Alexander Choi

Betterment for Advisors Case Study Q&A: How Truepoint lowered the cost of serving more clients Nov 22, 2022 5:57:00 PM Founded in 1990, Truepoint Wealth Counsel is an independent and nationally-recognized RIA based in Cincinnati, managing over $4BN in AUM and voted among the 2020 Top Workplaces by the Cincinnati Enquirer. Non-paid client of Betterment. Views may not be representative, see more reviews at the App Store and Google Play Store. Betterment’s Alex Choi recently sat down with Brad Felix, portfolio manager at Commas (formerly RhineVest), a subsidiary of Truepoint Wealth Counsel, to hear about how the firm has successfully leveraged the Betterment platform to grow the practice. Alex: Tell us a little bit about your practice and the factors that have contributed to your success. Brad: When Commas started in 2015, I realized how technology was changing the wealth management industry. Betterment was one of the disruptors driving that change, and we saw how the Betterment for Advisors (B4A) platform could lower an advisor’s operating costs. We wanted to leverage those cost savings to serve those who don’t necessarily have a million dollars (and that’s a lot of people). We've grown from 0 to 338 households since 2015. Growth was supercharged when Truepoint Wealth Counsel acquired our firm in 2016 and there’s been no looking back. Alex: How does Truepoint think about segmentation and where does Commas fit in? Brad: Today, Truepoint’s True Wealth service offering represents our firm’s bread and butter where we provide tax and estate services. But we still want to serve other clients well and do right by them. So segmentation just makes sense, and the Commas/B4A combination offers a great solution. B4A and Commas started by serving clients with less than $1 million but are now starting to serve clients in the $1 to $3 million tier as well. Alex: What were some of the biggest hurdles you encountered while you were initially growing your business and how did you navigate those? Brad: I think the hardest thing for every new firm is distribution; and with the less than $1 million client segment, it can be a challenge to convince people that they need a financial planner. A lot of people feel like they don't qualify. So the first marketing push was letting people know that they had options beyond an insurance company or a bank, and that fee-only fiduciary advice was available regardless of how much money you have in your investment accounts. We tried to do that in a number of ways: a kind of radical, very transparent website that clearly showed pricing and the fact that we had no minimums. We created an edgy brand to show that we don't take ourselves too seriously and that everyone needs and deserves access to financial advice. We've also done some work around search engine optimization (SEO), focusing on keywords like “financial planner” and local searches in our Cincinnati geographic area. We like to rank well in those local searches and believe that our memorable brand and website helps us attract new clients. I think there's an advantage to being different when compared to lots of financial planners that kind of look the same. I would encourage others to define a unique message and lead with that because it does help you stand out. Although things were slow at first, at some point it just clicked. Delivering on your promises and serving clients well will get that flywheel going where they're telling their friends about the good experience they've had at your firm. Alex: I have always been a big fan of your firm’s website. Can you talk a little more about your process for building that out and why you chose to include what you did? I think a lot of our clients aspire to build similar type sites and would appreciate how you went about it. Brad: I appreciate that. We worked with a really good local designer who pushed us to come up with a very simple message about why we were unique, why we were different. Our biggest goal for building out our site was transparency. We know that consumers are tired of landing on websites and still not being able to understand how much they would pay for something. We’re very clear, very upfront because in our minds this is the first stage of trust. We want people to talk to us, so our “let's talk''' button is all over our website. If the website conveys enough trust to get them to have a conversation, then we can be successful in moving them to the next stage to be a client. We felt that Betterment had an attractive product so any chance we had to note our decision to utilize Betterment’s B4A offering and also to highlight how we're providing value to the client seemed to resonate with people. Alex: So how does Commas position Betterment for Advisors to its clients? Brad: We describe Betterment as our technology partner. Given Betterment’s increasing brand awareness, we talk about Betterment alongside Fidelity and Schwab, and people are comfortable. It’s part of our tech stack just like anything else. In addition, we're in the business of financial planning. It's what we do. In that vein, we've always viewed Betterment as a complementary partner, not a competitor. Alex: How do you price your offering, and how do you communicate your firm's pricing to clients? Brad: Our financial planning fee is $65 a month, but we also believe investment management is an essential part of the whole package. Our investment management fee is 80 basis points, which includes the Betterment fee. Alex: Does Commas leverage some of the client behavior functionality like goals-based planning modules and behavioral guardrails? Brad: Well, to be honest, the advantage of partnering with Betterment is that it also has a retail product and you put in the research to know what's a good feature, what's a good design choice, how do you get a better outcome, better behavior, etc. We honestly try not to interfere with the work you all do there and really just let the platform guide our clients and focus them on what we do best. We really spend most of our time on financial planning and just working through all the goals a client has set up in the Betterment system. Alex: Can you tell me some ways your practice has become more efficient? Brad: Very simply, the Betterment platform significantly lowers our cost of doing business. So account sign up, trading, cash management, those are all ways that we're not spending money on labor. We’re maybe unique among the firms that are using your platform in that we never intended to use Betterment as a solution only for children of our clients, but we now find that we can serve as many people as possible. Automation and efficiency are key to our profitability, because we provide great service at a higher client to advisor ratio vs. the industry. Alex: Could you just kind of take us through what the experience would be for a new client from when they hit your website to you guys actually opening and transferring their assets and where Betterment may fit into an onboarding workflow? Brad: The Betterment technology helps us to compress our onboarding cycle considerably, sometimes to as little as a day. At the end of an introductory client meeting, we send a welcome email that has a link to the questionnaire that helps us learn more about them, a link to open a Betterment account, and a link for our financial planning fee. The client signs our agreement as part of the automated Betterment signup process. Depending on what they fill out in the questionnaire, there may be additional automated follow-up. For instance, if they have certain held away assets, another email asks for more information. Once all the information is received, the advisor can then get a good look at their entire financial picture so that at the first financial planning meeting the conversation can focus on what's important to the client, rather than all the administrative details. Alex: What additional tools and automation do you employ along with Betterment? Brad: We subscribe to the “low code” or “no code” technology trend. The whole idea is that you don't have to be a developer to create automation between different systems. And that's really the whole premise of what we started experimenting with three or four years ago. We started using Zapier to tie together different pieces of our software. We use Typeform for our initial client questionnaire that we send out and that questionnaire is delivered by Mailchimp, which is a common email service. We also had a CRM at the time, so linking all those together. The basic discovery workflow started when a client booked a meeting through Calendly and then received the questionnaire. Ultimately that information would flow back into our CRM without our advisors doing anything. We were focused on determining how we can spend more time talking with clients and thinking critically while automating everything where human interaction doesn't add value. Alex: So it sounds like you’ve compiled a pretty big tech stack. Do you still find from a unit economics perspective that all those monthly subscriptions are saving you money? Brad: Yes. Our tech stack is not your typical financial industry tech stack. We're bucking the trend on what people say we should use and looking at other industries to find different, innovative tools. We’ve found that pricing for these non-industry tools is dramatically lower. We got rid of our CRM and now use Airtable, which I think everyone should check out. We use a client-to-advisor ratio to help us guide profitability. In a standard firm, this ratio is roughly 100 to 1. Even at 200 to 1, we would have profitable outcomes, but at 300 to 1, we’d feel really confident that creating business in this segment can deliver industry-like margins. It's just a different type of model. It's higher volume, perhaps less complexity, but requires a lot of efficiency to get there. The other metric of course is average account size, but the more efficiency you can create, the lower your average accounts can be. In full transparency, our first business plan assumed an average client balance of $100K. Over time we have far surpassed that. And I think it's only going up from here as we've realized this platform can be used to serve not only clients below a million, but in the $1 to $3 million range. Our average balance is only going up and we're only getting more efficient. Alex: What recommendations do you have for others thinking about how to build out their tech stack? Any resources you’d recommend? Brad: I typically recommend that before people look at available technology solutions, that they start with a whiteboard and draw what they need the technology to do. Then find the tools that fill that need. As far as resources, I’ve scooped up tons of information from #fintwit on Twitter. I think in this new economy that you don’t have to be a developer. For instance, you can build a website yourself much more cheaply than you could 10 years ago. And with subscription-based tech, you can find solutions that allow you to connect everything together yourself. The reality is the operating cost of running a business like ours over the last decade has declined substantially. But not everyone knows or realizes that yet. Alex: What would you tell advisors who might be skeptical of using a platform like a Betterment or someone else's? I think there's always skepticism around whether an algorithm can perform certain activities such as trading, rebalancing, and asset location. However, the contributions of an automated platform with impressive technology and execution can really shine during a situation like COVID, which came upon us so fast, but was met with industry high records of near-daily rebalancing of client accounts on certain high volatility days. Most human trading teams probably couldn't keep up with that pace. The other concern that advisors may have would be working with a lesser-known custodian. In my mind, custodians are more of a commodity at this point. It becomes a non-issue for most people once you educate them on what a custodian does, what they don't do, and what it really means to be somewhere else, while also articulating the advantages that they can give you. Finally, the Betterment UX provides people a clear, visual representation of their whole financial picture in a way that I don't think anyone's ever gotten with other online platforms or traditional custodians. Alex: Any parting comments? Brad: The one message I would like to tell everyone is don't just think about Betterment as a way to serve one segment of your existing high net worth business. Go out and build a business to serve the broader population because the market opportunity there is huge, there's no competition, and millions of people need financial advice. We hope that other advisors can learn from our experience in their consideration to utilize automated platforms and other tools.

Introducing the RIA Tech Suite Oct 13, 2022 12:00:00 AM The RIA Tech Suite brings together complementary technology platforms to help automate critical back-office tasks for advisors. The RIA Tech Suite brings together complementary technology platforms to help automate critical back-office tasks for advisors. Along with RIA in a Box®, RightCapital, and Wealthbox, Betterment for Advisors is excited to introduce the RIA Tech Suite: a set of services and tools that advisors can use to help automate and streamline back-office tasks. Why should firms utilize the RIA Tech Suite? Together, these intuitive and complementary tech tools can streamline everyday practice management, giving you more time to acquire new business and to provide a better experience for your current clients. Additionally, the RIA Tech Suite includes discounted pricing for firms that adopt two or more of the services—a discount that could save the average RIA firm up to $3,200 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 3200 USD is an estimate of the maximum amount saved on the annual cost for combined subscription fees across all four services noted in this article. Calculation assumes the average of weighted monthly rates offered across all four services plus their onboarding fees, which are subject to change at each service providers’ discretion, and then applies a 15% discount from each. The discount rate of 15% per company is activated upon engagement of a minimum of two companies. Actual dollar amount saved may vary; Betterment makes no guarantee of the specific dollar amount your firm could save.

More Billing Flexibility For Advisors Sep 29, 2022 12:00:00 AM As part of our mission to make it easy for advisors to manage their practices, we offer a variety of billing plans to provide advisors more flexibility for charging clients. Our three Billing Plans allow advisors to set fee structures that fit the needs of both their advisory firm and their clients. Under each plan, advisory fees will accrue daily and be assessed on a monthly or quarterly basis as set by the firm. Advisors who have admin privileges can create new Billing Plans and set the default Plan for their firm, which will be used for new households moving forward. Any advisor can choose from the list of available Billing Plans—which are created by admin advisors—and assign any Plan to their clients. Below, we’ll outline how each Billing Plan works and give examples of how fees might look for households of varying asset ownership levels. Asset-Based Billing Fixed Fee Billing Tiered Billing Note that regardless of which Billing Plan is chosen, each advised client pays a percentage fee directly to Betterment for portfolio management. The fees represented in each Billing Plan below are additional fees (on top of Betterment's wrap fee) that are collected by Betterment on behalf of the advisor and sent to each advisory firm on a monthly or quarterly basis. Asset-Based Billing In the past, the only billing option for advisors was to charge basis points (bps) on a client’s assets, regardless of account balance. We’ll still be offering this asset-based billing option, however, it must now be applied to a total household rather than separately across a household’s legal accounts. As a reminder, legal accounts include individual taxable, joint taxable, trusts, and each type of IRA. A household consists of all legal accounts owned by one person, as well as all the accounts owned by anyone that person shares a joint account or trust with. Households can also be created by explicitly associating two or more people. Example of Asset-Based Billing Plan at 50 bps Balance Annual Fee Approx. Quarterly Fee Household 1 $50,000 $250 $62.50 Household 2 $500,000 $2,500 $625 Household 3 $3,000,000 $15,000 $3,750 Fixed Fee Billing Advisors can set a fixed annual fee for their services, and apply it to households regardless of balance. The most important thing to know about this plan is that a household’s balance must be above the fixed fee amount in order for fees to accrue. For example, if the fixed fee is $5,000, a balance of $4,999 would not accrue fees. Because fees accrue daily, if a household’s balance is below the set fixed fee amount at the close of market on any given day, no fee will accrue on that day. Since fees are assessed on a monthly or quarterly basis, the annual fee set by the firm will be prorated across each billing period. Tiered Billing Tiered billing allows for ranges to be set for both asset-based fees and fixed fees. The tiers work similar to tax brackets, in that only the assets held within each tier’s range are charged with that tier’s rate. Below is an example of what an asset-based tiered structure might look like. Example Tiered Billing Structure: Asset-Based Asset Range Rate $0 to $100,000 100 bps $100,001 to $500,000 75 bps Over $500,001 50 bps Households under the above tiered billing structure would be charged as follows: Balance Annual Fee Approx. Quarterly Fee Household 1 $50,000 $500 $125 Household 2 $225,000 $1,937.50 $484 Household 3 $2,600,000 $14,500 $3,625 Setting A Minimum Fee Advisors can utilize the tiered structure to set a minimum fee by setting a fixed fee for the lowest asset tier, and then applying an asset-based fee for the higher subsequent tiers. Just like under the fixed fee plan, a household’s assets must be higher than the lowest fixed fee rate in order for fees to start accruing. Example Tiered Billing Structure: Fixed Fee + Asset-Based Asset Range Rate $0 to $100,000 $1,000 per year $100,001 to $500,000 75 bps Over $500,001 50 bps If you have any questions about how Billing Plans work, head to our FAQs to find answers to the most commonly asked questions. If you still need help, our Advisor Support Associates can help you find the right billing solution that works for your firm.