Advisor Resources

What’s new from Betterment Advisor Solutions Oct 2, 2025 9:00:00 AM Discover the latest products and features launched in Q3 2025, designed to give advisors more control, flexibility, and transparency. Table of Contents Rebalancing Billing Integrations Advisor experience Retirement Explore our newest updates, featuring enhanced portfolio management, smarter billing, and a smoother experience. This upgrade is designed to help you gain more control and transparency for delivering efficient, tax-smart outcomes to your clients. Preview the tax impact before you rebalance No surprises. No blind spots. Just a clear view into the expected tax impact–down to the position level and how it factors into each client’s capital gains allowance. Now you can see what happens when you trigger an immediate portfolio rebalance. And soon, you’ll be able to preview the tax impact when you: Turn on/off rebalancing or change the drift threshold Initiate a portfolio migration The preview screen also provides insights into wash sale warnings, short- and long-term gains and losses, post-trade weights, and more. We're making it easier to evaluate tax implications and make more informed decisions aligned with your clients’ goals. Take an interactive tour Streamline fees with cash-first billing Now when you choose cash-first billing, you can opt into a strategic fee structure that draws funds from Cash Reserve, then taxable investing accounts, and lastly, retirement accounts to better preserve tax-advantaged dollars. With cash-first billing, you can: Improve cash flow management: Avoid liquidating investments to cover advisory fees, reducing potential tax implications. Create a seamless client experience: Ensure fee payments are handled smoothly from Cash Reserve balances, so clients can stay fully invested without interruption. Tailor your approach: Choose a fee structure that suits your needs, and lets you provide a more personalized approach to portfolio management. Cash Reserve offered by Betterment LLC and requires a Betterment Securities brokerage account. Betterment is not a bank. FDIC insurance provided by Program Banks, subject to certain conditions. Learn more. Adjust fees with flexible sharing Now you can fully cover (or share) Betterment fees out of the overall fee you charge clients, giving you greater flexibility in how platform costs are managed. This option lets you absorb, share, or pass along fees based on your business model, creating a more transparent experience that aligns with your practice. Learn more Streamline reporting with the Capitect integration Now you can view Betterment accounts alongside other custodians in Capitect, a robust reporting and billing platform. Our latest integration lets you access client data and run performance reports—all in one place—so you can manage more with less effort. Learn more Access robust transaction reporting faster With our refreshed Client Activity Page, you can see recent transactions, trade-level details, and allocation changes all in one place. With easier access to client data, you can respond to clients quicker, with clearer information. Gain more flexibility in account setup You now have greater control over how you plan and organize client accounts. Instead of being required to assign a goal, you can set up accounts with or without them—giving you the flexibility to structure accounts that align with your workflow. Make solo 401(k)s simpler and more rewarding Your self-employed clients may now be eligible for up to $1,500 in tax credits—$500 per year for three years—when they open a solo 401(k) with auto-enrollment. As part of our fully digital solo 401(k) solution, auto-enrollment helps further maximize client savings by streamlining contribution setup and eliminating manual steps. Accounts default to a 3% contribution rate to ensure eligibility, with the flexibility to adjust and integrate seamlessly with our tax-smart tools to maximize efficiency. You and your clients can also choose the funding approach that works best for you, lowering barriers to entry so clients can start saving sooner and stay on track. And with upcoming Roth enhancements, including mega backdoor Roth conversions, your clients will have even more ways to boost retirement savings. Learn more Unlock greater plan onboarding oversight Plan advisors can now view detailed onboarding progress with estimated launch dates and key details for every plan: Onboarding tasks: Review what’s in progress, not ready, or complete, so you always know where each plan stands. Launch milestones: Stay on top of key dates like document signing, employee setup, and payroll approval to ensure a smooth plan launch. Plan details: Quickly access plan type, payroll provider, and your Betterment onboarding contact to manage every plan with confidence. If you missed the last update, see all the new features in Q2 of 2025. And, if you’re ready to talk to someone on our team, book a demo today.

"What Do You Do?": Compelling Value Propositions for Financial Advisors Aug 4, 2022 1:04:31 PM As your advisory practice grows, you will find yourself having more and more conversations about what it is you do. These conversations are key to growing your network, your client base, and ultimately your business, so it’s important that you can describe your practice clearly, confidently, and concisely. If you can articulate the value you bring to the table, and if you can do so in a way that differentiates you from your competition, these conversations become much easier. Plus, it makes your marketing efforts more effective, from designing your business cards to writing your website copy. In this guide, we will look at examples of how to articulate your value proposition as a financial advisor (answering the question, “What do you do?”), as well as how to form your unique selling proposition (answering the question, “Why should I work with you, specifically?”). Value propositions for financial advisors A value proposition is a simple statement of what you provide to your clients. Most companies have a generic value proposition built into their business category. For example: Grocery stores provide value to consumers by giving them a single place to buy different types of packaged goods in consumer quantities. (Otherwise, people would have to create relationships with dairies, produce providers, and large CPG brands themselves.) Dentists provide value to patients by cleaning and inspecting mouths in ways that consumers wouldn’t otherwise have the means, equipment, and expertise to do. Law offices provide value to clients by renting out their knowledge of law and policy, saving clients the time and effort of learning to practice law (and avoiding the costs of accidentally handling things illegally). Likewise, in the financial advice space, the value you provide to your clients comes from several generic sources. These sources fall into two major buckets: financial value and extra-financial value. Financial value vs. extra-financial value Financial value is the most straightforward benefit you provide. It simply refers to the ROI that your clients realize through working with you. This includes generating returns, avoiding losses, managing and optimizing deposit limits, etc. Extra-financial value is more expansive. This refers to all the “extra” benefits that someone enjoys besides the ROI—it’s what some financial advisors have begun to refer to as ROL, or “return on life.” This includes value sources such as: Planning: objectively envisioning what your clients can accomplish. Your clients can be inspired to change their investing, spending, and saving habits simply because you helped them set a vision and make a plan to realize it. This can create feelings of confidence and security that could be difficult to come by otherwise. Organization: helping your clients know if they’re on track. By organizing your clients’ financial lives, you give them the assurance that at any point in time, they can quickly check in to see if they’re on track to meet their goals. You also make it much easier for them to access information they need for tax reporting, estate planning, and other wealth management activities. Accountability: keeping your clients on track. Just like a personal trainer holds their clients accountable for reaching their fitness goals, you’re the voice that reminds and encourages your clients to work toward their financial goals. Expertise: educating and counseling your clients. You’re the financial expert, so your clients don’t need to stay abreast of the stock market, monetary policy, fiscal policy, inflation, and the like if they don’t want to. Instead, you keep them informed on what they need to know, and you’re available to educate them on what they want to know. Almost every financial advisory practice will provide value through a blend of what we’ve listed above. However, that blend will vary from advisor to advisor. Some advisors will be stronger at building tailored plans, while others will focus more on client education. So while all advisors more or less provide value from the same sources, individual value propositions will vary from practice to practice. How to write your value proposition Writing a value proposition should be a simple process. The statement doesn’t need to be fancy, and it can be as long or brief as you want. But some criteria separate a useful value proposition from a useless one: It should be easy for your audience to understand. Unless your target market is the extremely financially literate, you should avoid technical in-speak. It should be easy for you to remember. Although you can use your value proposition for multiple marketing purposes (more on that later), your value proposition will help you most if it can simply answer the question, “What do you do?” As an RIA, you don’t want to come up with a new answer to that question every time someone asks it. Your value proposition should be your immediate, go-to response. It should sound natural. Don’t treat your value proposition like a composition assignment. Use words that you would use in a regular conversation. Instead of “I optimize and organize my clients’ portfolios so as to maximize return on investment and realize their financial goals,” you might try, “I help people set financial goals, get their finances in order, and keep them on track for reaching their goals.” It should be verifiable. If someone asks you if you have examples or if they ask how your offerings work, you should be able to naturally bring up real-life scenarios that explain or illustrate the value you provide. Example value propositions for financial advisors Your value proposition needs to communicate the benefit you provide to your clients and how you provide that value. Here are some example value propositions: “I help people get their financial lives in order: I manage their investments so that their money is working toward their long-term goals without them needing to worry about it.” “I’m like a counselor, but I focus on people’s finances. I keep my clients educated on how the market works and help them make objective decisions with their money.” “I keep people on track with their financial goals: my clients and I work together to set expectations and milestones, and I help them keep their eye on the long-term.” Ways to use your value proposition As we’ve discussed, your value proposition can be helpful primarily when describing what you do in conversations—especially in the early years of your practice. However, your value proposition will come in handy when: Creating marketing collateral. Your business cards, your letterhead, your email signature, bios and descriptions for community events and sponsorships, your Google My Business description—all the little bits of text you may need to write to describe your business become easier to create when you’ve already articulated what you do. Crafting your social profiles. Your LinkedIn profile, Facebook page, Instagram account—all the places where you describe yourself can benefit from already having articulated your value proposition. Onboarding clients. When you bring a new client in for that first meeting, your value proposition can function as an outline for the ground you need to cover. This will help you set expectations for your client and make sure they are aware of all the services you provide. Organizing your website. If you have articulated what you do, then deciding what pages and content you need on your website becomes much easier. A comprehensive value proposition can be a good starting point for mapping out the content and navigation for your website. Onboarding employees. If you’re ready to hire new talent, your value proposition can be a vital tool for giving new employees an idea of your firm’s goals and what they will be helping your clients accomplish. (Plus, it will help them answer the question, “What do you do?” when it comes up—amplifying your word-of-mouth marketing efforts.) Articulating a unique selling proposition. You’re not the only financial advisor in your market, and knowing what you do is the starting point for explaining why someone should choose to hire you instead of the competition. This last part is important, because a value proposition is just a start when it comes to communicating your value as a financial advisor. Once you have your value proposition articulated, you will want to move on to writing your unique selling proposition. Unique selling propositions for financial advisors While a value proposition describes how your practice creates value, the unique selling proposition makes the case for why you’re the right advisor for your target market. Value propositions are descriptive; unique selling propositions are persuasive. The unique selling proposition (which marketers usually shorten to “USP”) is typically a one-or two-sentence statement that should accomplish the following: Resonate with your target market’s emotions. The USP should involve an emotional appeal: you want to tap into how your most satisfied clients feel (or how you want your future clients to feel). Differentiate you from “the rest” of the financial advisors. This doesn’t need to be a unique product offering. But your unique flavor should be evident when people read or hear your USP. If you focus on helping… people in a certain profession (e.g., medical professionals), or people from a certain background (e.g., first- and second-generation immigrants), or people with certain like-minded values or practices (e.g., homeschooling families), or people facing certain challenges (e.g., newly divorced parents) … … then this should be evident in your USP. It could even come down to a different tone or energy that you bring to your client meetings (e.g., you might be the humorous, nerdy, and/or outdoorsy FA in your city). Plainly state how you help your clients. Your USP should highlight the value you bring to your target audience. This is much easier to do after you have developed your general value proposition. How to use your unique selling proposition Developing your USP can be beneficial for fleshing out your marketing strategy. It bridges the gap between what you do and why people choose to work with you. Once your USP is written, you can use it in various ways: Website homepage copy. It can be tough to figure out exactly what to say on the homepage of your website—but if you have already articulated your unique selling proposition, most of the work is done. Your website homepage is the perfect place for your USP to live: it immediately tells your website visitors who you serve, what they can expect, and why they should choose you. Networking with competitors. Unless you are the only financial advisor in your community, you will likely find yourself at networking events with other advisors. If you know what separates you from the rest of the pack, then networking becomes a bit easier. Not only can you naturally differentiate yourself from the other advisors, but you can also differentiate yourself to the other advisors. It’s easier to converse with and learn from other people in your field if they know you’re not chasing their target audience. Advertising copy. Should you start spending money on ads, your USP will help you target your spending on the right audience. It can also increase your return on ad spend, as you won’t be advertising generic services—you’ll be promoting something uniquely appealing. Grow your advisory business with Betterment Your value proposition and USP are two key tools you can use to grow your business. By articulating what you do and why people should choose you, you give yourself an advantage in both your everyday conversations and your marketing efforts. But this degree of intentionality can take time. And processing the demand that comes with effective communication takes even more time. One way to optimize your time as you grow your advisory practice is to invest in tools that reduce hours spent on investment management and back-office admin. If you’re looking for a better way to grow your business, Betterment Advisor Solutions can help. Our platform helps you deliver personalized model portfolios to your clients and manage your entire practice—which means you can spend more time crafting your message, building relationships, and bringing in new clients.

How to support tax-smart giving with a modern Donor-Advised Fund (DAF) Dec 1, 2025 9:15:00 AM Betterment Advisor Solutions offers a donor-advised fund on our charitable giving platform, perfect for high-net-worth clients. There’s a smarter way to give to the causes that matter most to you. Betterment Advisor Solutions partners with Daffy, a modern donor-advised fund provider, which allows your clients to make a donation—and an impact—with ease. With Daffy, clients can access a cost-effective, subscription-based DAF, where they can set annual giving goals and distribute donations to 1.5 million charities, schools, and faith-based organizations—all in one place. Why donor-advised funds can be ideal for high-net-worth clients With a donor-advised fund, your clients can contribute appreciated assets—like stocks—to a charitable account and may be eligible for tax benefits in the year they contribute. Contributing to a donor-advised fund can simplify the donation process and give your clients the flexibility to decide when and where to distribute funds to various charities over time. It can also help donors avoid paying capital gains taxes on eligible donated assets. Top benefits of a donor-advised fund with Betterment Advisor Solutions Cost advantages: Your clients will pay a flat fee starting at $3/month for self-directed donations, instead of the AUM-based fees incumbents charge that can add up over time. And clients who want to collaborate with their financial advisor can add you to help manage their donations. Compare that to donor-advised funds managed by traditional advisors, where Fidelity costs at least $100 per year and Vanguard costs a minimum of $250 per year, as of November 2025. Delightful client experience: Clients seeking to maximize the tax benefits of a DAF can manage one-time or recurring donations, set up automatic contributions, and view their donation history—all in one place. They can also give you access to manage everything on their behalf for added convenience. No processing fees: Unlike other providers, Betterment doesn’t charge processing fees for transfers to the donor-advised fund—or for charitable donations. This means 100% of what your clients give goes directly to the charities they care about. Betterment receives referral fees from Daffy. See more in our charitable giving disclosure here. How to get started with our donor-advised fund provider Getting started is easy! Clients can navigate to the Transfers tab on their Betterment dashboard. From there, they will scroll down to “Other ways to transfer” and select “Donate to charity.” They’ll receive information on the perks of donating, and at that point, they can choose to donate through Daffy. Here’s how: Make a donation to Daffy. Clients become eligible for a tax deduction when they contribute to their DAF. Their funds will be held at Daffy if they have not yet set up their account. Create a Daffy account. Clients should use this referral link to set up a Daffy account, which is required to manage their donations. Daffy allows your clients to grow their charitable funds tax-free while they decide which causes to support—all for a flat fee, starting at $3/month. Select charities. After creating an account, clients can log into Daffy to make donations to more than a million nonprofits. Managing your clients’ donor-advised fund Your clients also have the ability to add you to their Daffy fund. This will allow you to make charitable donations on their behalf, request a change in the fund’s investment portfolio, access tax receipts, and recommend donations for them—all through Daffy’s advisor portal. Learn more about advisor capabilities on Daffy. Ready to help your clients maximize their charitable impact? Download our user-friendly one-pager to learn more and share with your clients to help support their philanthropic goals. And, check out this blog post to help your clients understand the specific tax benefits of donating shares to a donor-advised fund.

2026 portfolio updates: What financial advisors need to know Jan 5, 2026 10:15:00 AM Updates to the Betterment managed strategies are coming soon. As part of Betterment’s investment oversight, our Investing team regularly reviews and updates our portfolio strategies to align with changing market conditions. In our 2026 portfolio updates, we are implementing strategic adjustments across multiple portfolios, guided by updated capital market assumptions, the expected risk and return profiles of asset classes. Portfolios refreshed by the 2026 strategy changes: Core portfolio Value Tilt portfolio Innovative Technology portfolio All Socially Responsible Investing (SRI) portfolios: Broad, Social, and Climate Impact Crypto ETF portfolio Key investment shifts: equities, bonds, and crypto Equities: We are modestly increasing our exposure to U.S. large-caps, while reducing exposure to U.S. mid-caps, for nearly all portfolios. This better aligns our portfolios with benchmarks while maintaining strong diversification. Fixed Income: This year, we’re introducing an additional actively managed bond fund to our non-SRI portfolios. Unlike traditional passive bond strategies, which tend to overweight U.S. Treasuries, active management gives us the ability to be more flexible and seek opportunities across broader areas of the bond market. This added flexibility helps portfolios stay aligned with shifting market conditions. In a declining interest rate environment, segments like securitized products and high-yield bonds may offer more attractive risk-adjusted return potential. At select risk levels across our portfolios (including all three of our SRI portfolios), we’re also adjusting short-term bond allocations by slightly increasing exposure to short-term Treasuries. These changes help smooth the glide path used in our auto-adjust feature, which de-risks clients as they approach their goal’s target date. Betterment Crypto ETF portfolio: We are increasing our bitcoin and decreasing our ethereum allocation to align with its market capitalization weight. Further changes include obtaining these exposures through lower-cost funds, which reduces the portfolio’s weighted average expense ratio of the portfolio by 0.10%. How these updates affect your clients’ portfolios Similar to last year’s updates, we plan to update allocations for newly funded portfolios towards the end of January 2026. For existing goals, our automated rebalancing feature will transition client portfolios to the new target portfolio weights, using clients’ dividends, deposits, and withdrawals and sell/buy rebalancing to manage the transition tax-efficiently. Funds that are no longer in the target allocation may be retained to help reduce potential tax impact, while future cash flows will be directed toward the new primary holdings. Rebalancing will respect any gains allowance, or other rebalancing settings that you’ve set for your clients’ goals. You can log into the Advisor Dashboard to review and update your client gains allowances, or disable system rebalancing if you prefer to rely on only cash flows to reduce drift in your client accounts. You’ll want to adjust settings before the end of January to ensure they're in effect before portfolio updates are made. Learn more about Betterment’s investment approach If you’d like to find out more about Betterment’s approach to investing, you can check out these articles: Portfolio Construction Process: Core, Value, Innovative Technology ETF Selection Methodology

What’s new from Betterment Advisor Solutions Jun 30, 2025 6:06:27 PM Discover the latest products and features launched in Q2 2025, designed to give advisors more control, flexibility, and transparency. Table of Contents Portfolio management Billing SBLOCs Advisor experience New Advisor Exchange episode We’re continuously building out new tools and enhancements to help you work smarter not harder. In Q2, we introduced a wave of powerful updates—including a major acquisition and new portfolio management features designed to give you greater control and customization with less manual effort. Expanded support for legacy and concentrated positions Build custom models with ETFs, mutual funds, and now single stocks. Our latest update gives you more control without adding complexity and helps you: Bring legacy and held-away assets into a long-term strategy—powered by TLH, rebalancing, and smart withdrawals that minimize the tax impact. Use sell-only substitutes with ETFs, mutual funds, and single stocks to unwind concentrated positions gradually. You can leverage sell-only substitutes when incorporating your clients' legacy positions into your target model's asset allocation, without buying additional shares during rebalancing. Here’s what’s changed: More control over rebalancing: This functionality allows you to add additional tickers to your security groups for greater control over rebalancing behavior in your custom model portfolios. Tax-efficient exposure: Betterment will help reduce exposure over time according to your instructions with our tax-efficient algorithms. Read more about sell-only substitutes. The future of portfolio management Our recent acquisition of Rowboat Advisors, a portfolio optimization software, paves the way for direct indexing capabilities on the platform. Over the coming months, we’ll be introducing new features that deliver more customization, intelligent automation, and enhanced flexibility to support your firm’s unique needs. Be on the lookout for: Tools for more transparent trading: Run sophisticated simulations and use critical data to better understand trade impacts and make more informed decisions. Expanded portfolio options: Create and edit portfolios with a wider range of options that work seamlessly with rebalancing, tax-loss harvesting, tax-smart portfolio transitions, asset location and intelligent withdrawals. Watch our latest webinar to learn more about what’s to come in 2026, including UMAs and direct indexing. Reduced ACH payment timelines Big news: We’ve shortened our payment processing time from 12 days down to just 5 business days. You’ll get paid sooner, with more transparency. With billing and fee tracking fully integrated into the platform, it’s easy to see exactly what you’re owed each cycle—no spreadsheets, no guesswork. The result: a cleaner more efficient, billing experience that helps you stay compliant, minimize error, and save time. Upgraded mutual fund transactions Give your clients the clarity and confidence they expect when moving assets, with updates that: Eliminate withdrawal discrepancies due to fluctuating Net Asset Value (NAV). Improve fee-assessment precision, reducing the risk of over/undercharges and aligning with regulatory expectations. Simplify tax reporting for clients by ensuring the amount withdrawn matches the amount received. A faster lending solution Securities Backed Lines of Credit (SBLOCs) with Betterment Advisor Solutions give your clients access to the value of their Betterment assets as lines of credit without liquidating investments. Fast and flexible for your clients: It’s a simple, automated application process, giving your clients immediate access to their credit line after approval. Streamlined for your firm: Leverage an integrated borrowing solution that complements your investment management practice. Register for our webinar to learn more and explore how SBLOCs can become a valuable tool for serving high net-worth clients. Save your seat Securities-Backed Lines of Credit (SBLOCs) are offered by The Bancorp Bank, N.A., Member FDIC, to Betterment clients. Betterment is not a bank. See more in disclosures. Guided client tours for winning new plans Win prospects and onboard with confidence with our new Clients Tours tab. This highly requested update enables you to give plan sponsor clients a guided demo around our platform. Access client tours in the left rail of your advisor dashboard. Planning strategies for the equity-rich and cash-constrained In our latest episode of The Advisor Exchange, Natalie Taylor, CFP®, founder of the Goodland Group, discusses how she maximizes planning for an underserved segment: mid-career tech professionals with complex equity compensation packages. From navigating RSUs and AMT to rethinking the AUM model and scaling with values-based planning, Natalie shares the strategies, tech, and mindset that have shaped her fast-growing firm. Watch now. It’s been a busy year—see what we launched in Q1, or get in touch with our team to learn more. Book a demo.

How portfolio rebalancing works to manage risk for your clients Dec 20, 2024 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? Rebalancing is a Betterment feature that seeks to reduce drift in your client portfolios. Betterment performs two types of rebalancing on your clients’ behalf. First, in response to cash flows such as deposits, withdrawals, and dividend reinvestments, Betterment buys underweight holdings and sells overweight holdings. Second, if cash flows are not sufficient to keep a client’s portfolio within its applicable drift tolerance, automated rebalancing sells overweight holdings in order to buy underweight ones, aligning the portfolio more closely with its target allocation. Measuring portfolio drift Over time, the value of various holdings within a diversified portfolio moves 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 rebalance the client’s portfolio to target the original allocation. Clients may also transfer in assets from outside Betterment that are not part of the target portfolio strategy and/or 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. Betterment and partner portfolios For Betterment constructed portfolios (excluding Betterment’s Crypto ETF portfolio*), we broadly define portfolio drift as the total deviation of each “super” asset class (put in positive terms) from its target allocation weight, divided by two. These six super asset classes are US Bonds, International Bonds, Emerging Markets Bonds, US Stocks, International Stocks, and Emerging Markets Stocks. 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. Drift for advisor-built custom model portfolios Your firm may elect to construct a custom Model Portfolio on our platform. If so, drift for these portfolios is evaluated on the security group level, rather than at the super asset class level as described above for Betterment constructed portfolios. Betterment will calculate drift at the security group level for custom model portfolios even if the security group(s) used are pre-populated options provided by Betterment in the interface. Advisors can also set customized drift tolerance thresholds for their client’s portfolio. For reference, security groups are groupings of ETFs that include a primary ticker, and may include secondary and/or IRA secondary tickers designed to help reduce wash sales and allow for tax-loss harvesting opportunities. This means that for custom model portfolios, drift is calculated as the total deviation of each security group (put in positive terms) from its target allocation weight, divided by two. *Please note: As of the date of the publication of this article, Betterment’s default drift tolerance threshold is generally 3% for stock and bond ETF portfolios, as well as portfolios containing mutual funds, and 7% for Crypto ETF portfolios. For custom model portfolios, advisors can set a custom drift tolerance threshold. Betterment may change the default drift thresholds without notice. Rebalancing Betterment automatically takes actions to reduce drift for your client through reactive-flow rebalancing and proactive rebalancing, depending on the circumstances, and with an eye on tax efficiency. If you choose to take advantage of Betterment’s tax-smart transition features, we will aim to respect the customized drift tolerance and gains allowance that you’ve set when rebalancing your clients’ goals. A gains allowance can reduce eligible opportunities to reduce drift through rebalancing, because Betterment will not initiate rebalancing transactions (or will only initiate partial rebalancing transactions) in a client goal with gains in overweight securities above the gains allowance. Learn more. Reactive rebalancing This method involves buying or selling when cash flows into or out of the portfolio happen. Cash flows (such as deposits, dividend reinvestments or withdrawals) can be used to rebalance your client's portfolio. Fractional shares allow us to allocate these cash flows with precision. Inflows: When a client makes a deposit or receives a dividend, we use the inflow to buy holdings that are currently underweight, reducing their drift. The result is that the need to sell in order to rebalance is reduced. Whenever client drift is higher than normal, 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. Outflows: Withdrawals (and other outflows) are also used to rebalance, by prioritizing selling holdings that are overweight. Proactive rebalancing When cash flows are not sufficient to keep your client's portfolio’s drift within its applicable drift tolerance (such parameters as disclosed in Betterment’s Form ADV), Betterment seeks to rebalance client portfolios by selling and buying assets, aligning the portfolio more closely with its target allocation. Rebalancing requires a minimum portfolio balance (advisors can review the estimated balance at www.betterment.com/legal/portfolio-minimum). The rebalancing algorithm is also calibrated to avoid frequent small rebalance transactions and to seek tax efficient outcomes, such as reducing wash sales and minimizing short-term capital gains. As with any sell trade, our tax minimization algorithm seeks to select the lowest tax impact lots for rebalancing transactions. 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 experience higher levels of drift without rebalancing if we have no long-term lots to sell. Generally this is because the account is less than a year old, or a substantial portion of the account’s holdings have been purchased within a year. A client account with a gains allowance can also experience higher drift, since rebalancing will not recognize any gains above the gains allowance. And large positions transferred in via ACATs with embedded gains can also lead to higher drift and delay proactive rebalancing. If you’d like to turn off automated proactive rebalancing in a client’s account (so that Betterment only rebalances client’s accounts in response to cash flows), you can do so in the clients tab of your advisor dashboard. Betterment has discretion to limit or postpone rebalancing in order to prioritize other trading activity on any given day, including days where extreme market conditions produce a higher volume of trading. To learn more about rebalancing, see our rebalancing disclosures. Allocation-change rebalancing Changing your client's target allocation by moving the allocation slider and confirming the change could also cause a rebalance. When you update a client's portfolio strategy and/or asset allocation, Betterment will give you the option to select one of our three tax-aware migration strategies. Depending on which option you select, this could result in selling securities and could possibly realize capital gains. As with all sell trades, we will utilize our tax minimization algorithm to help reduce the tax impact. Additionally, before confirming the allocation change, you can review the potential tax impact of the change with Tax Impact Preview. *The Betterment Crypto ETF portfolio is composed of two ETFs that are market weighted in the portfolio, and as such, do not have geographic and stock to bond super asset classifications. See disclosures for more information. Transaction Timelines