The ability to tailor a portfolio strategy for a specific client’s needs is one of the things that a good advisor brings to a client relationship. Depending on the client’s circumstances, portfolio adjustments beyond overall stock-to-bond allocation may be important changes. And, of course, your ability to make adjustments can give clients a more personalized experience that helps to build their trust in you.
That’s why we’ve developed a Betterment for Advisors feature that allows you to adjust the asset class weights in the Betterment Portfolio Strategy. We call this feature Flexible Portfolios because it enables you to adjust a specific portfolio’s composition without needing to completely self-direct the portfolio’s construction.
Flexible Portfolios aims to help you make adjustments to client accounts based on circumstances of their life or to express your professional views on portfolio construction, which could differ from the our investing committee’s recommendation.
Along with giving you more flexibility in adjusting asset classes in the Betterment Portfolio Strategy, we are also providing access to previously unavailable asset classes Using a Flexible Portfolio, you can add International REITs and Domestic REITs, as well as U.S. High-Yield Corporate Bonds. We utilize our standard fund selection process to choose the ETFs representing these new sub-asset classes.
So, how do Flexible Portfolios work?
Start with the Betterment Portfolio Strategy.
By offering Flexible Portfolios, we recognize that you may enjoy part of how we’ve constructed the Betterment Portfolio Strategy, but you may have reason to adjust the portfolios of some clients. For instance, many advisors appreciate the baseline market-cap portfolio construction and optimization and the built-in cost-aware ETF selection process. Flexible Portfolios simply enable you to take control over certain targeted exposure levels. We make it easier by giving you baseline portfolio construction, then enable you to make client-specific customizations.
Adjust portfolios based on client goals.
One distinct advantage of Flexible Portfolios is that you can adjust portfolios for the distinct investment goals of each client. If a client has two different investment goals in their advised account, you can use a Flexible Portfolio for one, and a different portfolio strategy for the other. By giving you goal-specific adjustment capabilities, you can target your adjustments to specific areas of your financial advice.
Take control of the portfolio. Rely on us for automation and tax optimization.
Flexible Portfolios let you take on additional control of portfolio management while still taking advantage of Betterment for Advisors’ investment automation and tax optimization features.
You’ll notice that most asset classes in a Flexible Portfolio have primary and secondary ETFs—which are critical to using Tax Loss Harvesting+™. When you use a Flexible Portfolio, you’ll also still be able to help shape positive investor behavior using features like auto-deposit, automatic rebalancing, our underlying fractional share trading, and Tax Impact Preview.
Get immediate feedback when building a Flexible Portfolio.
When you use a Flexible Portfolio, Betterment for Advisors provides immediate feedback on your adjustments, removing some of the effort around calculating the volatility and diversification of the resulting portfolio. We’ll rate the diversification and the relative risk before you finalize the individual asset class weights for the portfolio. You can read about how we rate diversification here.
When does a Flexible Portfolio make sense?
We’re offering Flexible Portfolios because we heard from you—our partners in financial advice—that our built-in recommended portfolios sometimes don’t enable you to tailor your advice as much as you might wish for some clients. Maybe the client has an unusual asset exposure you don’t control and wish to offset. Maybe you have subtle differences in how you’d like to optimize a portfolio to pursue certain goals. We generally think of Flexible Portfolios as helping you to:
- Adjust a portfolio for a client’s specific circumstances
- Adjust a portfolio for your professional views on portfolio construction
We hope this feature on the Betterment for Advisors platform helps you to offer the right amount of control for your business, while saving you time and some heavy lifting.
This article was published on November 19, 2018