Betterment, the largest independent digital advisor, will be adding funds from Dimensional Fund Advisors (DFA) to its Betterment for Advisors platform beginning sometime in the third quarter.
These will be the first mutual funds offered on the Betterment platform, which currently includes only ETFs, and they will be available only to advisors with DFA approval, which involves an education process to understand the firm’s philosophy and the ability to articulate it to clients, according to Betterment CEO Jon Stein. DFA funds are available only through advisors.
“I’ve been a fan of DFA for over a decade,” Stein tells ThinkAdvisor.
DFA bases its portfolios on the belief that market prices reflect all available information and a diversified portfolio with fundamental tilts, such as size and value, coupled with tax efficiency and turnover can outperform traditional market-cap indexes. The firm is considered by many to be the first smart beta portfolio manager before smart beta became a term.
Advisors will be able to invest client assets in DFA funds on the Betterment for Advisors platform at no additional cost and no per-transaction trading fee above the usual 25 basis-point fee for the first $2 million in client assets (and 15 bps above that level).
They will also be able to customize portfolios with DFA funds, adding their own preferences, said Stein, noting that between now and the third-quarter debut of DFA funds, Betterment will be working with advisors to design model portfolios using those funds.