Less than 14 months since Betterment launched its robo 401(k) service, known as Betterment for Business, the firm announced a partnership with ADP, the business outsourcing firm for payrolls and employment benefits.
(Related on ThinkAdvisor: Betterment for Business Officially Launches Robo-401(k))
ADP, according to its website, is the largest provider of HR services in North America, and pays one in six workers in the U.S.
The partnership will allow employees of companies that use ADP’s payroll system to direct their 401(k) contributions to Betterment for Business through the ADP Marketplace, a cloud-based app for human capital management, beginning in the second half of the year. It’s designed for firms that already have 401(k) plans in place who could choose to convert to one managed by Betterment for Business.
In its statement announcing the partnership, Betterment for Business said the new partnership reflects a “rapid response to customer feedback” that will strengthen its ability to serve “midsized professional services firms.” Technology firms are another target client, according to a spokesperson.
(Related on ThinkAdvisor: Betterment Signs Up 300-Plus Retirement Plan Clients in 2016)
“At the onset of the Betterment for Business journey, we set out to simplify 401(k) by building a turnkey solution. This partnership reinforces our ability to respond to customer feedback through partnership with a market leader, applying the best technology to improve the plan sponsor experience.”
Will Trout, Head of Wealth Management Research at Celent, said the Betterment for Business partnership with ADP is “a strategic initiative that helps Betterment and plan sponsors, the latter of whom have been under withering assault by plaintiff’s attorneys for the excessive fees charged to employee-investors.”
He explained that the “partnership reduces the exposure of sponsor-employers to fiduciary liability and boosts their attractiveness to potential new hires [while it] helps Betterment increase assets in its RetireGuide program.”
Betterment, the largest independent robo-advisor, described the new service as a “360-degree integration that will allow for payroll information from ADP to be fed directly into Betterment for Business, and vice versa, providing:
- A seamless and efficient exchange of information, freeing up firms to engage in other valued-added work on behalf of employees
- Easier collection of data including eligibility tracking and plan entry dates, which can simplify compliance
- Improved scale in adding new employees to the platform
Betterment for Business said the partnership represents “ADP’s first-ever API integration,” with a 401(k), service referring to an application program interface, which is the source code that allows two software programs to communicate with each other.
It noted that the API integration is smoother and more efficient that the more typical file transfer protocol (FTP), which is exchange of files between companies, or screen scraping whereby a computer program copies data from a website.
As for what the new partnership could mean for advisors working with 401(k) plans, a spokeswoman said, “Betterment for Business wants to partner with advisors and consultants that are true fiduciaries to their plan sponsors and participants” and currently partners “with several different consultants and firms across a number of clients.”
—Related on ThinkAdvisor:
- Betterment for Business Advisory Board Adds Google Benefits Director
- Betterment Now Offers Human Advice, Restructures Fees
- Betterment Study Urges Strong Oversight of Advisors Working With 401(k) Plans
- Betterment Signs Up 300-Plus Retirement Plan Clients in 2016
- Betterment Partners With Uber to Provide Driver Retirement Accounts