Rekindling old feud, Michael Kitces blasts Betterment, if civilly, for stealth price hike and other shortcomings

The blogging phenom puts love-hate relationship with the New York robo phenom on display as he calls out Betterment's sustainability and growth-rate problems, but as a customer still sees more to love than hate

Author By Lisa Shidler February 6, 2017 at 11:48 PM

4 Comments

In here-is-the-church-here-is-the-steeple pose, Michael Kitces critiques Betterment in the best tradition of Chinese dissidents.

Robo-Advisors

Michael Kitces

Jon Stein

Scott Smith

Cerulli Associates

Betterment

XY Planning Network

Bill Winterberg

February 7, 2017 — 1:26 AM

Among the observations Kitces makes include a <b>stealth</b> price hike of 67% Why do you say "stealth" price hike? In both Betterment's blog post and updated Form ADV, the change in price was clearly disclosed. Granted, it was not in the lede and/or very first sentence or paragraph, but the change in pricing was not buried in the fine print, either. By saying "stealth," you make it sound as if Betterment intentionally obfuscated the price change from their customers perhaps for devious or nefarious purposes. "Betterment’s growth rate has been falling for a while," Kitces writes. Ziemer disagrees. Indeed, both are talking past each other. What is noteworthy is the metric of 210,000 accounts under Betterment's RIA, making it the second largest RIA by number of accounts, a runner up only to industry behemoth Financial Engines topping 900,000 accounts. One has to extend a search down to ~45,000 accounts to find the third RIA by number of accounts (which is Alpha & Omega).

Jeff Spears

February 7, 2017 — 3:16 PM

This argument reminds me of our flawed two party political system. Voters are more diverse that the restrictive Republican or Democratic platform. Investors also can not be restricted to either robo or full service advice. Seems like Betterment has realized this. Welcome back Lisa!

Jack Waymire

February 7, 2017 — 4:27 PM

Why would any investor select the 40 bps service level for one contact per year? This is a two tier pricing system: 25 bps or 50 bps. The assumption may be investors with larger asset amounts will pay 50 bps for increased human contact. But, that may not be the real marketing challenge. It is not just human contact. Investors with larger asset amounts are used to face-to-face contact with traditional advisors for 100 bps. So 50 bps virtual advisors are 50% less expensive than traditional advisors. Is that enough of an incentive to convince investors to give-up their traditional advisors?

Stephen Winks

February 11, 2017 — 11:50 PM

The sparing between Kitces and Betterment is good for a rapidly evolving advisory services industry where everyone is falling short of a prudent expert standard. The level of counsel is about to increase exponentially at far lower cost without affecting the advisors take home compensation establishing a preemptive advisor value proposition relative to brokers who oppose fiduciary duty. SCW

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Mentioned in this article:

Cerulli Associates
Consulting Firm
Top Executive: Kurt Cerulli

Kitces.com
Consulting Firm
Top Executive: Michael Kitces

Betterment, LLC
Financial Planning Software
Top Executive: Jon Stein