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Betterment Lures Indie FAs with Commission-Free Offer

April 12, 2019

Rather than compete with traditional independent financial advisors, robo-advice pioneer Betterment is offering them access to a new family of funds they can trade commission-free using the firm’s platform, according to news reports.

Dimensional Fund Advisors is already popular with indie advisors and has attracted $576 billion in assets, Devin Ryan, brokerage analyst at JMP Securities, tells the Wall Street Journal.

Betterment plans to give advisors access to the Dimensional funds through its platform for free in the third quarter, according to the paper.

So far, it’s the digital advice provider’s most significant move toward being more competitive with the largest e-brokerages that currently dominate the market for letting indie advisors automate portfolio management while hosting their clients’ assets on their platforms, the Journal writes.

“Dimensional has been on the wish list since the early days of our adviser platform,” Jon Stein, Betterment’s CEO, tells the paper.

Betterment first began offering services for independent advisors back in 2015 and has so far attracted 450 independent financial advisors to its platform, Stein tells the Journal.

That’s far below the roughly 7,500 independent firms that are clients of Charles Schwab Corp., the current leader in offering services to indie advisors, according to the paper.

Jonathan Stein

But getting access to commission-free Dimensional funds comes with a catch: advisors must complete training to sell the funds and then be approved by Dimensional, according to the Journal.

Dimensional funds’ average underlying fund fee is 0.30%, Dave Butler, co-CEO of Dimensional, tells the paper. That’s compared to the 1.1% average expense ratio for mutual funds and 0.53% for exchange traded funds, according to Morningstar data cited by the Journal.

By Alex Padalka
  • To read the Wall Street Journal article cited in this story, click here.