opening an account takes less than two minutes at Betterment, so that really minimizes the intake process.  At other firms, account opening can take 20 minutes. The workflow hasn't changed, largely because custodians remain the weakest link in the chain. It's still paper. It's still, “You need these forms for this account and these forms for this account. Oh, we gave you the wrong answer. You have to redo the forms.” Some will allow electronic signatures, some won't. It's just a nightmare trying to figure out how to open accounts.  Why were you early adopters of Betterment’s platform?  It's because we saw the ability to create time. In fact, as one of my good friends always says: “In sports, when you're on offense, you're supposed to create space and when you're on defense, you reduce space.” And if we're theoretically on offense, trying to grow our business and help more people, then creating time and creating space is of tremendous value. And that's what the platform did for us.  I think that the tax loss harvesting feature is capable of being a big benefit to our clients. I’m still amazed at how few people understand the benefits of tax-loss harvesting. I show clients how they didn't just get the stated investment return. A client could get an additional 50-100 basis points per year from tax loss harvesting. I think it's also important in a rapidly changing environment that advisors remain on the cutting edge. Utilizing a more forward-thinking company like Betterment that is constantly deploying new technology to improve the client and advisor experience is extremely valuable.  For which kinds of clients is a platform like Betterment a good fit?  For us it’s a good fit where estate planning is not a key focus. It's typically super easy for smaller accounts, but there’s no size limitation. I think our largest account on the Betterment platform is $40 million, so it works just fine for large accounts where we don't have estate planning complexity.  How have you helped advisors you partner with get over any skepticism they might have about Betterment?  The biggest issues are inertia and the fear of being marginalized. But advisors who are open to new technology and who are looking for efficiencies have no problem. Betterment is all about simplicity and creating time that the advisor can use more productively for the benefit of clients. Advisors have to have confidence in what they’re doing and believe that they’re adding value in different ways. I often use a gym analogy. Clients can get in shape on their own for cheap. But if they want a personal trainer, they know it’s going to cost more. That's similar to our role as advisors, and we shouldn’t feel defensive about trying to justify that.  Have you ever had a client leave your firm to do it themselves on Betterment retail? Never, not one. It's actually been the opposite. People will say, “Oh, I have a Betterment account, can I move it over to you guys so you can oversee it?” So we've had a lot of Betterment retail accounts come on to AdvicePeriod, but we haven't seen it the other way around.  Besides Betterment, what other technologies are you using that others may not be? I remain amazed at how many firms deploy portfolio management systems and performance measurement systems and still crank out PDF reports when they can just give the client a portal. We’ve organized all of the important documents and give clients 24/7, transparent access to everything so they can see what’s happened over time from both the planning and portfolio perspectives. Our rollout of Vanilla is a big tech change. Even someone like me, who's super planning focused, had overlooked some very important aspects to being fully prepared with things like healthcare and financial powers for my adult children. Are you seeing an uptick in ESG or SRI requests from clients?  No, but I did read one of the big reports that basically said that something like 60% of people are asking about ESG right now. But we’re not seeing it. And the challenge I have with ESG is it reduces predictability because you increase tracking error. So I've always encouraged people to take the extra money they earn from their high confidence of having a properly allocated portfolio and apply it directly to the charities you care about. But we'll see where things go. There's certainly more social awareness today than there was five years ago.  Are there any specific areas that you think custodians should be focusing on for the next few years?  People should be able to move their accounts like they change their cell phone numbers. So I'd love to see custodians do that. Also: access to data. But instead of opening up data access, they're starting to close it down again. Ease of account opening. I mean, Betterment's been around since 2010 for retail customers, so online account opening in less than two minutes has been around for some time. We're going on the 10th anniversary of being able to open your accounts online and the major custodians still can't do it. So is it that they can't or they won't or both?  One last question: any pearls of wisdom for new advisors who are just starting out?  There’s an old saying in counseling that “you can't be a guide to a place you've never been.” So I would tell everyone to open an account with your own money—not just $10 that you ignore, but enough money so that you pay attention to it. If you're not using the system yourself, then it's hard to say it's good or bad.  Don't be afraid that engaging a platform like Betterment may lose you clients. Find things that make you look better and do a better job for the client. And if you're not using tax loss harvesting in your practice, you're not doing the best job you can for your taxable clients.  Disclaimer: This case study was conducted as a Q&A in 2020 and is not reflective of all client experience, which may vary depending on individual circumstances not considered herein, and may not apply to all clients, as past experience is not indicative of future or similar outcomes. 

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Webinar Recording: Efficient Rebalancing as a Potential Source of Alpha May 1, 2020 12:00:00 AM Catch our latest on-demand webinar recording on efficient rebalancing as a potential pursuit of alpha.  

5 Tips to Give to Inexperienced Investors During A Market Dip Apr 30, 2020 12:00:00 AM If your clients are first-time investors, helping them make that initial deposit and setting up their portfolios can be difficult. During a market dip? Even more so. Here are 5 talking points to help you communicate with inexperienced investors in times of volatility. Investing money for the first time may make your clients feel like diving into the deep end of the pool. It can be nerve wracking. If they ultimately decide to, here are 5 tips to help new investors get started during a market downturn. 1. "Have an emergency fund." Talking about emergency planning can be a great way to get new investors comfortable with the idea of investing. Help your client set about three to six months’ worth of expenses and recurring payments aside in an emergency fund. At Betterment, this bucket of money that is most often held in either a cash account or very low-risk investments. Having an emergency fund will give them the freedom to invest the rest of their money more aggressively, and with less worry. 2. "Invest at your own pace." Investing a lump sum all at once can be scary. Even though studies show that a lump-sum investment will outperform two-thirds of the time, your clients may not feel comfortable doing that, which is okay.  Another approach that may make clients feel more comfortable is to invest a little bit at a time. One of the best ways to do this is by helping your clients set up an auto-deposit, where they choose the amount (ie. $300) and frequency (ie. monthly). That way your client set their own pace. 3. "Focus on your time horizon." Remind your clients that not all of their investments need to have the same risk level.  Your clients are likely investing for many different financial goals at the same time, like a home down payment, future college expenses, or retirement. Each of these financial goals likely has its own time horizon, and thus should be invested differently.  Breaking your clients’ investments into goals allows you to better control their risk and build a personalized investing plan, as well as make them feel more comfortable with how much risk they are taking on compared to how soon they’ll need access to a particular bucket of money.  Betterment automatically adjusts your clients’ allocations over time to account for market performance and their goals’ time horizons, ensuring that we work for you and your clients through all the ups and downs. 4. "Pay attention to historical context." As a new investor, your client may not have much context or know what to expect in terms of performance.  It can be helpful to let clients know that many others before them have felt nervous about markets. From 1854 to 2009, the U.S. has been through 33 economic downturns. On average, these downturns last for about 1.5 years. Remind them that, after each of the past downturns, the stock market has fully recovered and even surpassed previous all-time highs.  That is all to say that you should make sure clients understand that they have been through many market dips in the past and likely will see many more in the future. They are an inescapable part of investing and are something that all investors, new and old, should learn to cope with.  Though your clients may be tempted to withdraw all of their investments or even halt their auto-deposits, now is the time to stay the course. History can show them that the market, and thus their portfolio, will recover. 5. "Focus on what you can control." Your clients can’t control the stock market. They also can’t control the news, inflation, GDP growth, or unemployment rates.  However, they can control how much they save, how much risk they take, how diversified they are, and how they react when markets get scary. In the long run, push your clients to focus on what they can control, and encourage them to do their best to ignore what they cannot control. Help clients make educated decisions about their investments. New investors should not be discouraged by market dips.  At Betterment, our passive investing model is derived from the idea that taking action based on market movement can be detrimental: contrary to what your clients might think, this could actually lower their returns.  Despite this, when volatility hits, we are working for your clients. Our automatic allocation adjustments, portfolio rebalancing, features like tax loss harvesting, and updated personalized advice can help your clients ride out a market downturn. Ultimately, being thoughtful about your clients’ finances and overall risk in their portfolios during market uncertainty can help them weather the storm, no matter how long the downturn lasts.

How Portfolio Rebalancing Works to Manage Risk for Your Clients Apr 21, 2020 12:00:00 AM Portfolio rebalancing, when done effectively, can help manage risk and keep your clients on track to pursue the expected returns desired to meet their goals. What is rebalancing? Over time, the value of individual ETFs in a diversified portfolio move up and down, drifting away from the target weights that help achieve proper diversification. Over the long term, stocks generally rise faster than bonds, so the stock portion of your client's portfolio will likely go up relative to the bond portion—except when you client's rebalance the portfolio to target the original allocation. The difference between the target allocation for your client's portfolio and the actual weights in your client's current portfolio (e.g. their actual allocation) is called portfolio drift. Measuring Portfolio Drift At Betterment, we define portfolio drift as the total deviation of each asset class (put in positive terms) from its target allocation weight, divided by two. Here’s a simplified example, with only four assets:   Target Current Deviation (±) U.S. Bonds 25% 30% 5% International Bonds 25% 20% 5% U.S. Stocks 25% 30% 5% International Stocks 25% 20% 5% Total     20% Total ÷ 2     10%   A high drift may expose your client to more (or less) risk than you intended when you set the target allocation, and much of that risk may be uncompensated—meaning that the portfolio isn’t targeted higher expected returns by taking on the additional risk. Taking actions to reduce this drift is called rebalancing, which Betterment automatically does for your client in several ways, depending on the circumstances, and always with an eye on tax efficiency. Cash Flow Rebalancing This method involves either buying or selling, but not both, and generally occurs when cash flows into or out of the portfolio are happening anyway. Cash flows (deposit, dividend reinvestment or withdrawal) can be used to rebalance your client's portfolio.  Fractional shares allow us to allocate these cash flows with precision to the penny. Inflows: Your client may be rebalanced if they make a deposit, including when they auto-deposit or receive dividends in their account. We use the inflow to buy the asset classes your clients are currently under-weight, reducing their drift. The result is that the need to sell in order to rebalance is reduced (and with sufficient inflows, eliminated completely). No sales means no capital gains, which means no taxes will be owed. This method is so desirable that we’ve built it directly into our application. Whenever client drift is higher than normal (approximately 2% or higher), we calculate the deposit required to reduce the client's drift to zero, and make it easy for them to make the deposit. Although we show the deposit amount needed to bring drift back to 0%, smaller deposits also help reduce drift. In fact, the first dollars deposited have the largest impact on reducing drift. This means, for example, that depositing half the amount recommended to reduce drift to 0% will generally reduce drift by more than half. Portfolio Drift vs. Deposit Size The chart above is a hypothetical, illustrative example of the relationship between portfolio drift and deposits needed to rebalance without selling any assets. The blue line in the chart demonstrates the general relationship between deposit size and drift. As you can see, the first dollars of a deposit reduce drift by more than the last dollars. The dotted grey line shows what a linear relationship between drift and deposits would look like. Withdrawals (and other outflows) are likewise used to rebalance, by first selling asset classes that are overweight. (Once that is achieved, we sell all asset classes equally to keep you in balance.) We employ a sophisticated ‘lot selection’ algorithm called TaxMin within asset classes to minimize the tax impact as much as possible in taxable accounts. Sell/Buy Rebalancing In the absence of cash flows, we rebalance by selling and buying, reshuffling assets that are already in the portfolio. When cash flows are not sufficient to keep your client's portfolio’s drift within a certain tolerance, we sell just enough of the overweight asset classes, and use the proceeds to buy into the underweight asset classes to reduce the drift to zero. Sell/Buy rebalancing is triggered whenever the portfolio drift reaches or exceeds 3%. Our algorithms check your client's drift approximately once per day, and rebalance if necessary. Note: In addition to the higher threshold, we built in another restriction into the rebalancing algorithm for taxable accounts. As with any sell trade, our tax minimization algorithm seeks to select the lowest tax impact lots, and stops before selling any lots that would realize short-term capital gains when possible. Since short-term capital gains are taxed at a higher rate than long-term capital gains, we can achieve higher after-tax outcomes by simply waiting for those lots to become long-term before rebalancing, if it's still necessary at that point. As a result, it’s possible for your client's portfolio to stay above the 3% drift if we have no long-term lots to sell. Almost always, it’s because the account is less than a year old. In this case, we recommend rebalancing via a deposit to avoid taxes. The Portfolio Tab will let your client know how much to deposit, as described above. Please note that for advised clients on our Betterment For Advisors platform, the drift threshold is 5% for portfolios that contain mutual funds. Allocation Change Rebalancing Changing your client's target allocation by moving the allocation slider and confirming the change will also cause a rebalance. Because you have chosen a new target allocation, Betterment will rebalance to the new target with 0% drift.  This sells securities and could possibly realize capital gains. Moreover, if you change your client's allocation even by 1%, the portfolio will be rebalanced entirely to match your new desired target allocation, regardless of tax consequences. As with all sell trades, we will utilize our tax minimization algorithm to help reduce the tax impact. Additionally, before your client confirms the allocation change, we will let them know the potential tax impact of the change with Tax Impact Preview. Transaction Timelines If you’d like to turn off your client's automated rebalancing so that Betterment only rebalances your client's portfolio in response to cash flows (i.e., deposits, withdrawals, or dividend reinvestments) and not by reshuffling assets already in the portfolio, please contact us.

Using Technology when Working from Home Mar 13, 2020 12:00:00 AM If your organization has implemented or is preparing to implement work from home (WFH) policies, technology can help you maintain close relationships with your clients and colleagues. Here are a few suggestions for how to keep your business on track.  Get comfortable with video chat. Since face-to-face meetings may be put on hold for a while, video conferencing can be a great solution. Whichever software you choose, be sure to test it before using it with a client, and know that you may need to invest a few minutes at the start of every meeting getting clients comfortable with the technology.  Keep your appointments (even with prospects). Especially given all that’s going on in the markets, clients need to know they can count on their advisor. Reach out well in advance of upcoming meetings to let them know that your organization has implemented WFH policy and provide the dial in information (preferably with video chat).  Don’t hide behind a blank screen. Even if your clients choose to have their camera turned off, yours should always be on so they can see your body language, know that you’re not distracted, and see your passion and commitment.  Match the communication format to the issue. For unscheduled conversations, consider the best communication format based on factors such as the sense of urgency or the complexity of the topic. Long email chains can be frustrating for everyone involved. Picking up the phone is often the speediest course of action, and having a video component can be helpful.  Make your presence known in group meetings. In group meetings, be sure you remain present and are actively listening to the discussion. Participating in meetings via video helps ensure you remain focused, allows you to raise your hand if you have a question, and helps others know you are engaged.  Create an environment at home that is conducive to work. Try to set up a quiet, dedicated workspace and consider how you'll take calls. Keep to your normal business schedule as much as possible. Shower, get dressed, and take a short walk to “commute” to the office before settling in for the day.  Minimize distractions. Distractions can be a major issue, so be ready to make adjustments to avoid them. If you have others in the house, talk about 'office etiquette' including when it is appropriate to interrupt, what it means when you have headphones on, etc.  Keep teamwork and collaboration alive. Allow for time for collaboration and relationship-building, even if you have to schedule it. Make full use of any collaborative tools you have access to. Google Docs, for example, are a great way to get clarity, gather input, and gain consensus without an in-person meeting.  Communicate more frequently with your team. Don’t ignore the need to keep in close contact with your team. Check in with one another at the beginning and end of each day so everyone knows when you're on- and offline. Being less visible to one another makes it even more important to keep each other in-the-know. Maintain a sense of transparency by discussing what you're doing, sharing your work-in-progress, and keeping everyone in the loop before they wonder how you’re spending your time. 

Webinar Recording: Goal-Based Investing Dec 17, 2019 12:00:00 AM View the recording of our Betterment for Advisors webinar on Goal-based Investing.  

Betterment for Advisors Goal Projection and Advice Methodology Dec 4, 2019 12:00:00 AM Details on how projections work within Betterment for Advisors' client accounts. Betterment provides allocation, savings and withdrawal advice alongside a projection graph when customers view their goal projection under “Plan.” The graph is intended to show the possible future investment values in order to illustrate the impact of different contribution and withdrawal choices, investment time horizons, and portfolio allocations. Actual individual investor performance has varied and will continue to vary depending on market performance, the time of the initial investment, amount and frequency of contributions or withdrawals, intra-period allocation changes, and taxes. An indication of “On Track” is not a guarantee of achieving a goal in the future. Acting on savings and withdrawal advice is not a guarantee that goals will be met or that the investment will meet cost-of-living needs throughout one’s life. See our Terms and Conditions. In the following sections, we’ll provide an overview of our methodology and assumptions for each component under “Plan” in a Betterment goal. Projection Methodology and Assumptions The expected portfolio returns used in the portfolio value projection results are based on the expected returns and risk-free rate assumptions for your target Betterment portfolio allocation. (See more about how the expected returns are derived). This portfolio is set by the user-selected allocation to “stocks” and “bonds”. The allocation choice corresponds to weights of the underlying Exchange Traded Funds (ETFs), as defined in our Portfolio. The recommended allocation mix is based on user investment profile including age, the goal type, and time horizon. Monthly Contributions or Withdrawals, if specified, are assumed to be made at the end of the month. We project your balance in monthly increments, never going below twelve months. We project allocation changes on a monthly basis. For users with remaining goal terms of less than one year, our projection assumes that you maintain the allocation at the end of the goal term rather than liquidate. We sometimes map external assets to proxy assets. For investments with available data, we map holdings to our asset classes to make approximate projections of their expected risk and return. In some cases we do not have data for a specific investment, usually because the holding is a non-publicly-listed vehicle, such as a private 401(k) plan. In those cases, we use proxy tickers to determine the appropriate asset class exposures. Proxy tickers are provided by Quovo, our third-party data provider for synced external accounts. Quovo uses a proprietary process to identify similar public securities to the unknown ticker using structural information (including security type and fund name) and to qualify the confidence level of the similarity. Betterment uses Quovo’s proxy tickers only for securities that pass a threshold confidence level of similarity. Quovo’s methodology may change over time, and Betterment will continuously evaluate any such changes. Fee Assumptions There are two relevant fees for projections: (1) the Betterment platform fee (“Betterment fee”); and (2) the Advisor’s fee. Both the Betterment fee and Advisor’s fee can be found on the Settings page, under the Account tab. Betterment assumes that both fees applicable on the date the projection is displayed will remain the same through the entire projection term. For projections, Betterment calculates an effective fee that is a sum of the Betterment fee and the Advisor’s fee. For projection purposes, Betterment converts each Advisor’s fee into an effective fee rate expressed as a percentage of client assets. This Advisor’s effective fee rate is calculated using one of the following methods, depending on how the Advisor’s fees are structured: If the Advisor uses a constant asset based rate as their fee (e.g., 0.25% / year), Betterment uses that rate as the effective fee rate in its projections. If the Advisor uses a flat fee, Betterment calculates the effective fee rate as the flat fee divided by the balance of the household assets held with the Advisor at Betterment. For example, if a client has $50,000 of advised assets with an Advisor, and that Advisor charges a flat fee of $100 per year, Betterment calculates the effective fee as ($100 / year) / ($50,000) = 0.2% / year. If the Advisor uses a tiered fee system with a series of asset-brackets and marginal rates, Betterment calculates the effective fee rate by multiplying the amount of advised dollars in each bracket by the marginal rate, summing those values and dividing by the total advised dollars. For example, if an Advisor charges a tiered rate of 0.25% / year for the first $100,000 of advised dollars and 0.15% / year thereafter, and an advised client holds $150,000 with that Advisor at Betterment, Betterment calculates the effective fee as ((0.25% / year * $100,000) + (0.15% / year * $50,000)) / $150,000 = 0.217% / year. As a unified example, let’s assume that the Betterment fee is 0.25% per year. Further assume that an Advisor charges a flat fee of $500 / year and that the advised client has $100,000 of assets held with the Advisor on Betterment’s platform. The overall effective fee assumed for projections is then 0.25% / year + ($500 / year) / ($100,000) = 0.75% / year. Savings Advice Methodology and Assumptions The monthly contributions estimate is based on a 60% likelihood of the portfolio value reaching the goal target at the end of the investment term. Calculations assume the current portfolio. If the portfolio changes over time or has different expected returns, outcomes may be adjusted. Calculations will be updated based on the current portfolio held. Savings advice and graphs are in nominal terms. Withdrawal Advice Methodology and Assumptions The monthly safe withdrawal is based on a 96% likelihood of having $0 or more at the end of the time horizon, assuming the following assumptions hold true. The safe withdrawal amount assumes the user adjusts the withdrawal rate and allocation according to our advice at least once per month. The safe withdrawal amount assumes the user does not live past the specified time horizon (“plan-to-age”). Calculations assume the current portfolio. If the portfolio changes over time or has different expected returns, outcomes may be adjusted. Calculations will be updated based on the current portfolio held. Withdrawal advice and graphs are in real terms, using an inflation rate of 2%. The default time horizon (“plan-to age”) is 90 years of age, or age + 50 years if younger than 40, or age + 10 if older than 80. The model will use this value or the value entered by the user. Graph Explanation The Graph exhibits the possible range of projected portfolio values using color. The dark line indicates the projected portfolio value under average market conditions. This means that there is a 50% likelihood of portfolio values greater than this and a 50% likelihood of portfolio values less than this. The lighter, shaded region indicates the range within which there is 80% likelihood of the projected portfolio value. This means that there is a 10% likelihood of portfolio values greater than the top of this region, and a 90% likelihood of portfolio values at least as high as the bottom of this region. Goal Status (Savings Goals) – On Track or Off Track The Betterment Savings Advice tool constantly tracks the portfolio performance and indicates the ability of the portfolio to reach the Goal target, assuming average market performance. The portfolio performance is categorized as “On Track” or “Off Track”, and Betterment makes recommendations to increase the likelihood of reaching the Goal target. The portfolio performance is “On Track” when the total projected portfolio value exceeds the Goal target assuming average market performance. This is equivalent to a likelihood of 50% and above of reaching the Goal target. The portfolio performance is “Off Track” when the future projected portfolio value (i.e. current balance plus future contributions, plus investment growth) is not sufficient to reach the Goal target assuming average market performance. This is equivalent to having less than 50% likelihood of reaching the Goal target. Betterment provides advice for bringing the goal back on track in three areas – either increasing the amount of future monthly contributions, or increasing the term of the investment or increasing the current balance in the account by making a one-time deposit. These recommendations are based on a relatively conservative stance, e.g. a 60% likelihood of projected portfolio value to reach the Goal target, compared to the 50% chance used by other models. Limitations The Goal target is a user input and may not be sufficient to provide income for actual spending or retirement income needs. The model does not account for any taxes, except for retirement goals. All non-retirement goal values are assumed to be pre-tax. The model does not account for forced withdrawals such as Required Minimum Distributions that must be taken from pre-tax qualified retirement accounts after a certain age. The model does not account for auto-deposits that are skipped. The savings model is in nominal terms and therefore does not have a direct inflation assumption. (The withdrawal model is in real terms, and uses a 2% inflation assumption). The withdrawal model does not take into account other sources of income outside the Betterment account. A full income plan should include all sources of income and a spending needs analysis. Past performance is not indicative of future results. These projections do not guarantee investment performance. Extreme market conditions, sustained high inflation, or other unforeseen events may reduce portfolio value and withdrawals. Income is not guaranteed.

More Billing Flexibility For Advisors Dec 4, 2019 12:00:00 AM Betterment For Advisors has listened to advisor feedback and is now offering new Billing Plans that will provide more flexibility for how advisors can charge their clients. We value the feedback our advisors provide, and one thing we’ve heard is that they want more flexibility over client billing. Our three new Billing Plans will 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 quarterly as usual. 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 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 For an advisor's existing households, we will automatically carry over their existing asset-based billing plan. The advisor will be able to make changes if they would like, but otherwise, there is nothing further they'll need to do. Fixed Fee Billing The ability to charge a flat annual fee is something advisors have asked for—so we’ve added it to our Billing Plan options. Advisors can now choose 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 quarterly, the annual fee will be prorated across each calendar quarter. 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. Lastly, keep the feedback coming—we value the voices of our advisors and we will continue to make improvements to meet their dynamic needs.

Using Dimensional Funds through Betterment for Advisors Oct 11, 2019 12:00:00 AM Follow our instructions for getting started with using Dimensional Funds. Approved to use Dimensional Funds and ready to customize your own portfolios? It’s easy to create and brand your own custom portfolios from scratch or use one of our templates to start. Firm admins can create client portfolios directly from their Advisor Dashboard through 3 easy steps: Select the “Portfolios” tab on the left  Choose the tab labeled “Dimensional Portfolios” Select “Create Portfolio”  If additional members of your team need administrative access to the platform, simply have your firm's primary contact notify us at support@bettermentforadvisors.com. Contact us if you want to become approved with Dimensional Fund Advisors or learn more about Dimensional Funds on the Betterment platform. If you click the link above, Betterment may share your firm name with Dimensional in order to determine firm eligibility to use Dimensional Funds.

Training Video: Sync External Accounts Sep 18, 2019 12:00:00 AM Watch our product training video on how to assist your clients in connecting external accounts to the Betterment experience.  

Training Video: Link a Bank Account Sep 18, 2019 12:00:00 AM Watch our product training video on how to connect a funding account to help your clients transfer cash into Betterment.  

Client Video: Goal Based Investing Sep 18, 2019 12:00:00 AM Watch our product training video on Betterment's goal-based account setup and configuration.  

Training Video: Open a New Client Account Sep 18, 2019 12:00:00 AM Watch our product training video on how to open a new client account and get them started.  

Advisor Guide to Betterment Transfers Jul 29, 2019 12:00:00 AM At Betterment for Advisors, our goal is to make transferring assets on behalf of your clients easy and automatic. Not every account is eligible to be moved using the same transfer method. We’ll break down each transfer scenario and walk you through how to get started. Transferring Qualified Accounts To get started, you’ll first need to ensure your client has opened the appropriate receiving Betterment IRA. If they have not done so already, you can log into your advisor dashboard, select the specific client’s “Overview” page, and then click “Add Account.” From there, you’ll be guided through the automated account opening flow. Once done, you’ll be able to move forward with the actual direct IRA transfer request by clicking “Start a Transfer” from your advisor dashboard. At the end of the flow, your client will be emailed further instructions. As their advisor, you will be CC’d on this email to retain oversight and provide any needed guidance. Not every retirement account is eligible to be moved using the same transfer method. Our rollover flow is designed to analyze and select the most appropriate option available, given the specific account information provided by you and your client. Important note: The questions we prompt you to answer within the automated transfer flow will be used to pre-fill your client’s actual transfer request form. It’s critical that you enter accurate and up to date information on behalf of your client. Generally, when a transfer request fails or is rejected by a contra-firm, it's due to incomplete or mismatching information provided. Having a recent client statement on hand is a good best practice. We suggest confirming the following pieces of information before you get started: Client’s current account type: Legal account type and brokerage status. Client’s current account number Client’s current clearing broker: Enter the clearing broker’s name in the “Current Provider” field when prompted. Direct IRA Transfers At a high level, the possible direct IRA transfer options at Betterment are: Full or partial ACATS transfer of supported investments plus any cash. Generally, this takes 5-6 business days to complete. When adding your client’s specific tickers, if any search returns a “No match” or you receive a notice that says the ticker is not supported, you’ll only be able to submit a PARTIAL TRANSFER REQUEST on behalf of your client. Any requests submitted for a full transfer will be rejected. Supported investments will be moved in-kind to Betterment. Once received, we will liquidate any investments to cash and reinvest all the proceeds into their IRA portfolio here. Electronic fax of the client’s direct IRA transfer form to their contra firm. Generally, this takes 7-10 business days to complete. There is no physical paperwork required. Client will consent to the transfer by e-signing the transfer form and then the fax will be automatically sent by Betterment. IRA proceeds will be sent to Betterment via a mailed check and automatically reinvested into your client’s IRA portfolio here. Pre-filled direct IRA transfer form and instructions, which must be printed, signed, and mailed to the contra firm by the client. Generally, this takes 14-21 business days to complete. The client must take action from their side for the transfer to complete. In some cases, the contra firm may also require a notary or a medallion signature guarantee. IRA proceeds will be sent to Betterment via a mailed check and automatically reinvested into your client’s IRA portfolio here. If your client is attempting to transfer an inherited IRA, refer to our Inherited IRA FAQ. 401(k) and Employer-Sponsored Plan Rollovers Moving retirement money from an employer-sponsored account—such as a 401(k) or 403(b)—into an IRA is usually not an option via ACATS. We still attempt to automate this rollover process as much as possible. We generally do not need any paperwork from you or the client. You can simply get started by clicking “Transfer or Rollover” from your client’s Overview page. The rollover flow will guide you through a series of questions and then we’ll email your client a full set of personalized instructions for how to proceed. The instructions will lay out the exact next steps to take and will contain the information your client needs to complete their rollover. This includes their unique Betterment IRA account number, how their provider should make their rollover check payable, and where they can mail the rollover check. Many providers will accept employer-sponsored rollover requests from a client verbally, effectively avoiding any paperwork requirements from their side. We encourage advisors to call the current provider—with the client on the line—to verbally request any high-value rollovers. We’ve seen a stronger completion rate when this approach is taken. It’s worth noting that some providers may still require your client to fill out special rollover paperwork. If so, there’s no way around that. If any additional paperwork is required, please send all requests to support@bettermentforadvisors.com. Lastly, we will notify you and your client via email as soon as their rollover funds are invested into their IRA and everything is complete. Click here to get started. Indirect IRA Transfers In some cases, an indirect IRA transfer or rollover may be the only option available to your client. The good news is that this can be the fastest process of all and it could prevent delays due to contra firm requirements. Any cash proceeds from an early distribution out of your client’s qualified account which meets the requirements related to indirect rollovers can be re-deposited into Betterment by instructing your client to make a cash ACH deposit from their linked bank account into their Betterment IRA. If your client has not already done so, they can use these instructions to link their primary bank account. When your client is ready to make their deposit, please be sure they complete the following: Direct your client to log into their account and select “Deposit” from their Home page. The client will be prompted to choose which account to make their deposit into. If they have more than one IRA open, please be sure your client knows which one to choose specifically. Once the IRA has been selected, they will be asked to select a deposit type. Please be sure your client chooses “Indirect IRA Rollover.” Inherited IRA Transfers If your client is attempting to transfer an inherited IRA, refer to our Inherited IRA FAQ. Please CC your client and email support@bettermentforadvisors.com with the following information: Name of current provider. Type of IRA (Traditional or Roth). The IRA account number at the current provider. Indicate “full” or partial transfer. Provide the exact dollar amount to transfer if partial. Name of original IRA account holder. Since we will need to open a new legal account type, please have the client review our Customer Agreement and send us the statement, “I agree to the terms and conditions of the Customer Agreement, and I give Betterment permission to open an inherited IRA account on my behalf.” Your email will be directed to one of our rollover specialists, who will set up the inherited account at Betterment and guide you and your client through the next steps. Transferring Taxable Accounts Taxable ACATS Transfers When possible, Betterment recommends using the ACATS method to move taxable brokerage accounts to Betterment. Generally, an ACATS transfer is faster and more convenient than other types of transfers. Betterment supports ACATS transfers of nearly all ETFs, many mutual funds, some single stocks, and cash positions. We’ve created an automated taxable 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. Click here to get started.  Important note: The questions we prompt you to answer within the automated transfer flow will be used to pre-fill your client’s actual transfer request form. It’s critical that you enter accurate and up to date information on behalf of your client. Generally, when a transfer request fails or is rejected by a contra-firm, it’s due to user error.  Having a recent client statement on hand is a good best practice. We suggest confirming the following pieces of information before getting started: Client’s current account type: Legal account type and brokerage status. Client’s current account number Client’s current clearing broker: Enter the clearing broker’s name in the “Current Provider” field when prompted. Please email support@bettermentforadvisors.com for any questions regarding your client’s taxable account requirements or ACATS eligibility. Non-ACATS ACH Bank Deposits Your client can initiate a cash deposit into a taxable Betterment account at any time, as long as they have successfully linked their bank account. For any taxable money they wish to move to Betterment that cannot be moved via ACATS, you can instruct your client to liquidate to cash and then move the cash proceeds to their linked bank account for funding. Any related tax implications should be discussed prior to making this recommendation to your client. To initiate the ACH deposit, instruct your client to click “Deposit” from their Home page. Note: We only allow electronic transfers from your client’s checking account via the ACH network and do not accept personal checks. For transfers greater than $300,000, wire instructions may be generated. There is no fee from Betterment for wires, but please have your client check with their bank for any fees they may be charged. To access a client’s specific wire instructions, log in as the client, select “Transfers”, then “Wire Transfers”, and follow the prompts. Get Support As always, our support team is available to assist with any questions related to moving your client’s assets. Please email support@bettermentforadvisors.com and copy your relationship manager. For more immediate assistance, call 888-646-2581.

Training Video: Digital ACATS Jul 26, 2019 12:00:00 AM Watch our product training video on how to use Betterment's Digital ACATS service.  

Advisor Spotlight: Paul Sydlansky, Lake Road Advisors Jun 18, 2019 12:00:00 AM For our second Advisor Spotlight, we welcome Paul Sydlansky, founder of Lake Road Advisors, an independent, fee-only financial planning firm. Advisor: Paul Sydlansky Firm: Lake Road Advisors Bio: Paul Sydlansky, founder of Lake Road Advisors LLC, has worked in the financial services industry for over 20 years. Prior to founding Lake Road Advisors, Paul worked as a relationship manager for a Registered Investment Adviser. Previously, Paul worked at Morgan Stanley in New York City for 13 years. While at Morgan Stanley, Paul was a senior-level manager within the Institutional Equities Department. In 2018, he was named to Investopedia's Top 100 Financial Advisors list. Paul received a Bachelor's degree in Economics from Marist College and holds an MBA from New York University Leonard N. Stern School of Business. Paul is a CERTIFIED FINANCIAL PLANNER™ and a member of the National Association of Personal Financial Advisors (NAPFA) and the XY Planning Network (XYPN). Firm Bio: Lake Road Advisors LLC is an independent, fee-only financial planning firm, specializing in working with mid-career professionals to help make sure they are making the right decisions to live a smart financial life today as well as tomorrow. Why did you decide to become an advisor? There are really 3 main reasons why I decided to become a financial planner. First, I work in a field I have been interested in my entire life (finance/business/markets). Second, I get tremendous satisfaction from helping people feel confident in their own financial lives. Third, it allows me the flexibility to build my own schedule and spend time with my family. What are some questions that you wish more clients would ask, and why? I would like to see more clients ask about systems and techniques for developing better financial habits. There are no secrets or shortcuts to building wealth; it happens over time due to consistent and disciplined action. What do you think is the biggest mistake people make with their money? Having no financial plan at all for spending, saving, or investing. What is the biggest money mistake you’ve ever made? Too much Real Estate exposure in 2008-2009 as a percentage of my net worth. What does your current technology stack look like? Betterment & Vestwell for Investing, MoneyGuidePro and The First Step Cash Management System for Planning, Riskalyze for Risk, Wealthbox for CRM, and Calendly for scheduling. How is technology impacting the way you and your clients interact? Technology allows me to more efficiently and cost effectively serve my clients. Which do you prefer: Billions, Wolf of Wall Street, or The Big Short? Billions. I spent the first part of my career working with hedge funds and they do a tremendous job of putting you into that world. If you won the lottery, what would you do with the money? Definitely complete my current financial goals but I would absolutely need to sit down and reevaluate my personal goals. I wouldn't just retire because I really enjoy what I do. What do you think is the biggest opportunity for advisors today? Changing the way we are viewed as an industry. Often advisors and brokers are viewed as predatory and untrustworthy. We have a chance to really change the landscape and make the business more about helping people figure out their financial lives and have a plan, and less about selling products. If you could only give one piece of financial advice, what would it be? Start investing as much as you can as a percentage of your income as early as you can (I would aim for 20-30%).

Betterment for Advisors Now Offers Dimensional Funds Apr 11, 2019 12:00:00 AM Advisors who have access to Dimensional funds will be able to design and manage Dimensional fund-based portfolios directly on Betterment for Advisors. Betterment for Advisors announced the addition of a new fund family that advisors can use to manage their clients’ investments, Dimensional Fund Advisors (Dimensional). Advisors who have access to Dimensional funds are able to design and manage Dimensional fund-based portfolios directly on the Betterment for Advisors platform. With a 37-year track record and $576 billion in firm-wide assets under management, Dimensional is a leading global investment firm that translates academic research into practical investing solutions that are widely recognized in the financial services industry. “We’ve long been admirers of the strong community that Dimensional has built among financial advisors,” said Jon Stein, Founder & CEO of Betterment. “Dimensional has been on the wish list since the early days of our advisor platform. We’re excited to deliver Dimensional funds in an efficient and low-cost way.” With this new launch, advisors with access to Dimensional funds can leverage Betterment’s core technology around integrated, automated portfolio management with Dimensional funds, saving advisors time and greatly improving the experience for their clients. Dimensional funds are available on the Betterment for Advisors platform with no additional per transaction trading fees. “We are constantly looking to help the advisors we work with deliver outstanding client experiences by providing them with solutions and access to value-added services,” Dimensional Co-CEO Dave Butler said. “We believe Betterment for Advisors has a strong track record of delivering innovative tools and technology. We’re excited to work with Betterment to help advisors advance their businesses.” Since its launch, Betterment for Advisors has continuously evolved its platform based on the feedback of advisors. The introduction of Dimensional funds follows a series of improvements and enhancements made to enable advisors to tailor investments for their clients on the Betterment for Advisors platform. These enhancements include improvements to its allocation advice, access to additional portfolio strategies including Flexible Portfolios, SRI Portfolio, BlackRock Target Income Portfolio, Goldman Sachs' Smart Beta Portfolio, and the Vanguard model portfolios. More broadly, other developments include a new robust advisor dashboard experience, access to commodities, a trust account opening feature, an ACATS tool, and much more. About Betterment for Advisors Betterment for Advisors is a leading digital-first wealth management platform. By combining our technology with an advisor's personal touch, we are reimagining what's possible in wealth management. Our automated, tax-efficient portfolio management, paperless back office, and intuitive user experience empower advisors to grow their businesses and build deeper client relationships. Hundreds of firms trust Betterment for Advisors to custody and manage client assets. For more information visit www.betterment.com/advisors. About Dimensional Fund Advisors Dimensional Fund Advisors is a leading global investment firm that has been translating academic research into practical investment solutions since 1981. Guided by a strong belief in markets, they help investors pursue higher expected returns through advanced portfolio design and careful implementation. With clients around the world, Dimensional has 13 offices in nine countries and global assets under management of US$576 billion as of March 31, 2019. Learn more at us.dimensional.com.

Advisor Spotlight: Devon Klumb, RhineVest Feb 20, 2019 12:00:00 AM For our first ever Advisor Spotlight, we welcome Devon Klumb, Financial Planner at RhineVest. For our first ever Advisor Spotlight, we welcome Devon Klumb, Financial Planner at RhineVest, a fee-only financial planning firm based in Cincinnati. Advisor: Devon Klumb, CFP®, BFA™ Firm: RhineVest Bio: Devon Klumb, CFP®, BFA™ is a Financial Planner at RhineVest, a fee-only financial planning firm based in Cincinnati. He started his career as a commodities trader and transitioned to financial advice and planning out of a commitment to help his family, and people like them, develop better financial habits. Firm Bio: RhineVest was created to bring fee-only, fiduciary advice to the people who need it most. We’re the outcasts. We never fit in at the banks, the insurance companies, or other investment firms. We’re the ones who couldn’t ignore our conscience to sell lucrative financial products. All of us believe there’s a better way. That’s why we exist. Our Q&A with Devon Why did you decide to become an advisor? The short answer: It was kind of decided for me. I went to college for Industrial Engineering because I thought that earning an engineering degree would give me the ability to wiggle my way into any job I wanted. All I needed was an interview. Pretty arrogant, right? Totally, but, it worked. I took a job out of school trading commodities in Omaha, NE. No, Warren Buffett had nothing to do with me becoming an advisor (though, I did eat at the same McDonalds as him many times). In fact, I'm not sure that I would have found myself in this position had my wife not begged that we move back to Cincinnati. Around this time, my dad convinced my wife and I to attend Dave Ramsey's 'Financial Peace University' course. The classes were on Saturday mornings at 8am at a local church... for like 8 weeks straight. I still can't believe we did that! Now, I love my parents, but their financial track-record wasn't something you'd aspire to. And wouldn't you know it, my wife and I were awful with our money, too. Only, I had no idea that was the case until we went through this course. The synopsis of our experience: our money was not going to places that reflected our values and an immediate change was necessary. I essentially became obsessed with reversing the trend of poor financial habits in my own family, which led to a deeper obsession with helping others do the same. So, I did the only logical thing a commodities trader with an Engineering degree living in Omaha could do. I quit my job and moved back to Cincinnati to be a financial advisor. As I said, it was kind of decided for me. What are some questions that you wish more clients would ask, and why? "How can we get better at delaying gratification?" This is by far the most obsolete principle in our consumer-centric society. Ironically, this is, in my opinion, the key to building wealth. What do you think is the biggest mistake people make with their money? Spend it on things that don't actually make them happy. Or, save it for things that they don't actually care about. What’s the biggest money mistake you’ve ever made? Oddly enough, the worst financial decision I've ever made resulted in the most rewarding experience I've ever had. At 24, I decided to leave my high-paying commission job and start a fee-only financial planning firm with a friend. This was no bueno for the old savings account, especially as we would soon learn that my wife was pregnant with our son, Jack. BUT, what an incredible journey I've been afforded the opportunity to trek since making that decision. Should I have been more 'financially stable' before making the leap? Yes, absolutely. Would I do it again. Yes, absolutely. What does your current technology stack look like? You name it, we use it. Wealthbox, Zapier, Betterment for Advisors, Slack, Google (Drive, Mail, Calendar), RightCapital. How is technology impacting the way you and your clients interact? The use of technology allows us to serve smaller balance clients more effectively. It's also allowing us to serve far more clients than we ever thought possible. Most importantly, technology is allowing us to spend more time with clients on issues that can't be solved with algorithms and less time pushing paperwork. Which do you prefer: Billions, Wolf of Wall Street, or The Big Short? The Big Short If you won the lottery, what would you do with the money? Keep enough to cover education costs for our kids and give the rest away. Though, if we're being totally honest, I'd probably use up a small chunk trying to find some way to play a round at Augusta National... just one. What do you think is the biggest opportunity for advisors today? I think the biggest opportunity today is authenticity. Investors have been burned over the years, badly. They are less inclined than previous generations to trust you just because you have some letters after your name. The BS detector is strong with this one (Yoda voice). If you're here for the right reasons, your clients and prospects can tell. If you’re not, they will notice soon enough. Technical advice is becoming a commodity. Candor and behavioral accountability are among the greatest opportunities we have to impact the lives of our clients. If you could only give one piece of financial advice, what would it be? "Let’s admit it, we all got two wolves in us, a good one and a bad one, you know what I’m talking about — and they BOTH wanna eat… We just gotta feed that good wolf a little more than the other one." - Matthew McConaughey We all make mistakes. What separates those who succeed (financially or otherwise) from those who ultimately fail is the ability to acknowledge their OWN faults and make adjustments moving forward. The definition of insanity is doing the same thing over and over and expecting different results. If you struggle to break those habits, find someone who can help.

Webinar Recording: Closing the Behavior Gap Dec 11, 2018 12:00:00 AM Join Betterment Head of Behavioral Finance & Investing Dan Egan for a webinar that covers the behavior gap and how to help improve investor management.  

4 Signs That It’s Time to Adopt Investment Management Technology Nov 8, 2018 12:00:00 AM Today’s advisor technology offerings have the power to boost a firm’s efficiency, both in the front office and the back office. Financial services technologies are “hot”: Adoption of digital tools that simplify, support, and/or streamline money management has doubled just since 2015. But your advisory firm is probably doing okay without the latest technology... right? If your firm is hesitant (or just slow) to launch tools designed to increase efficiency, consider that the most successful advisors use more technology — and spend more on technology — to drive growth and scale. They understand its value in creating greater efficiencies and in creating a better overall client experience. Here are four signs your firm is ready to take advantage of technologies that can help improve how you do business: You spend less than half your time nurturing clients and prospects In this case, you may be among the majority of today’s financial advisors who wish they could spend more time with clients. Many advisors spend the majority of their time managing portfolios, doing administrative work, and other low-value activities. If that’s you, it may be time to find a solution that frees you up to spend your time building your business. Technology can take on everything from performance reporting and recordkeeping to portfolio management, transactions and trades, aggregation, account reconciliation, and more. You’re not acquiring assets fast enough It’s been shown that advisors who are enabled to spend more time with clients generally fare better than those who can’t: they have an annual growth rate higher than that of advisors whose time is focused on investment management. They also have more clients, greater annual asset growth rates, and greater annual revenue growth. In other words, technology makes it possible to remove repetitive, low-value work from advisors’ desks and give them more time to spend where it makes the biggest impact — with clients. If your business isn’t growing the way you’d like it to, it could be time to bring technology into the mix. You’re as bogged down with paper as you were five years ago Technologies that organize and store documents are making old-school systems — and the potentially costly errors that come with them — things of the past. Today’s technology makes it possible to optimize most processes within a firm, automating everything from workflows and reporting to compliance, client correspondence and statements, online transactions, account management, due diligence, trade confirmations, and more. Even the account opening process can be completely paperless. The impact of technology in optimizing a firm is significant: automation can help firms save up to 60% on time-to-resolution of repetitive tasks, with the added benefit of accuracy and reduced costs. Your HNW clients are asking for better digital capabilities Many high net worth clients, especially those under 40, are asking for (or, rather, demanding) digital capabilities to support their portfolio and relationship management needs. Finding a technology that offers an intuitive, convenient platform for them to engage with advisors should be evaluated as a priority for any firm eager to serve clients and ensure their long-term loyalty. Investors of all ages may want more technology applied to investing and, if used effectively, might actually increase clients’ trust in an advisor or firm.   Today’s advisor technology offerings have the power to boost a firm’s efficiency, both in the front office and the back office, and can relieve advisors and staff of activities that don’t directly contribute to growth. Taking a critical look at the amount of time being spent on low-value tasks and on your current growth trajectory could reveal a number of opportunities for improvement that can be solved by implementing the right digital solutions.

5 Ways to Make Small Clients More Profitable Jul 24, 2018 12:00:00 AM As a financial advisor evaluating the future of your firm, it's time to think more expansively on the potential of small clients and accommodated accounts. This article was originally published on WealthManagement.com. If you’re like most advisors, you focus most of your time and energy on your “A” and “B” clients—those with large investable assets and who represent the “bread and butter” of your business. The smaller accounts (“C”s) are often viewed as requiring too much time relative to the revenue they generate—time that could be better spent developing new A and B clients and increasing their assets under management (AUM). Rather than ignore these clients (or cut ties with them altogether), it’s time to think more expansively about the potential of smaller accounts. Much of their value to you as an advisor is the high potential of these often younger clients to grow into traditional clients. Furthermore, working to build long-term relationships with the next generation of wealth helps “future proof” your firm. Allowing junior advisors at your firm to manage these small clients benefits your firm, too, as it gives them important client-facing experience. Remember, too, that small clients may be your biggest, most loyal fans: they trust you, are often a source of referrals, and appreciate that they’ve been well-served even though they’re not a great source of revenue (yet!), so efforts to nurture them can be very productive. Here are a few steps you can take today to make them more profitable: 1. Be selective about the small clients you advise. Look beyond a client’s investable assets to understand their underlying investing philosophy and their mindset regarding saving. With time, does the client have the potential to become more like your traditional clients? If they’re a DIYer and not likely to accept a broader spectrum of guidance, or if they’re highly sensitive to fees, it’s unlikely that the client will be profitable (or even advisable) in the long term. Similarly, if their occupation and career path do not suggest upward mobility and increasing assets, they may not be a good fit. The best investors are those who understand, value and are comfortable taking your guidance, and who are willing and able to pay for it. Tip: Don’t summarily reject DIYers if you can determine that this person is someone who’s realized they can no longer manage their investments well on their own. These can be great clients who ask good questions, understand the investment process, and who aren’t reactionary when the market dips. 2. Consider outsourcing your investment management. A study by Cerulli (Cerulli Associates, US Advisor Metrics, 2016) found advisors spend nearly 20% of their time on investment management (half of that on portfolio-related tasks like research and due diligence). Advisors who outsource spend 12% of their time meeting prospects and 37% meeting existing clients, compared with 6% and 20%, respectively, for advisors doing their own investment management. More time with prospects and clients has a huge payback: outsourcing investment management, on average, added an additional $14.5 million to advisors’ assets annually – twice the amount of those who managed investments in-house. Tip: While clients might initially be resistant when you explain you’re relying on outsourced expertise for managing their portfolios, positioning it as a strategic move that allows you to serve them better will help allay any fears they may have. 3. Invest in technology to support administrative needs. The right technology can streamline operations and reduce overhead, and, more importantly, make it possible for advisors to expand their reach, targeting more and different types of clients. There are a number of tools available, including those that allow you to hold virtual meetings, eliminating travel expenses and making meetings more convenient for you and the client. Virtual meeting tools also minimize the effects of a client moving out of your area. Other tools include visualization software like Tableau that improve client interactions by enabling you to present powerful visual analytics, and calendaring systems that take the hassle of scheduling routine appointments off your plate. Not only do these tools relieve you of many of the time-consuming (and relatively low-value) tasks, they address millennials in the way this demographic prefers and expects. According to a Deloitte report, millennials are digital natives who embrace technology and consider online platforms an important aspect of financial advice. In fact, 57% percent even say they’d change their banking relationship for a better technology platform solution. Tip: When implementing new technologies, start with existing clients first – and don’t overlook older clients; they may appreciate tools that make engagement with you easier and more productive. Once you have evidence that the technology adds value, introduce it as a valuable part of your service offering. 4. Leverage a virtual assistant (VA) to do routine tasks. By turning over low-value work to what’s essentially a freelancer (or, in some cases, automated intelligence “bots”), you’re able to spend your time on higher-leverage activities. Websites like upwork.com connect you with virtual or AI assistants who can schedule appointments and referral dinners, find contact information for prospects, send thank you notes and similar work. Unlike salaried or hourly employees, you pay only for the actual time a VA spends working, making him or her a more flexible resource whose usage can easily be scaled depending on need. Tip: To work effectively with a virtual assistant, you must view him or her as another employee. Set your VA up to succeed by clearly outlining processes and providing specific instructions for each task. Send a test project to gauge the quality, expediency and overall cost-effectiveness before you commit. 5. Rethink pricing. Today, many advisors are still pricing their services based on assets under management, typically at 1%. The failure of this method is that it keeps clients with less money from investing – or, if they do invest, keeps the advisor from being profitable. And, when the market declines, fees decline, yet advisors are offering the same level of service to their clients, regardless of the market environment Though asset-based fees remain the most common fee structure, according to Cerulli the number of advisors charging fixed fees for financial planning continues to rise, increasing from 33% in 2013 to nearly 50% in 2017. Interestingly, far more millennial advisors are charging fixed fees (62%), suggesting that as younger generations become increasingly willing to pay for financial advice, younger advisors are aligning with the trend by implementing this model. It could also be a reflection of that generation’s familiarity with and use of subscription-based services, like Netflix and Amazon Prime. A close look at how much time you’re spending on small accounts might reveal an opportunity to structure your pricing differently. Conduct a simple time study: assign a dollar value (e.g., $200) to the hours you’re spending and determine what margin you want. If the results show that you’re not making the margin, you may want to consider implementing a flat-fee based structure to achieve this. There are a number of structures that could work, like monthly/quarterly/annual retainer, project-based and others. The structures vary and depend on many factors, including the advisor’s client base, what they’re willing to pay, and the goals of the advisor, both financially and in terms of who he or she serves. Tip: Do some legacy client testing on implementing such an idea, and position it as a test to gauge a reaction before rolling it out more broadly. You may also decide to set up two service level offerings — it doesn’t have to be a one-size fits all. If you’re not working to build long-term relationships with your small clients today, you risk losing out on what could be very profitable relationships in the future. The pervasive perspective that these clients “aren’t worth the effort” is short-sighted. By being selective in choosing clients, leveraging technology to optimize interactions, outsourcing tasks that don’t require your skills, and pricing your services for profit, you increase the likelihood that these once-small clients will develop into some of your most profitable.

Empathizing with Your Prospects to Secure the Next Meeting Jul 6, 2018 12:00:00 AM A cookie-cutter approach to prospective client meetings won’t cut it. Advisors, learn to pay attention to your prospect’s mindset with these meeting tips. What are today’s investors looking for from their financial advisors? Guidance, certainly, but the nature of that guidance has changed over the years; more importantly, it’s very different depending on the investor’s lifecycle stage. Whether your prospects are in the accumulation phase, the preservation phase, or the distribution phase, they all seek the practical guidance of experts who can help them make decisions that will lead them to their investment goals. By better understanding who your prospects are and what needs, goals, fears, and perspectives they have, you can engage more productively and build mutually beneficial relationships with them. Accumulation Phase People in this phase are often relatively new to the workforce and beginning to consider positioning themselves appropriately for the future. A 2018 Forbes article reveals that millennials are saving at an impressive rate: 71% are saving for retirement – with 39% being defined as “super savers” who save more than 10% of their salaries. They’re are on track to replace 78% of their estimated retirement expenses, according to a 2018 Fidelity survey. About one in six have already saved $100,000 or more, according to Bank of America’s Better Money Habits survey. But while a growing number of people in this phase are saving, they seem reluctant to invest: 66% of people aged 18 to 29 (and 65% of those 30 to 39) say investing in the stock market is scary or intimidating, compared with 58% of those aged 40 to 54 and 57% of those 55 and older, according to an Ally Financial survey. Millennials held 25% of their investments in cash, compared to 19% of investors overall, according to a Charles Schwab & Co. study of client data. 20% of millennials say their retirement money is invested mostly in bonds, money market funds, cash or other stable investments, compared with 15% each for older generations, according to Transamerica. This contrast isn’t entirely unexpected. Those in the accumulation stage understand the need to save but, having witnessed the Great Recession of 2008-2009, are confused where to start. Framing the conversation A Deloitte study found that while 72% of millennials describe themselves as self-directed with control over their wealth, they don’t have the level of financial knowledge older generations do – yet they know when they need help and will reach out to get it. In fact, 84% seek financial advice to help them make financial decisions and reach their goals. Knowing there’s a knowledge gap, begin conversations not by talking about investments, but by covering the basics: Does the prospect understand the value of being enrolled in his or her employer’s 401(k) and setting up an IRA? Has he or she established a budget, considered an emergency fund or taken steps to reduce debt? Discussing some of this “low hanging fruit” gives you the opportunity to demonstrate your financial coaching value and provide the most appropriate solutions. Because Millennials have likely not experienced meaningful returns from standard checking or savings accounts, they may underestimate the potential of moving assets to online savings accounts, which are typically more responsive to rising interest rates than traditional bank checking/savings accounts. The value of these accounts have the potential to rise with interest rates, unlike checking/savings accounts that don't automatically increase and, as a result, lose money to inflation. In general, millennials are looking for experiences and connections – in their home lives, work lives, social media...everything. When meeting with a prospect, ditch the canned Powerpoint presentation. Instead, make it a two-sided conversation in which you ask questions and listen closely to their answers – then use those answers to formulate the most appropriate guidance. Remember these are “digital natives” and early adopters of technology who grew up with, rely on and expect technology to simplify their lives. Promote interactive online capabilities that allow them to manage their investments. Preservation Phase During the preservation phase – the period during the middle of investors’ lives – people are focused on both growing and protecting their investments. Their kids, if they have any, may be in college, retirement is a ways away (but in sight), and most large purchases (second home, college for kids, etc.) have been made. Their comfortable financial situations may lead such clients to take a hands-off approach to their finances, or they may consider taking money out of their retirement savings to make additional purchases. They were likely impacted financially by the recession and, while the economy today is healthy, they fear the loss they’d experience should markets turn down again. Having gone through the high interest rates of the 1980s and the downturn that began in 2008, this age group fears inflation, loss, and outliving their money (6 in 10 fear outliving their money more than they fear death itself). Their knee-jerk reaction to even slight upticks in interest rates could cause them to pull their investments. Framing the conversation According to Insured Retirement Institute, 42% of Baby Boomers have no retirement savings and among those who have some retirement savings, 38% have saved less than $100,000. Thus, approximately half of Baby Boomer retirees are, or will be, living off of their Social Security benefits. It’s critical advisors help educate these prospects about the importance of increasing contributions to their portfolios to improve retirement funding for the remainder of their lives. One reason Baby Boomers lack retirement funds could be attributed to the recession of 2008-2009. This scared many right out of the markets – some of whom missed the subsequent rebound. That fear remains and could present a roadblock to advisors. Technology that’s simple to use and straightforward will likely be welcomed by this group, as it gives them some amount of control over their finances. Balance its usefulness with person-to-person exchanges in which you as an advisor provide insights and guidance. Distribution Phase Investors nearing retirement generally become more averse to risk, and those actually in retirement are most concerned with depleting their nest eggs too soon. Expected life spans are increasing (today, U.S. 65-year-old men can expect to live to age 83 and women to almost age 86, according to the National Center for Health Statistics, whereas in 1970, those numbers were 78 years old and 82 years old respectively), and if they’ve not planned appropriately, retirees’ investments might not cover their living and care expenses – many in this group may need to rely on investment withdrawals for 30 years or more. Framing the conversation As clients enter this phase, managing risk is as important as ever. While some clients may be focused on preservation and generating income, others may have different needs and objectives. This phase of the investor lifecycle can be filled with joy and excitement for the adventure ahead, but at the same time can be a difficult transition. Many of your clients have spent the past several decades saving for this moment. You’ve both planned for this moment, and you can encourage spending with safe withdrawal rates. Technology that allows this group to monitor their investments must be easy to use, and should be complemented and supported by face-to-face discussions. These interactions allow the client to get answers to their questions, help build trust, and foster a sense of security. Listen to Learn No matter which type of investor you’re talking with, your first goal should be to listen and learn. Listen to their fears and understand their goals – and only then talk about solutions. You’ll enhance your credibility when you show that you’re most interested in providing guidance that’s in their best interests. If they do have fears, validate those fears – don’t dismiss them. Often, the best way to mitigate fears is with information. Provide resources and insights that help explain issues and pave a practical way forward. Reach out on a regular basis (the cadence of which will depend on the client). In both good times and not-so-good, be there to offer guidance. The value of interaction cannot be overstated.

The Betterment Portfolio Strategy: What Every Advisor Should Know Nov 6, 2017 12:00:00 AM Betterment’s core portfolio strategy is continually improved. One of the great strengths of Betterment for Advisors is how you, our advisors, are so naturally aligned to Betterment’s investing approach. More often than not, we find that advisors join Betterment for Advisors not just for the digital tools we offer, but because they believe in our investment philosophy: that investing advice is based on real-world evidence and formulated by unbiased decision-making. In this article, we’ll provide an overview of how we continuously improve the Betterment Portfolio Strategy in line with our philosophy of ongoing research. Just as we’ve introduced new, improved portfolio strategies to the platform over time, we also continue to analyze and improve Betterment’s core portfolio strategy. Whenever our Investment Committee decides on modifications to our portfolio strategies, we notify you prior to the start of trading execution. In order to ensure we achieve best execution of trades, the lead time and level of detail can vary based on the type of change. How We Develop the Betterment Portfolio Strategy Planning in Diversification At its foundation, Betterment’s portfolio strategy is based on Modern Portfolio Theory. Betterment selects asset classes that represent the total investable global market—excluding commodities and private equity, which have unusually high costs in products accessible for retail investors, e.g., ETFs. In traditional total market portfolio strategies, the “total market” was assumed to be the U.S., so only U.S. stocks and bonds were included. However, since 2011, Betterment has included equities from both developed and emerging markets. International developed market stocks, in particular, have been shown to outperform bonds on a risk-adjusted basis. Emerging market stocks have higher volatility but also higher expected returns. The portfolio strategy has held a diverse array of bonds since 2013, when we added granularity to the bond basket by including ultra short-term treasury bonds, inflation protected bonds, investment-grade corporate bonds, international developed market bonds, and emerging market bonds. In 2014, we improved the tax profile of the portfolio strategy by including municipal bonds in taxable accounts. Increasing the Value of Portfolios through Optimization The involved process above encapsulates the Betterment Portfolio Strategy’s basic asset allocation, which represent the total market. We then optimize the portfolio strategy by mathematically maximizing each portfolios’ forward-looking return given the correlated risk. In other words, we try to develop portfolio combinations with realistic alignment with the efficient frontier. While there are plenty of practical constraints involved with portfolio optimization, our process results in 101 different portfolios within the strategy. In 2017, we updated our portfolio optimization techniques and updated the world market capitalization data which is a key input. This results in improved diversification in each individualized portfolio and better expression of portfolio tilts toward value and small capitalization. The main objective of these changes are higher expected returns. The tilts of the Betterment Portfolio Strategy—toward value and small capitalization—arise of the landmark research of Fama-French, which demonstrate how the returns of equity securities are driven by three factors: market, value, and size. The underlying structure of the Betterment Portfolio Strategy ensures the market factor is incorporated, but to gain higher returns from value and size, we tilt the portfolios, using a framework known as Black Litterman. The final weights of each portfolio are also influenced by constraints imposed by the liquidity of the underlying fund and are controlled by our level of confidence in the views for each factor. We’ll continue to improve the Betterment Portfolio Strategy Our investment philosophy is to use rules-based decision-making whenever we see evidence that Betterment for Advisors’ available investment strategies can be improved. We’re committed to always improving the strategies you offer your clients. Over time, we continue to stay up on new portfolio construction research and carry out our own research. You and your clients will continue to benefit from this investment as we roll out future improvements to our strategies. With any change to a portfolio strategy, we’ll notify you as we implement the changes. For more information about the Betterment Portfolio Strategy, check out our full paper here.

Introducing Income Portfolios from BlackRock Sep 13, 2017 12:00:00 AM Partnering with BlackRock, you and your clients can access an income portfolio strategy that delivers cash income while preserving capital. Betterment for Advisors has selected an income portfolio strategy from BlackRock to help advisors offer their clients the opportunity to generate cash income while preserving capital. Nearly a decade of historically low interest rates has forced advisors to take extraordinary measures to help clients reach their investing goals. Meanwhile, one of the longest stock market rallies in history leaves some investors fearing that we’re near a market top, making them too nervous to invest at all. To help you better serve your clients with a preference for a low risk investment strategy, we’re adding a new income portfolio strategy sourced from BlackRock to add to your arsenal of portfolio strategy options. If you’re familiar with BlackRock’s income ETFs, you know that the income portfolio strategy is a diversified 100% bond basket that seeks to provide a steady stream of cash income while minimizing potential loss of capital or stock market volatility. In our portfolio strategy arrangement with BlackRock, we offer four risk levels to choose from, each with different expected levels of income yield. This portfolio strategy will be available to Betterment’s direct retail customers in addition to Betterment for Advisors’ clients. An income portfolio strategy is part of Betterment’s objective for offering customers’ greater personalization to meet their needs and preferences. We see Betterment for Advisors as a critical part of this focus on personalization. You understand your clients’ inclinations and motivations, their beliefs and personal preferences. In order for some investors to use this new income portfolio strategy successfully, they may need guidance from an advisor who understands their situation, and in many cases, we expect Betterment for Advisors to play that role. We are firm in our belief that offering personalized portfolio strategies like this one is a way to grow your business as well as Betterment’s business. Keep reading to explore two scenarios we see this portfolio being potentially useful for your clients. Generating Retirement Income As advisors know well, many retirees value stable income and principal preservation during the later stages of their lives. They also tend to hold most of their wealth in tax-advantaged accounts such as IRAs and 401(k)s. The income portfolio strategy is one way to meet retirees’ preferences. Like with any account you manage through Betterment for Advisors, you can invest a retirees’ entire savings into an income portfolio, or you can use a “bucket approach,” investing a portion of the savings to prioritize income generation, while leaving the rest in stocks for long-term growth. The chart below shows the expected income yields for each of the four risk levels in the income portfolio strategy and how those levels compare to Betterment’s core portfolio strategy with similar levels of risk. Expected Income Yields Betterment Portfolios vs. BlackRock Target Income Portfolios Disclosure: This chart compares the four BlackRock income portfolios available to Betterment against four allocations of Betterment’s core portfolio strategy with similar relative risk levels. All four of the comparison allocations include both stocks and bonds, while BlackRock’s income portfolios are comprised completely of bonds. The Betterment Portfolio’s income yield is comprised of dividends from equities and coupon income from the underlying bonds in the fixed income ETF. The BlackRock Target Income Portfolios’ income yield is comprised solely of coupon income from the underlying bonds in the fixed income ETF. The expected income yields are expressed in annual terms and are based on the historical dividend yields over the past 1-year period ending August 30, 2017 for the individual funds in each of the portfolios, as reported by Yahoo Finance. These expected yields correspond to the time period referenced above for the funds in the relevant portfolios and will change over time as economic and market conditions change. When an economy is expanding (contracting), for example, interest rates will tend to rise (fall) and credit markets will tend to strengthen (weaken) as companies become less (more) vulnerable to defaulting on their debt. These figures do not include the Betterment fee or fund level expenses. The Betterment stock allocations shown here correspond to the Betterment portfolios that have expected volatilities that are closest to the expected volatilities of the four BlackRock income portfolios. The stock-to-bond allocations used for Betterment are: 9% stock to 91% bond, 22% stock to 78% bond, 37% stock to 63% bond and 40% stock to 60% bond. Expected volatilities are estimated based on the historical total returns data for the relevant funds over the past 10 years using the methods of Ledoit and Wolf (2003). This chart is hypothetical and used to illustrate the points discussed in this article. Past performance is not indicative of future results and does not guarantee that any particular result will be achieved. As you can see in the chart above, Betterment’s income portfolios have a higher expected income yield than allocations in Betterment’s core portfolio strategy with comparable risk levels. For example, if a client had a $1,000,000 retirement portfolio, you could invest it in the 40% stock Betterment Portfolio, and the income portion of your client's return would be about $24,000 per year in gross investment income. (Note that the income portion composes only part of the total potential return generated by a Betterment portfolio allocation.) However, if the client invested in the income portfolio strategy with the same level of expected risk, your client could potentially receive an expected $43,000 per year in investment income. It’s also important to note that any income-focused strategy will be inherently less tax-efficient than a strategy that balances income and growth because bond interest is taxed at a higher rate than long-term capital gains. Low Risk Investment Alternative In addition to the retirement use case, we believe the income portfolio strategy could also be useful for clients who show considerable anxiety about the stock market. If your client strongly prefers not to invest in stocks, the income portfolio strategy can be an effective, personalized approach. It’s one way to make sure their money doesn’t sit idly in cash without taking on more risk than they are comfortable with. According to Gallup, 48% of Americans have no money invested in the stock market. And with the best savings accounts paying only slightly above 1% in interest, choosing bonds over cash products can be a nice middle ground that better balances risk and return. The chart below shows the risk (as measured by standard deviation) for various types of bonds over the past 15 years, compared to stocks in large US companies. Comparing Risk The chart shows the risk (as measured by standard deviation) for various types of bonds over the past 15 years, compared to stocks in large U.S. companies. Click respective categories for data on short-term bonds, intermediate-term bonds, long-term bonds, high-yield bonds and large cap stocks. Short-term bonds were almost six times less risky than US large company stocks. Even high-yield bonds, the most risky type of bonds, were almost two times less risky than stocks. It’s worth noting that investing in bonds is generally more costly than investing in stocks, so your clients will pay a higher expense ratio on income portfolio funds compared to funds invested in the core Betterment portfolio. The Betterment portfolio strategy, which contains a mix of stocks and bonds, has annual ETF fees of only 0.07% - 0.16%, depending on the portfolio’s allocation. The income portfolio strategy, while still far lower cost than the industry average, has slightly higher ETF fees of 0.21% - 0.38%, depending on the portfolio’s target income level. Different Income Targets to Meet Clients’ Needs As with the other portfolio strategies we’ve made available to Betterment for Advisors, all of our portfolio strategies can adjust to your clients’ risk tolerance. The income portfolio strategy is no different. The income portfolio strategy includes four different risk levels to choose from, each with different targeted levels of income. The income portfolio strategy is actively managed, so the exact allocations of the underlying bonds is subject to change approximately once per quarter (and up to 6 times per year depending on market volatility). With each rebalance, we allocate to the asset classes that are designed to help your clients maximize their income return while limiting overall volatility. The income portfolio increases projected income by taking on more risk in two main ways: Investing in longer-term bonds: Long-term bonds are more sensitive to changes in interest rates, and thus carry more risk. To compensate for this risk, long-term bonds pay more interest. Investing in lower-quality bonds: When you lend money from less-established companies, the chances of the company defaulting and not paying you back are higher. To compensate for this risk, low quality bonds pay more interest. With this additional strategy to offer your clients, you can personalize your financial planning to match a client’s specific goals, risk tolerances, and viewpoints. Whether you have a retiree who wants to focus on income rather than growth or a nervous investor who would feel better with bonds rather than stocks, we hope this new portfolio offering will help every advisor further personalize their services and offer investors more added value. You can explore the new income portfolio strategy by BlackRock alongside the other portfolio strategies within your advisor portal. Please contact our team with in-depth questions about this new offering and any other features of Betterment for Advisors.

Introducing our Socially Responsible Investing (SRI) Portfolio Jul 19, 2017 12:00:00 AM Betterment is moving the category forward for socially responsible investors by offering an SRI portfolio that is fully diversified and keeps costs low. It makes sense that some clients you advise try to align their investments with the values and social ideals that shape their world view. The way they live, the career they choose, and the people they care about align with their personal values; shouldn't their investments do the same? Today, we’re proud to introduce Betterment’s first socially responsible investing (SRI) portfolio. This portfolio enables you to align your sound financial advice to your clients’ personal values. To learn more about how and why we’ve built the Betterment SRI portfolio, read on to the following sections. Our full approach to our SRI portfolio can be found in the technical whitepaper here. Why Is Betterment Developing an SRI Portfolio? Betterment is dedicated to offering a personalized experience for you and your clients. We decided to develop an SRI portfolio because, currently, there are three major ways that most investment managers attempt to execute an SRI strategy, and none meets an investor’s full needs: Some advisors offer SRI mutual funds, which tend to have higher fees compared to performance and often lose out on important tax and cost optimization opportunities. There are also several SRI-specific investment managers whose SRI portfolios may fulfill investors’ desire for SRI screening but do not always provide proper diversification against risk. Still other advisors pick their own basket of SRI investments—a challenging and time-intensive approach. We set out to do better for SRI investors. As advisors, you should not have to choose between offering an SRI portfolio and offering a cost-controlled, fully-diversified investment strategy with tax optimization. The Betterment SRI portfolio is designed to achieve this balance. It allows you to help your socially conscious clients express a preference for SRI in their portfolios without sacrificing critical advice principles that protect their returns the most: proper diversification, tax optimization, and cost control. What Is Betterment’s Approach to SRI? If you’ve been watching SRI products evolve over the past two decades, you probably know that the majority of the market consists of actively-managed mutual funds with high fees. Only recently have lower cost options, like SRI-oriented ETFs, emerged. As we developed the SRI Portfolio for Betterment for Advisors, we analyzed all low-cost SRI funds available, searching for products that could replace components of our core strategy without disrupting the diversification or cost of the overall portfolio. We found that the only asset class (i.e., portfolio component) that we could confidently replace with an SRI alternative today is the U.S. large-capitalization stock allocation. Other asset classes, such as value, small-cap, and international stocks and bonds are not replaced with an SRI alternative in our portfolio either because an acceptable alternative doesn’t yet exist or because the respective fund’s fees or liquidity make for a prohibitively high cost to your clients. While just one asset class is affected in our SRI portfolio compared to our core portfolio, that change has an outsized impact on the social responsibility of the portfolio we’ve developed. For one, many investors are most concerned about the social responsibility of the largest U.S. companies in their portfolios, which often set standards for acceptable corporate behavior that other companies try to emulate. In our SRI portfolio, companies like Exxon, Chevron, Philip Morris, Wells Fargo, Walmart, and Pfizer may be excluded because they are deemed not to meet social responsibility criteria. Other companies deemed to have strong social responsibility practices, such as Microsoft, Google, Proctor & Gamble, Merck, CocaCola, Intel, Cisco, Disney, and IBM may make up a larger portion of the SRI portfolio than they do for Betterment’s core portfolio. In addition, a major reason why there are no acceptable SRI alternatives for other asset classes is that the demand for these products has not been sufficient to encourage fund managers to create them. If your clients are enthusiastic about electing the SRI portfolio, they’ll be signaling to the investing world that there is a demand for high quality SRI investment options and may help to encourage the development of well-diversified, low-cost SRI funds in a wider variety of asset classes. If you’re interested in a more quantitative understanding of how the Betterment SRI portfolio compares to our core portfolio in terms of social responsibility, you can review the SRI ratings published by MSCI (see below). MSCI’s ratings for the SRI funds used in Betterment’s SRI portfolio are higher than the ratings for the funds used in Betterment’s core portfolio. For more information on what the numbers mean, click here for our full whitepaper. MSCI ESG Quality Scores: US Large Cap Equity Holdings in the Betterment Portfolio vs. ETF tickers in the Betterment SRI Portfolio Betterment Portfolio - US Large Cap DSI KLD 5.039 6.34 8.01 Let’s Make Investing More Socially Responsible Currently, most accessible SRI approaches make investors choose between a well diversified, low-cost portfolio and an inadequately diversified and/or higher cost portfolio comprised of SRI funds. Diversification and controlled costs are investing fundamentals that all investors—SRI or not—deserve. They’re principles that live at the heart of fiduciary advice. The only reason other SRI solutions settle for higher costs and less diversification is because the industry isn’t challenged to offer something better. With your expertise and partnership, we believe we can create a future that does not ask SRI investors to choose. Today, our SRI portfolio reflects a 42% improvement to social responsibility scores for our U.S. large-cap holdings when compared to our core portfolio. In the future, we will improve our SRI portfolio even further, iterating and adding new SRI funds that satisfy our cost and diversification requirements as they become available. You and your clients can get started with our approach to SRI today, and join us as we work to expand our SRI approach together.

How Advisors Should Choose a Digital Partner Jul 10, 2017 12:00:00 AM Now more than ever, advisors rely on technology to serve their clients. Choosing the right digital partner is a challenge, but it shouldn’t be a headache. Follow our four-step evaluation process to help effectively vet your digital solutions. If choosing a technology platform for your advisory feels overwhelming, you’re not alone. According to the annual Brother Survey on small business technology (500 employees and less), 64% of business owners feel overwhelmed when it comes to shopping for technology solutions. And yet, technology has become a vital part of how every advisor does business. You use technology. Whether you're focused on improving client relationship management, back-office operations, client acquisition, tax optimization, or any other part of being an investment advisor, choosing the right technology is an important part of scaling how you operate. So, while vetting digital platforms may not be your favorite use of time, it’s at least important enough that you develop the confidence to choose a technology platform that will serve you well. In this guide, we aim to provide a step-by-step process of how to get from having a technology need to choosing a technology solution with as little pain and as much inspiration as possible. At Betterment, we are constantly vetting technology platforms and partnerships in the financial space. Think of this article as a collection of that wisdom—the best ideas from across the business as users and builders of technology. In the At Betterment, we are constantly vetting technology platforms and partnerships in the financial space. Think of this article as a collection of that wisdom—the best ideas from across the business as users and builders of technology. In the follow sections, we’ll explore: What you should consider before exploring for digital solutions How to settle on your business’ key priorities and objectives for a tech initiative How to sort through various digital tools available Why any tool should be measured by customer experience How to measure your digital partnership’s success in the future Advisor Prep Work Before Searching for a Digital Partner Before getting started searching for your technology needs, it’s important to get a lay of the land. One of the reasons we started Betterment for Advisors was that we saw a gap in the variety of tech available to advisors today. In particular, we felt that there was no digital platform that could simplify the rote, complicated tasks associated with custody and tax optimization while at the same time giving clients a top-notch digital experience. What immediately became clear as we developed our platform was that there are many providers selling a set of products that profess to help advisors “manage it all,” when in fact, they’ve only conquered a slice of what advisors could use to grow their business. In the advisory space, there is no all-in-one solution for every business need: custody, back-office management, tax efficiency tools, client portal, CRM, fee management, and marketing. Executing all of this well would be a lot for any one company. Right now, the landscape is limited, and while solutions like Betterment are working at growing the suite of features we offer, no one provider can offer everything. Knowing this can help you refine your search for a digital partner. If you can’t solve for all your needs at once, then that helps you make smarter choices about which needs to prioritize. For instance, is your biggest pain point today helping customers with fewer assets manage their money without occupying too much time, or does client acquisition and marketing keep you up at night? Do you need a great online client experience, or is your challenge in revenue management and fees? These questions are the key thoughts to discuss with your team before starting a search. From there, you’ll want to prioritize all these challenges and create key objectives for what your technology partnerships should achieve. That’s our first step. 1. Identify your priorities and key objectives. When you start by asking yourself which challenges have the most impact on your business, you begin to develop a framework for your technology priorities. From our perspective, the best way to prioritize the technology features you need is to write out your key objectives for meeting current challenges. Define what outcomes you want to achieve by adding in a digital platform. Once you have a well-articulated list, you can put them in rank order, prioritizing from top to bottom. This process forces you to assess which challenges will have the biggest business impact, setting up a list of criteria, against which you can evaluate various solutions. 2. Differentiate overall business technology needs from advisor-specific needs. Once you’ve identified your list of priorities, we recommend taking a step back to evaluate the range of tools at your disposal. In surveying the tools used most by advisors, we’ve found that there’s a fairly prominent divide in the products offered today. In some cases, advisors use general business administration products—CRM, marketing automation, accounting software, etc. In other cases, advisors use a range of solutions specifically designed for financial advisors: products and services for custodianship, portfolio management, client access, and handling transactions. There are also platforms that combine functionalities—for instance, one advisory tool might offer a core service for servicing client accounts while featuring some CRM capabilities. It’s important to vet whether these multi-functional platforms constitute a robust, fully-baked set of tools or whether each tool included is a limited version of what you could buy as a standalone product. For core financial functions, such as portfolio management, you likely want the expertise of a tool built specifically for your industry. However, for other business functions, such as marketing or website management, it can be to your advantage to vet advisor-specific tools against broader, mass-market platforms. 3. Solve for your clients first. Too many advisors try to solve their business needs at the expense of their clients’ experience. Whether you're considering a subscription service, a one-off software purchase, or a business partnership (such as Betterment for Advisors), always put your ability to service clients first. If you consider the state of most small-to-medium advisors, most advisors do not have the large marketing or customer service teams characteristic of their larger competitors. And yet, through digital solutions, advisors can often greatly enhance their client service capabilities. The key is to prioritize client experience as a major criterion for evaluating digital solutions. For instance, when choosing between a robust customer portal and a best-in-class CRM tool, it might be worthwhile to weight the direct impact on customers more heavily than solving internal process needs. In general, elements of customer experience like a digital log-in are becoming increasingly important to customers. Advisory consultant Michael Kitces asks the challenging question of whether client portals should be built around client vaults, planning software, or portfolio reporting—what he calls the “big three” advisor software categories. Our approach to answering this question begins with centering client experience as the main criterium for any of the tools you consider for your advisory business. If you solve for your clients’ needs first, you’re likely to find that other issues, such as the need for additional client acquisition tools, become less pertinent over time. 4. Buy for future scale and business needs As you assess digital partnerships, it’s important to make your investment in a solution that promises scale and adaptability as the future changes. Consider what the digital partner offers in terms of ongoing development or integration with other platforms. Also, evaluate how your business needs will change as you grow. For advisors especially, a digital partnership should be understood as a five-year (or more) arrangement; the solution should be adaptable for all the change that could occur in a long-term period. For instance, if you double the number of advisors on staff, how effective will the platform continue to be? If new investment vehicles enter the market, how will the platform handle the change? While it’s important to use appropriate software for the scale and shape of your business, it’s important to have enough flexibility to grow. Businesses face enough challenges when taking on new client loads and growing rapidly; you don’t want your digital partnership to hold you back. What are your options as a financial advisor today? The four points above should help you carefully evaluate and select the right digital partners and software solutions for your advisory business. Start by surveying the field, understanding what the options are like and identifying your key priorities and objectives. Then, differentiate the business needs you’re trying to solve for. The key to any digital partner search is keeping your focus on client service. And if you buy for future scale and business adaptability, you’ll likely make a great choice. To get started with your search of great digital partners, we encourage you to do a broad sweep of the field. But as a first glance, take a look at our offering at Betterment for Advisors. While we aren’t your CRM or accounting software, we do offer a robust, white-labeled platform for portfolio management, automatic tax optimization, and other back-office operations—with a goal of having the best client portal experience on the market.

Betterment Institutional Is Now Betterment for Advisors Sep 14, 2016 12:00:00 AM We’re fundamentally changing the wealth management industry by giving advisors even more portfolio strategies on our cutting-edge platform. Today we are excited to announce that Betterment Institutional is now called Betterment for Advisors (B4A). This change is not just about a new name, but also involves key developments to the B4A platform that will be available in October 2016. We heard from advisors that they wanted greater portfolio flexibility, so they’ll soon be able to choose additional portfolio strategies from our new partners, Goldman Sachs Asset Management (GSAM) and Vanguard. Our continued development strengthens our mission of partnering with advisors to reimagine what humans and cutting-edge technology can do together. The Prelude In 2014, Betterment launched its advisor platform, originally called Betterment Institutional, to give financial advisors access to its revolutionary investment management technology. Since then, the platform has helped hundreds of firms automate a wide range of administrative processes and tasks for thousands of advised clients. Our Mission, Aligned with Advisors We don’t believe robo-advice is about humans versus technology—where one will win and one will lose. We believe it’s about how humans employ technology to make their lives better, easier, and more efficient. An Improved Platform Advisors using the new B4A platform can offer unparalleled service on behalf of their clients. For example, they can open accounts for their clients within minutes, and do it all digitally, without cumbersome paperwork or tedious back and forth. Advisors can also automatically and efficiently manage their clients’ portfolios for them. Clients can benefit from the B4A platform thanks to Betterment’s intuitive, user-friendly experience that helps them more easily understand their investments. They’ll also be intimately involved with their accounts, and required to sign off on any actions that their advisors perform on their behalf. Organization Across Business Lines With this name change, we are aligning each of Betterment’s business lines to be more clear and consistent by customer group. Betterment serves retail customers, Betterment for Advisors (B4A) serves advisors and RIAs, and Betterment for Business (B4B) offers 401(k)s for employers. More Portfolio Strategies One of our most important priorities this year has been giving advisors more options to customize their experience on our platform. We heard consistent feedback about the need for greater portfolio flexibility. That’s why we’re thrilled to announce that advisors will be able to access a selection of model portfolio strategies from GSAM and Vanguard through the B4A platform beginning Oct. 17, 2016. We carefully selected partners and strategies that are consistent with our broader vision for portfolio flexibility, and we will continue to develop a curated suite of portfolios that offer unique solutions for our advisors’ clients. Advisors will be able to choose from an updated suite of portfolio offerings from the following industry-leading institutions: Betterment: Betterment’s portfolio consists of globally diversified stock and bond allocations with a U.S. value and small-cap tilt, and is comprised of low-cost, liquid, index-tracking ETFs from diverse providers. A 100% bond allocation is entirely U.S. ultra-short term treasuries, allowing for extremely low risk. Goldman Sachs Asset Management: GSAM’s ETF asset allocation portfolios provide exposure to core stocks and bonds as well as diversifiers, such as emerging markets and REITS, using low-cost, liquid ETFs. These portfolios use an established, factor-based approach designed to balance risk across multiple sources of return. “We are pleased to offer Betterment for Advisors model portfolios containing low-cost ETFs covering a wide array of asset classes,” said Larry Restieri, Chief Operating Officer for GSAM Third Party Distribution. “They are designed to help registered investment advisors meet their clients’ needs.” Vanguard: Vanguard’s ETF strategic model portfolios are derived from global market cap weights. They include exposure to U.S. and international equities and global investment-grade bonds, encompassing more than 19,000 global stocks and bonds, using low cost index-tracking exchange-traded index funds. “Vanguard ETF strategic model portfolios are constructed by our Investment Strategy Group, whose responsibility it is to develop and maintain Vanguard’s investment methodology,” said Evan Wolf, Head of Investment Services in Vanguard’s Financial Advisor Services. “The group draws from Vanguard’s more than 40 years of investment management experience to ensure that our model portfolios reflect our belief that investment success hinges on asset allocation, broad diversification, and low cost.” Advisors will be able to choose a model strategy aligned with their preferred investment approach or complementary to their current investment approach. Each of the strategies is designed to address their clients’ investment needs and risk tolerances. The new portfolio strategies will be integrated with the B4A platform, leveraging our award-winning user experience and streamlined portfolio management automation. Making additional strategies available through B4A is the first step among several we’re taking to provide more portfolio flexibility. We’re excited about sharing additional portfolio capabilities in the near future to meet the needs of our advisors and their clients. And we’re equally excited about continuing to grow with our advisors as we make more innovative progress on the B4A platform. Betterment is offering a range of model portfolios as a service to provide advisors with greater flexibility in serving their clients. The availability of a model portfolio offered by an independent third party on the Betterment for Advisors platform should not be construed as, and is not, a recommendation as to the advisability of utilizing such model portfolio strategy.

Help Your Clients See All of Their Wealth in One Place Mar 9, 2016 12:00:00 AM Now when your clients sync their outside accounts with Betterment for Advisors, you can see details about all of their investments, including fund allocations, holdings, fees, and cash. Your clients can now see all of their wealth in one place. Securely syncing outside investment and debt accounts, such as 401(k)s, IRAs, taxable accounts, mortgages, and loans held at other institutions, helps give you added insight into your client’s total wealth. Now, right from the Betterment for Advisors website, your clients will be able to see their portfolio allocations, holdings, and shares from various providers, as well as assets and debt. Betterment for Advisors’s aggregation technology summarizes fund fees and cash holdings so you can better manage your clients’ investment strategy. Outside accounts can also be factored into a tax-coordinated retirement goal, so their retirement plan is always on track. As a co-fiduciary, we will only use data to help you give better financial advice and more clarity into your clients’ investments. Your clients’ privacy comes first. We strive to exceed the strictest standards for protecting account and financial data. Syncing a financial account creates a secure, read-only connection with other financial institutions, and we never store their log-in information, nor share, sell or trade their synced data. What do we show you and your clients? Securities holdings, shares, and current value within each outside portfolio. Look-through allocation summary of each portfolio, using Xignite’s Morningstar data. Fees for mutual funds and ETFs. Cash holdings including currencies and money market funds. Liabilities, including mortgages, credit card debt, and loans. Other assets such as real estate can be manually added for a more complete view of total net worth. Betterment for Advisors supports over 13,000 institutions and most accounts sync in under one minute. Synced account data is updated automatically every day. Each of your clients’ accounts is visible on the Summary tab right in their Betterment for Advisors account, and portfolio details are available on the Portfolio tab. On the Portfolio tab, you and your clients can see what securities are held and how each of those accounts is allocated across various asset classes. Get started now by encouraging your clients to sync their accounts securely. Clients can add or manage synced accounts from the Summary tab in the External Accounts section by clicking Sync New or Manage.