Pricing is a differentiator for Betterment for Business. As with its retail offerings, Betterment’s 401(k)s will come with a low cost—plan sponsors with more than $1 million in assets will pay no up-front fees. The platform will charge an AUM fee ranging between 10 and 60 basis points, depending on the size of the plan.
“It’s very different because we put advice and record-keeping under the same umbrella at low fees,” Loh said. “Previously, firms made digital advice in the 401(k) space available at an additional fee, often between 40 and 50 bps, that was added on top of the cost of the 401(k). Our highest fee is 60 basis points, and that’s for everything.”
While many in the retirement industry are wary about the proposed Department of Labor fiduciary rule, which is expected to be adopted later this year, Betterment welcomes the proposed changes.
“We already act as a fiduciary,” Loh said. “The level of advice we provide is part of what makes Betterment for Business unique. We do all of the fund selection.”
Betterment for Business offers 401(k) sponsors and participants access to the same suite of index-tracking ETFs that Betterment’s robo-advisor offers retail customers.
Plan participants will also be able to open and customize taxable investment accounts, Roth and traditional IRAs, and trust accounts alongside their 401(k)s on Betterment’s platform, where they will be managed together.
Betterment for Business has also formed an advisory board to help with development and implementation. The first two members are Tom Clark of the Wagner Law Group and Ray Kanner, head of IBM’s global pension and savings system.
By entering into the $5.5 trillion 401(k) space, Betterment could substantially expand its business. Founded in 2010, the company now serves 130,000 individual clients and manages $3.2 billion in client assets through its retail and institutional platforms.