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Betterment, the robo advisor, RIA custodian and 401(k) plan provider, is continuing to bolster its ecosystem for mostly small, registered investment advisors with plans to launch direct indexing and a client referral network next year, executives said in an interview in New York.
Betterment announced the acquisition of direct indexing firm Rowboat earlier this year to boost its portfolio management options, including tax optimization and personalized investing. Edward Gottfried, vice president of product for the firm, said direct indexing would fit into its goal of offering efficient portfolio management options to clients of any asset size.
“That’s the approach we’re looking to take as we introduce direct indexing in the first half of the year—not imposing high dollar minimums, not requiring full shares in order to get that index tracking exposure with single stocks,” Gottfried said.
He called direct indexing a “natural progression” for the firm that began in 2008 by offering retail investors access to managed investments, followed in 2014 with custodial services for advisors who had seen the platform and wanted to use it with clients.
“The thing that we get that I think is harder to come by in the wealth management space is economies of scale that comes from us sitting alongside our retail offering,” he said. “We just have a broader universe of clients to plug into and a different kind of revenue stream that we can hook up to that makes it easier to hold house accounts of the other fractions of shares that are required in order to do direct indexing tracking.”
The custodian is also on track to further leverage those retail client origins by starting a referral program with RIAs using its custodial platform in 2026. Betterment currently has about 1 million clients across both retail and advisors representing more than $60 billion in assets, with roughly 600 firms on its custodial platform.
“A lot of people who started their investing journey with us five, 10, even 15 years ago are now at a point where the only reason they would look to leave our platform is because they have a financial advisor in the mix,” Gottfried said. “We want to create more of a graduation ecosystem for them and also a feeder system for our advisors that is something they can’t get elsewhere.”
Earlier this year, the country’s largest custodian, Charles Schwab, confirmed it was raising the minimum client asset range on referrals to $2 million or more in 2026. According a spokesperson, the Schwab Advisor Network generally has from 100 to 150 active firms depending on the “needs of our retail clients and the program.”
