Betterment Advisor Solutions sets custody platform fees at 0.20% under $10 million

Betterment Advisor Solutions will charge advisory firms a platform fee of 0.20% a year on assets held at the custodian, falling to 0.12% once a firm keeps more than $10 million there and to a negotiated rate above $100 million, with the schedule taking effect Jan. 1. CEO Sarah Levy described the new grid to Financial Planning as "very, very simple."

Custody pricing has long been a private negotiation, and a published grid turns it into an opening bid. The business is dominated by Charles Schwab and Fidelity Investments, with smaller platforms pitching advisors on technology and relatively transparent fees, according to Financial Planning. Betterment remains a minor participant by that measure. Its custodian launched in 2014, has been renamed twice since, and works with 600 RIAs for an undisclosed amount of assets, even as the parent company reports more than $70 billion in assets under management and a million retail clients across a business that includes the custodian, a 401(k) arm called Betterment at Work and, as its largest piece, the consumer robo advisor.

What the tiers cost a given firm depends on a detail the coverage leaves open: whether the lower rate applies to the whole balance or only to assets above each threshold. A firm holding $10 million at 20 basis points would pay $20,000 a year. Just over the line at $10.1 million, the bill is $12,120 if 12 basis points covers the entire book and $20,120 if the higher rate still applies to the first $10 million — an $8,000 difference worth a call before the schedule takes effect.

Betterment has notified its custodial clients of the change, and Levy said some existing customers have already secured agreements to keep at least some of their current fee structure in place. That carve-out may matter more to advisors than the grid itself, since this publication has argued that custodial contracts should be treated as negotiable terms rather than defaults — and here is a custodian saying the list price is not the last word.

The platform fee is one line of the custodian's economics, and Levy listed the others: cash sweeps and lending services, third-party payments from fund companies, and payment for order flow routed through Apex Fintech Solutions, the firm's trading and clearing partner. The custodian's sole transaction fee, she said, is a charge for automated customer account transfers. An advisor comparing platforms on published price is therefore comparing a number that leaves sweep income, lending and order-routing revenue out of the estimate.

Two other additions target the operational work of moving and winning accounts: an AI document reader meant to speed client onboarding, and a client referral service among select RIAs that Levy said will eventually be more widely available. The referral piece extends a pattern on the advisory side — in August, Betterment expanded a paperless Solo 401(k) offering to the advisor networks HUB and Osaic — and it is the sort of thing that lands on a growth plan rather than a fee schedule.

Levy framed the reset as a scale decision, saying Betterment is now profitable as a firm and has the flexibility to cut and simplify pricing after a similar change last year for its retail robo clients. The company's stated target is the increasingly multicustodial RIA, and 600 firms against a million retail accounts suggests the custodian is still a small piece of a much larger company — one where a tiered schedule could win the slice of a book that an advisor keeps at a second platform and can move at low cost.

That slice is least expensive to win at the bottom of the schedule, where the published rate is highest. Schwab has told firms in its Advisor Network that it will stop passing along referrals for households with less than $5 million starting in 2027, pushing those practices to source growth on their own. A firm under $10 million would pay Betterment its top rate and, in exchange, get a custodian actively recruiting that segment.

Before Jan. 1, the remaining questions are whether the 0.12% applies to the whole balance and whether the negotiated tier above $100 million is offered or has to be asked for. The 600 RIAs already on the platform will have their own answer soon, and the ones weighing a second custodian now have a public number to hold against their current arrangement.