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December 06, 2016 at 10:10 AM
Betterment, the country’s largest independent robo-advisory that now oversees more than $6 billion in assets, placed full-page ads in Sunday’s New York Times and Monday’s Wall Street Journal imploring readers, investors, and President-Elect Donald Trump to get behind the Department of Labor’s fiduciary rule.
The Times ad, featured in the paper’s business section, was in the form of a letter from Betterment’s CEO and founder, Jon Stein, to Trump.
“You said in June that under a Trump presidency, the American people will finally have a president that will fight for them and protect them,” wrote Stein in the ad. “Now’s the time,” he added.
The Labor Department’s fiduciary rule, which requires advisors to IRAs and 401(k) to provide investment advice in the best interest of retirement savers, “is under attack,” Stein tells Trump.
“This rule is worth your time and attention, and worth your support,” said Stein. “We hope that you will stand on the side of America’s 75 million retirement savers, not the firms with deep pockets who are lobbying you to protect their bottom line, instead of their customers’ interests.”
Joe Ziemer, vice president of communications for Betterment for Business, the record-keeping arm of the firm that administers 401(k) plans for 300 plan sponsors, said the purpose of this week’s ad initiative was twofold.
“In light of the recent election there’s been increased chatter on how the rule will be impacted,” said Ziemer in an interview. “We wanted to make sure our vocal stance on the rule was known to the public, and we want to use the opportunity to raise awareness of what we do.”
(Related: DOL’s Borzi: Rule or No Rule, There’s No Going Back on Fiduciary)
The ad in The Journal, which is not a letter to Trump, implores readers to ask if their existing investment advisors are giving non-conflicted advice.
Betterment, based in New York, did not the need the DOL’s rule to establish its conflict-free business model—it has done so since the company’s inception in 2012, the ad says.
“Do you want your money with a company that has always put its customers’ interests first? Or a firm that had to be forced to do it?” the ad rhetorically asks.
Fiduciary rule good for robos
Betterment and other independent providers of automated investment platforms, the so-called robo-advisors, have been vocal supporters of the fiduciary rule.
Robo-advisors deliver various levels of customized investment strategies. On Betterment’s retail platform, assets are invested in low-cost, non-proprietary exchange traded funds, and routinely and automatically rebalanced via algorithms to comport with individual investment goals.
Many industry analysts speculate automated platforms will benefit from the fiduciary rule, which will increase traditional firms’ fee disclosure requirements. That, in turn, could bring attention to the value proposition of low-cost automated platforms.
Critics of the rule charge that its allegedly onerous compliance requirements will price small investors out of the retirement advice market.
In testimony before Congress prior to the rule’s finalization, Labor Secretary Thomas Perez argued that technology and online investment tools could deliver non-conflicted advice to smaller investors at fees lower than existing industry standards.
