We value the feedback our advisors provide, and one thing we’ve heard is that they want more flexibility over client billing. Our three new Billing Plans will allow advisors to set fee structures that fit the needs of both their advisory firm and their clients.

Under each plan, advisory fees will accrue daily and be assessed quarterly as usual. Advisors who have admin privileges can create new Billing Plans and set the default Plan for their firm, which will be used for new households moving forward. Any advisor can choose from the list of available Billing Plans—which are created by admin advisors—and assign any Plan to their clients.

Below, we’ll outline how each Billing Plan works and give examples of how fees might look for households of varying asset ownership levels. 

Note that regardless of which Billing Plan is chosen, each advised client pays a percentage fee directly to Betterment for portfolio management. The fees represented in each Billing Plan below are additional fees (on top of Betterment’s wrap fee) that are collected by Betterment on behalf of the advisor and sent to each advisory firm on a quarterly basis.

Asset-Based Billing

In the past, the only billing option for advisors was to charge basis points (bps) on a client’s assets, regardless of account balance. We’ll still be offering this asset-based billing option, however, it must now be applied to a total household rather than separately across a household’s legal accounts. 

As a reminder, legal accounts include individual taxable, joint taxable, trusts, and each type of IRA. A household consists of all legal accounts owned by one person, as well as all the accounts owned by anyone that person shares a joint account or trust with. Households can also be created by explicitly associating two or more people.

Example of Asset-Based Billing Plan at 50 bps

Balance Annual Fee Approx. Quarterly Fee
Household 1 $50,000 $250 $62.50
Household 2 $500,000 $2,500 $625
Household 3 $3,000,000 $15,000 $3,750

For an advisor’s existing households, we will automatically carry over their existing asset-based billing plan. The advisor will be able to make changes if they would like, but otherwise, there is nothing further they’ll need to do.

Fixed Fee Billing

The ability to charge a flat annual fee is something advisors have asked for—so we’ve added it to our Billing Plan options. Advisors can now choose a fixed annual fee for their services, and apply it to households regardless of balance.

The most important thing to know about this plan is that a household’s balance must be above the fixed fee amount in order for fees to accrue. 

For example, if the fixed fee is $5,000, a balance of $4,999 would not accrue fees. Because fees accrue daily, if a household’s balance is below the set fixed fee amount at the close of market on any given day, no fee will accrue on that day. Since fees are assessed quarterly, the annual fee will be prorated across each calendar quarter.

Tiered Billing

Tiered billing allows for ranges to be set for both asset-based fees and fixed fees. The tiers work similar to tax brackets, in that only the assets held within each tier’s range are charged with that tier’s rate. Below is an example of what an asset-based tiered structure might look like.

Example Tiered Billing Structure: Asset-Based

Asset Range Rate
$0 to $100,000 100 bps
$100,001 to $500,000 75 bps
Over $500,001  50 bps

Households under the above tiered billing structure would be charged as follows:

Balance Annual Fee Approx. Quarterly Fee
Household 1 $50,000 $500 $125
Household 2 $225,000 $1,937.50 $484
Household 3 $2,600,000 $14,500 $3,625

Setting A Minimum Fee

Advisors can utilize the tiered structure to set a minimum fee by setting a fixed fee for the lowest asset tier, and then applying an asset-based fee for the higher subsequent tiers. Just like under the fixed fee plan, a household’s assets must be higher than the lowest fixed fee rate in order for fees to start accruing.

Example Tiered Billing Structure: Fixed Fee + Asset-Based

Asset Range Rate
$0 to $100,000 $1,000 per year
$100,001 to $500,000 75 bps
Over $500,001  50 bps

If you have any questions about how Billing Plans work, head to our FAQs to find answers to the most commonly asked questions. If you still need help, our Advisor Support Associates can help you find the right billing solution that works for your firm. Lastly, keep the feedback coming—we value the voices of our advisors and we will continue to make improvements to meet their dynamic needs.


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This article was published on December 4, 2019

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