Betterment sets RIA custody fees starting at 0.20%

Betterment will apply a new platform fee to registered investment advisers and other advisory practices that custody assets at Betterment Advisor Solutions starting Jan. 1. Accounts with less than $10 million at the custodian will be charged 0.20% annually; firms with more than $10 million will pay 0.12%. Firms holding more than $100 million will receive negotiated rates.

The company notified its custodial clients of the new schedule. Some existing customers reached agreements to preserve parts of their prior fee arrangements. The change follows a reduction to fees for Betterment’s retail investment clients last year.

“The purpose of this pricing reset is to say that we’ve reached a scale that we can support bringing the fee schedule down and simplifying it,” — Sarah Levy, Betterment chief executive.

Betterment launched its custodian business in 2014. The firm manages more than $70 billion in assets and serves about 1 million retail clients. Roughly 600 RIAs use its custody platform. The custodian has been rebranded twice and is offered with portfolio management and automation tools.

The platform charges a platform fee plus a charge for automated account transfers, which the firm describes as its only transaction fee. Betterment also generates revenue from cash sweep programs, lending services, payments from fund firms and payment for order flow through its trading and clearing partner Apex Fintech Solutions. The advisor-facing platform includes portfolio management, tax optimization, onboarding tools, trading, billing and reporting.

Custody competition remains concentrated among large firms, while newer custodians have pitched simpler technology and clearer fees to win business from advisers that use multiple custodians. Industry data show that at the end of 2024 at least 22% of RIAs used three or more custodians and another 28% used two.

“It does take time, and it takes a lot of resources to execute on, so it’s hard to plan out how that would fare,” — Stephen Caruso, director of wealth management at Cerulli Associates.

Betterment has built an AI document reader to speed onboarding and has opened a selective client referral service for some advisory clients. The company presents its custodian as an option advisers can use alongside other custodians for particular client segments, allowing firms to move selected assets to Betterment for automation while keeping other assets elsewhere.

Levy acknowledged the largest advisory firms may require capabilities provided by the biggest custodians for complex products and indicated Betterment will continue rolling out automation and advisor-focused tools to reduce manual work for advisory practices.