Case Studies

Betterment for Advisors Case Study Q&A: How Ritholtz reaches a new client segment  Dan Egan, Head of Behavioral Science at Betterment, recently interviewed Matt Lohrius, Advisor and CFP® at Ritholtz Wealth Management Matt Lohrius oversees the Liftoff platform at Ritholtz Wealth Management, which began leveraging Betterment’s platform more recently. Ritholtz is located in New York City and manages more than $1.2 billion in assets. Dan: Tell us about how the sort of robo-advisor aspect of things works within Ritholtz Liftoff. How do you guys organize it and think about it? Matt: As you probably know, our core business was focused on high net worth households, people that were staring down retirement or leading up to it. And we put out a lot of content—whether it's blogs or The Compound (our YouTube channel)—so a lot of people are following us and telling us they’d like to become clients. But many of them didn’t fit our traditional high net worth, pre-retirement customer profile. But clearly there was a demand, and we wanted to help these people. So that's why we created Liftoff, which we’ve continued to improve over the years. But it really blossomed once we started working with automated platforms like Betterment. There’s no minimum, so it’s great for people in their twenties or thirties who are maybe just starting to invest. Dan:Tell us a little bit more about Liftoff’s ideal client profile. Matt: There are a couple of different types. One would be someone who's on the younger side and who is in the accumulation stage base. They may not yet be married or have a family, but they’re starting to make money and they want to save in a smart way. This type of investor also wants access to an advisor for questions that do arise: around what they should be doing differently when they do get married or start having kids. I also love talking to people who have just graduated college, because they’re such enthusiastic followers of ours. We’re happy to accommodate them.  Dan: This is obviously a big potential for growth. How do you think about growing Liftoff? Matt: I think we want to grow it as big as we possibly can and take it as far as we can. And that's kind of my mindset: I get on the phone with everyone who wants to chat. Hopefully we do get to the point where we need to bring more of me to oversee twice or three times as many Liftoff clients as we have right now. Dan: What have been the biggest hurdles to growth so far? Matt: One hurdle is that there's always going to be people out there that would rather just do it themselves and that's fine. We totally understand that. But there are still plenty of other people out there who don't even know where to start. And so we're looking to reach that group of people. Dan: Do you find that there is a catalyst that brings the self-directed types to you?  Matt: Yeah, it could be a year like this one that we're in right now where people who have been investing on their own for a while reach out because of all the uncertainty. They are looking to get a little more advice.   Dan: Talk a bit about the culture within Ritholtz to new technologies.   Matt: We're all about it. Outside of the Liftoff channel, Ritholtz is looking at technology to onboard clients more quickly and smoothly. We know it’s possible—with Betterment and Liftoff, you can open an account like that. So we want to be able to expand that kind of capability throughout our entire firm. And that really just involves us looking at all the technology we currently have to streamline the client experience. Dan: Can you talk a little bit about the difference that an automated platform like Betterment makes in your day? Matt: For Liftoff, it’s just huge from a technology standpoint: opening accounts, transferring money from other custodians, depositing money, linking a bank account. Everything is so easy and intuitive for the client. And that saves us a lot of time: we’re not having to help a client with the logistics of opening an account and can spend our time with them focusing on advice. That's where platforms like Betterment really excel, with the operational efficiencies. I think a lot of advisors hear “robo-advisor” and sometimes get a little turned off, but who doesn't want operational efficiency? And that’s on both sides of the equation to clients and advisors. Dan: What if you go back, what initially sparked the interest in convincing you to start using a robo-advisor as a partner? Matt: It’s kind of just set it and forget it. It's easy. You have a durable, long-term portfolio. You're going to invest in it just to keep saving. That's the work that you need to do, is constantly save. And outside of that, you don't need to do a whole lot. It's helpful for a lot of people. And when we do have a client ask “Can I do my own thing?"—because there’s often that temptation—we tell them “No, you can't.” That's the whole purpose and benefit of this. You can go somewhere else and do that. But if you want a concrete long-term plan, this is where you're going to get it, and it's very likely to work. Dan: What would you tell advisors who are skeptical about using a robo-advisor? How would you help them to understand how well it's worked for you and your clients? Matt: People who are skeptical need to realize that this is a hybrid platform. Yes, the portfolios and operations are automated, but you have access to an entire firm. Because if you have access to me, you have access to all the resources that I have access to. And that can be powerful.  Dan: Last question. Does using an automated platform like Betterment mean that you, as a CFP®, as an advisor, get to spend more time on bigger issue questions like planning?  Matt: Yes, one hundred percent. That is the whole reason Liftoff switched to Betterment. With the custodians we had been using previously, there were a lot more operational emergencies that needed our time and attention. But with a platform like Betterment, all of that is taken care of so that we at Liftoff can focus solely on providing quality advice. That's all we want to do here. Automation (through Betterment’s platform) is allowing us to do that now, which is why I'm confident that Liftoff will continue to grow.   Ritholtz Wealth Management is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where Ritholtz Wealth Management and its representatives are properly licensed or exempt from licensure. This website is solely for informational purposes. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Ritholtz Wealth Management unless a client service agreement is in place.  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 is not indicative of future or similar outcomes.

Betterment for Advisors Case Study Q&A: How Truepoint lowered the cost of serving more clients Founded in 1990, Truepoint Wealth Counsel is an independent and nationally-recognized RIA based in Cincinnati, managing over $3BN in AUM and voted among the 2020 Top Workplaces by the Cincinnati Enquirer. Betterment’s Alex Choi recently sat down with Brad Felix, portfolio manager at 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 RhineVest 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 Rhinevest 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 RhineVest/B4A combination offers a great solution. B4A and RhineVest started by serving clients with less than $1 million but is 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: Betterment has 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're actually in the process of rebranding RhineVest and designing a new website. So, be sure to check it out - we think it's going to be even better than what we have now. 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 RhineVest 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 RhineVest 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.   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 is not indicative of future or similar outcomes.

Betterment for Advisors Case Study Q&A: How AdvicePeriod creates space and time to better serve clients 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.