Investors on the Betterment platform can now securely sync outside financial accounts—including 401(k)s, individual retirement accounts (IRAs), taxable accounts, mortgages and loans held at other institutions—with their Betterment account. This will allow users to see their total net worth in one place, and it will help Betterment give better, more holistic personalized advice.
Account aggregation will help Betterment identify where users may be holding idle cash that could be turned into investment growth opportunities, identify where money could be lost to high fees, and then help customers take action on the advice.
In 2015, Betterment launched Betterment for Business, an integrated 401(k) recordkeeping and advice platform.
Betterment’s goal is to be an investor’s central financial relationship, according to Jon Stein, founder and chief executive, adding that the aggregation of accounts helps investors see all their wealth in one place as well as helping Betterment to provide better investing advice.
Betterment reports that it now manages more than $3.7 billion in assets.
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Managed account adoption has grown as employees face greater
market uncertainty and employers look for ways to attract and keep top talent.
New client survey data shared by Fidelity shows slightly more than
half of U.S. employers (51%) see managed account offerings within a
tax-qualified retirement plan as an important way to retain current employees,
while 49% say managed accounts help to attract the best employees.
Sangeeta Moorjani, senior vice president of Fidelity’s
Professional Services Group, explains that workplace managed accounts can serve
as a “shock absorber” to help cushion investors from dramatic market swings. “Companies
are providing the educational resources and direction needed to help employees
recognize the value so they can take full advantage of savings opportunities,” Moorjani
says.
Almost two-thirds (57%) of companies polled by Fidelity feel
that workplace managed accounts are very important to helping employees prepare
for retirement, while 53% say the service ensures employees are investing their precious retirement savings appropriately. About half (48%) of managed account users say
that the “ongoing monitoring of their investments was one of the most valuable
things about the offering.
Fidelity goes on to suggest that, for most workers and
employers, “to know managed accounts is to love them.” Related to this,
employees who didn’t already have a managed account were much less likely to
value them, which Fidelity suggests is usually a result of not understanding the
offering or the benefit.
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“Thirty-nine percent of employees who did not have a managed
account said they lack understanding of what is being offered, and one-quarter
said that not knowing enough about them is a major barrier to adoption,”
Moorjani observes. “But when those same employees were walked through what a
managed account is and how it offers ongoing professional management of their
retirement accounts, over half (54%) said that the concept was relevant to
them, 52% said they would find the service useful and 46% said they would like
to find out more.”
Fidelity points out that 80% of its clients who adopt
workplace managed accounts are also using educational programs “to help
employees gain the knowledge they need” to maximize retirement outcomes.
“Employers are realizing that education is a critical
component in the managed account dialogue,” Moorjani concludes. “Employees seek
professional guidance to help them navigate the uncertainty in the markets.”
Overall, Fidelity says use of its professionally managed
account portfolios, across both retail and workplace distribution channels—continues
to increase significantly year-over-year, with assets under management topping $212
billion in managed accounts in 2015.
According to the 2015 PLANSPONSOR Defined Contribution Survey, overall a little more than 30% of defined contribution plans in the U.S. currently offer managed accounts to participants. This rises to 44% when selecting for mega-sized plans with billions in assets.