March 4, 2024


Giving consultancies lots of options isn’t enough, says Tom Moore.

It’s about giving them something qualitatively different.

“I think where we try to differentiate ourselves is we always make sure we’re different from these legacy companies or challengers,” Moore, director of Betterment for Advisors, told financial plan“A lot of times I get frustrated that the challengers aren’t really bringing anything new to the market. They’re just creating more options.”

Tom Moore, director of Betterment for Advisors

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He said RIA Regulatory Department Nationwide Largest Independent Robo-Advisors As the RIA hosting business gets hotter, it’s getting an upgrade. They do this by taking care of companies that he believes are often overlooked by custodians.

“I think where it resonates most is in the small RIA world. It’s such a big game when you have the business model that the big custodians have, and the pressure is to go after bigger and bigger companies,” Moore said. “We’ve built our revenue model in a way where we have the technology to help scale small RIAs and really make those businesses a priority. That’s the difference. The difference is we bring an integrated technology stack to market, It puts a $100 million RIA run by one person to work.

“The ability to do that while providing a solution to customers at a low cost…that’s a huge opportunity.”

As Betterment For Advisors looks to cater for companies of all sizes, their wealthtech calendar for 2023 is full of new launches and upcoming platform improvements.an update is Overhauling its onboarding tools in late April Deliver a more streamlined experience and ensure your agents’ personal touch isn’t lost in the technology.

But growth hasn’t been easy, and the New York-based company has hit some tough headlines in the first half of the year. Round of layoffs, closure of Philadelphia office and a SEC $9M Settlement All part of the Betterment 2023 story.

As Betterment For Advisors gears up for the second half of the year, Moore catches up financial plan Talk about what’s in store for his team; how they’re dealing with headwinds and tailwinds; and why they’re so excited about the next set of hurdles they’re trying to clear.

This interview has been lightly edited for length and clarity.

Financial plan: The first half of 2023 will be a tumultuous year for just about everyone in the industry, and Betterment has not been spared. How does Betterment For Advisors navigate all the ebbs and flows of the market?

Tom Moore: Well, look at how we have chosen to grow the organization over time… When we first came out in 2010, it was the first robo-advisor. Disrupt finance here. That’s why we’re still called robo-advisors all the time. But over time, we’ve grown that platform to actually have three separate and distinct lines of business that are impacted by different market headwinds within the market headwinds. The three core businesses of Betterment Direct are robo-advisors; Betterment For Advisors, which is really like a vertically integrated custodian for RIAs; and then Betterment At Work, which is like a small business 401(k) offering. That makes us really durable when we see these big, unexpected swings. I always like to say it like when one business zigzags, the other zigzags. Our advisory business is less susceptible to rapid market changes, whereas in retail we see more of a knee-jerk reaction from investors as the market moves up and down. This creates a very interesting buoy for us when things are very volatile. We’ve built those three businesses, it’s not that different from Fidelity, right? It’s just that we always look at it from the perspective of the technological frontier. We were like, let’s deliver innovative best-in-class technology across these three categories and then leverage the segment of the market that really values ​​it. That’s how we really think about preparing ourselves for volatility and unexpected events. In addition to that, we also thought about it from a product point of view. There are good and bad, right. In 2020, we developed high-yield cash products because interest rates are rising. If you remember. such a short time.

Financial plan: What is it like to work and compete in such a dynamic environment? Especially knowing that there are a lot of outside eyes on your company and its trajectory?

TM value: We’re in an interesting place — because of how we came out, but also because of our disruptor role in the market — like we’re seen as innovators and people who are expected to continue innovating. But you know, we’ve also been around for 12 years now. So we’re in this interesting space, we’ve built enough cachet in the market that we’re really a household name. Like, we’re gonna stay. But we’re still trying to figure out how to keep innovating. I think we’re moving a little faster than your traditional business. I think we’ve been trying to solve real problems in the market that haven’t been solved. When we think about new products and new features, we’re trying to bring really new products and new features to market to move things forward. So it’s always great to work in this culture of innovation. But again, we’ve been around for 12 years. We are strictly regulated. We’re not flying under the watchful eye of the SEC. We don’t fly under FINRA’s radar. This creates more complications. It needed more infrastructure internally, but it also built a reputation as we became a household name. People respect us as a financial institution. But I remember in the early years, it was like, “Yeah, this is great. But are you guys going to get acquired in the next six months or disappear? Do I choose to host my business with you guys, and then Wake up the next day and you guys are out of business?” So we overcame that hurdle, which is really good. But we’re still small enough that we can really innovate in cool, fun ways.

FP: What are the new barriers your company faces?

TM value: The opportunity now in our space is a changing paradigm in the legacy custodial environment. I read about this twice a week. Every alternative custody option poses around this opportunity. Because we all know inertia is the number one challenge in our business. Getting people to make a change is the number one challenge. We now finally have a catalyst that can really inspire people to make a difference. But it’s human nature, right? Change can be scary.

But the challenge…we’re doing the same thing and pretending to take advantage of the opportunity too. We’re delivering something compelling, but it’s different. And our story is different. Because Betterment’s mission has always been to serve underserved populations. The same is true in an RIA environment. This is a small RIA. $30, 50, 70, 100 million dollar one-man shop. Their service is bad, and with this situation heating up, their service will be worse in three years.

family planning: In the meantime, how do you plan to serve smaller RIAs?

TM value: Huge challenge, even with all of this going on, even as these smaller RIAs see the omens…they still don’t want to move. This just goes to show the power of inertia. But as it relates to our product, we’re trying to think about how we can focus our product roadmap on making the change easier and then really be able to deliver the solutions that these consultants want when they come here. I can make it very easy. For the first half of the year, we focused all of our product roadmaps on improving the onboarding process and better adapting to customer legacy assets. Because when you convert customers, that’s everything. How can I make the migration as seamless as possible for my clients? And then how do I deal with those clients who have intrinsic benefits that are difficult to transfer due to the circumstances of their portfolio at Schwab?

And then very quickly, I think we have the cornerstone of the Betterment product development, which will be a smart tax transition tool for legacy assets. So it’s like you take legacy stocks, mutual funds, ETFs on the platform and then let Betterment automatically process those assets while taking into account the customer’s specific tax parameters? It seized its opportunity perfectly. But it also adds a little bit of Betterment, right? We don’t just allow you to do this. We’ll help you do this smartly while using technology.

family planning: Since it’s still one of the hottest topics in wealth tech right now, any thoughts on the rise of artificial intelligence and how Betterment might incorporate it into future products?

TM value: I think if you’re a company like ours or any company right now, and you’re not at least doing due diligence on the tools that are coming out to see if they’re applicable, I think you’re really missing out. Our CTO is all for it. He’s talking to all the different business stakeholders to understand where this might fit. I think where we are today … we’re looking at this as an interesting tool to increase the productivity of our employees internally. Can our copywriters use it for first drafts? Can we implement this into our marketing process? Can we implement this into our compliance process? Can we implement this into our sales process to generate macros? Because in my opinion, that’s where technology really optimizes right now, at least consumer technology. So that’s definitely talking.

What I really liked about this talk was that it brought to light a concept that I’ve been trying to discuss with advisors since I joined Betterment. That said, thinking about how you can increase productivity and productivity by allocating time more smartly and outsourcing things that don’t actually drive value is the real ROI and value. So it’s like, the first thing is to apply the current generative AI models, which I think we just look at as employee productivity. But there are also businesses that need to really think about how to use their time more efficiently or fall behind. This is what we talk about all the time when we think about automating parts of the advisor workflow. There is an argument that consultants who really optimize their businesses around systems like Betterment are actually ahead of the curve. At least that’s how they see things like this. Anyone involved in technology or working in technology, this should be of interest to you because it’s objectively interesting.