Fidelity Institutional Wealth Services announced this morning that it plans to refer advisors looking for a “robo-advisor” platform to Betterment Institutional.

“It is awesome that Fidelity was progressive enough to be the first,” said Steven D. Lockshin, chairman and founder of Convergent Wealth Advisors, with $9.4 billion in assets and offices around the country. Something of a serial entrepreneur in addition to running an RIA, Lockshin is a major investor in Betterment.

For those unfamiliar with Betterment Institutional, its platform provides advisors the ability to offer their clients managed low-cost portfolios of ETFs, “smart” rebalancing, automated tax-loss harvesting, automatic money transfers and automated dividend re-investment.

In addition, the platform allows advisors to scale their business, automate workflows, develop new client relationships and provide clients with a modern digital and mobile experience. An advisor dashboard allows advisors to view all relevant data at the firm level (assets under management, clients, business metrics) and at the client level (balances, allocations, performance and so on).

Betterment's technology features include paperless new-client brokerage/custodial forms and client agreements with an advisory firm; Web and mobile apps; bank-level security; billing software and fee collection; the generation of statements and reports; and technical support seven days a week. All client-facing materials -- including the Web site, mobile apps, client statements and e-mails -- are branded with the advisory firm’s logo.

The platform also offers secure co-browsing. This allows the advisor to log on to a client portal and see what the client sees. The advisor can then help with account set-up, answer questions and review performance with the client.

The platform for advisors referred through Fidelity has no minimums, upfront costs or transaction fees and will cost 25 basis points for the entire service. Overall, Betterment says 800 to 1,000 advisors are interested in their services.

According to David Canter, Fidelity's executive vice president of practice management and consulting, some of Fidelity’s advisor clients have been asking “How can you help me in the digital space?” Fidelity is teaming up with Betterment so it can offer a digital solution to clients.

For now, Fidelity's arrangement with Betterment Institutional is strictly a referral one. Fidelity will receive an unspecified referral fee for advisors they refer. There are no integrations between Fidelity and Betterment, nor are there any between Betterment and third-party software providers that integrate with Fidelity. All assets referred to Betterment under the agreement will be custodied at Betterment and cleared through APEX; there is no provision for funds to be custodied at Fidelity.

This kind of arrangement is typical of the ones that the practice management team at Fidelity initiates. “Our team makes referrals in a number of practice management areas,” Canter says. As an example, he cites firms that require capital: “We don’t provide capital to advisory firms, but we can help refer them to institutions that do provide capital to advisory firms.”

Both Fidelity and Betterment indicated that a deeper relationship might be in the cards. “Our hope is to build a deeper solution,” Canter said. Jon Stein, founder and CEO of Betterment, said, “We intend to deepen the relationship with Fidelity over time.” 

Betterment Institutional cites four major reasons for advisors who work with the company:

• Simplification. Spend less time crunching numbers, executing trades, filing paper, producing ad hoc reports and rebalancing portfolios. Betterment Institutional’s advanced technology makes managing client portfolios easier than it has ever been.

• Segmentation. Develop segmentation strategies for the emerging affluent millennials and Generations X and Y. Serving new segments is now as easy as the click of a button.

• Scalability. Onboard clients with a simple, paperless signup form and use Betterment Institutional’s automated portfolio services to make it easier to service more clients, more efficiently.

• Easy Start-Up. Train new advisors in an easy-to-use environment and develop a succession plan to ensure the longevity of your business.

Betterment Institutional indicated that they are working on further technology enhancements, and Fidelity indicated that they are open to expanding the relationship. Canter also indicated that this relationship is not exclusive: “This is the first of what we expect to be multiple digital solution options we offer advisors.”