Robo Adviser Beat:Betterment Claims Better ETF Construct for 401ks

MarketsMuse curators note that “there is always a better way, until its not better. ..”But that isn’t stopping Betterment LLC, the startup robo-adviser that claims to offer a solution for investors who seek an automated approach to stuff ETFs into their401k portfolios.

Betterment, a leading robo-adviser, announced last week that it will launch a 401(k) platform for employers starting early next year. Portfolios will be made up of exchange-traded funds.

Jon Stein, Bettterment CEO
Jon Stein, Bettterment CEO

According to Betterment CEO Jon Stein.. “Current 401(k) offerings—and we have examined them all—have poor user experiences, high costs, and a clear lack of advice. Not anymore. Betterment for Business will bring our smarter technology to the workplace and the millions of Americans who badly need it to meet their retirement needs. “It’s time that all Americans have low-cost, unconflicted advice and smarter technology for retirement planning.”

Betterment says it currently has 100,000 retail customers and $2.6 billion in assets under management in its diversified mix of exchange-traded funds.

Fast-growing ETFs remain a tiny part of the 401(k) market. Anne Tergesen at The Wall Street Journal notes that two key benefits of owning ETFs — intraday trading and tax-efficiency — are sound much less exciting in reference to 401(k)s:

“A couple of ETFs’ biggest selling points don’t give them an edge in the 401(k) market. ETFs trade all day long like stocks, but that typically isn’t a feature that employers want to offer in retirement plans. Employers want employees “to take a long-term perspective—not to be day trading,” Ms. Lucas said.  “ETFs are also tax-efficient, but that doesn’t matter in tax-sheltered retirement plans,” said Brooks Herman, head of data and research at BrightScope.”

In offering an ETF-only menu for its 401(k), Betterment joins Charles Schwab Corp. , which last year launched an all-ETF version of its Index Advantage 401(k) platform. Other companies that offer ETFs within 401(k) plans include Vanguard Group and Capital One Financial Corp.’s ShareBuilder 401(k).

For the full story from the WSJ, please click here