Betterment to Have Direct Indexing, Referrals in 2026
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.”
Betterment’s referral program, and Schwab’s new minimum, were both first reported by Citywire.
Schwab and Fidelity have traditionally been the desired referral programs for advisors. But as the industry struggles with client acquisition and organic growth, other custodians have been considering them, including BNY Pershing, Goldman Sachs and Betterment competitor Robinhood, which acquired custodian TradePMR in 2024.
Robinhood, like Betterment, is making the case that its retail clients can be an important new channel for advisors as those investors come of age and need more services. But Alison Considine, business development manager at Betterment, noted her firm’s traditional positioning more toward managed portfolios as opposed to retail stock picking.
“We have always offered managed portfolios of ETFs as opposed to more self-directed trading,” Considine said. “In some ways, our model has lined up better with ongoing advice and advisors.”
In a sign that Betterment, too, wants to continue expanding its retail client base both as a business, and for its advisor clients, it’s launching self-directed investment in about a month.
“We think there’s a place for both managed and self-directed investing to sit side by side,” she said. “We’ve heard demand from that from investors who want a managed portfolio for most of their assets, but also want to hold some self-directed holdings on the side.”
Considine said that over the past 18 months Betterment has focused on expanding its model marketplace along with its portfolio management software to give advisors as much choice as possible.
Betterment also offers cryptocurrency exposure to advisors and their clients through an ETF wrapper, Considine said. It is considering alternative investments, but has no plans to offer them as of now. If they do, it may be a liquid alternative via a mutual fund wrapper, she said.
“Our thought process there is really through advisor demand,” Considine said. “If they want to use it we want to provide a good way to get access to it.”
The firm also continues to evolve its 401(k) recordkeeping capabilities for financial advisors, which it launched in 2020 after offering retirement plans directly to businesses for years. In February, it started offering advisors solo 401(k)s for self-employed clients.
Betterment also offers advisors using its 401(k) program a way to interact and educate plan participants, who may become potential clients. They do not, as Gottfried pointed out, compete with them for those prospective wealth clients as some record keepers do.
“With some of the legacy players, [advisors] feel that there’s more competition directly with the platform,” he said. “We’ve tried to be very clear that we want to generate their business, we’re not directly competing.”
Edward Jones, the national broker/dealer, announced Monday it was expanding its “retirement plan product shelf” to its roughly 20,000 financial advisors through partnerships with retirement plan and education provider Voya and life insurance and annuity provider Nationwide. It also said it was investing in new technologies in the space including a firm called Aboon, which does retirement plan design and administration, and Addition Wealth, which is a digital financial wellness platform for savers.
“For nearly a third of Americans, the workplace is where they have their first investment experience,” Alyssa (Lysa) Harper, principal and head of the workplace segment at Edward Jones, said in a statment. “The investments Edward Jones is making, along with our expansive geographic reach, provide a tremendous opportunity to meet more people where they are – at work – offering business owners and their employees the advice, products and education they need throughout their financial journey.”