Credibility: Although a relatively new company (formed in 2008) Betterment has been laying down some strong credibility as a leading online investment advisor. In 2014 they became the first online investment service to reach 50,000 clients and manage more than $1billion. This year (2015) they have gained access to the Financial Times list of top financial advisors, also referred to as the FT300.
Website: Betterment Homepage
Assets Under Management: $3 Billion (at time of writing)
Minimum Investment amount: None
Annual Fees: On an account balance of 0-$10,000 Betterment charge 0.35% with a minimum of $100/month automatic deposit or $3 a month without an automatic deposit.If your account balance is between $10K and $100k they charge 0.25% and if your account balance is over $100k they charge 0.15%.
Investment Types: Bond Fund ETFs and Stock Market ETFs.
- Financial Planning
- Tax Loss Harvesting+
Company History: Betterment was founded in 2008 by CEO Jonathan Stein. Mr Stein received his BA in economics from Harvard in 2001, and then went on to do a further degree in premedical studies at Harvard. in 2009 he completed his MBA from Columbia. The company is based in New York city.
Betterment Main Facts
Betterment is one of the leading robo-advisors on the market, in fact according to their website, Betterment claim to be the largest automated investing service there is. The system was designed with the view of achieving the optimal return possible as every level of risk available. Betterment also makes the claim that through diversifying your investment, providing automated rebalancing of your investments, along with a better behaviour and lower fees, you as a customer can expect 4.3% higher returns than a typical self-investor.
When you start your Betterment account you will have the opportunity to choose the ratio of your investment between stock and bond ETF’s. The reason why Betterment use ETF’s as opposed to mutual funds is to the to lower expenses, along with the tax advantages. What ratio of investment you choose is up to you, and can be determined with the very simple to use dashboard. Even though you decide the investment ratio, it is important to remember to try and limit any potential loss by weighting any one investment too much, after all it doesn’t matter how good a platform or offer may be, every investment is subject to market risk.
What is also good when using Betterment, is that they will further diversify your investments for you. Take stocks for a moment, they will split your investment over 6 varying stock ETF’s and they currently use a variance of 7 different bond ETF’s
Main Features of Betterment:
Betterment has a very easy to use dashboard. Its visual interface allows you to easily see how your account is not only set up but how it is performing. Through the interface, you are able to access and manage the various portfolios you have set up, so you don’t have to flick across too many screens.
An additional feature that is a nice tool is the automatic relocation facility. A lot of investors regularly neglect to check their accounts to make sure their account has not drifted over a 5% allocation. Betterment do this for you every three months, meaning you don’t need to worry about you account shifting and ending up being heavier on bonds or stocks than you wanted it to be.
There are other benefits to the Betterment software that I could list, but I don’t want to over do it and lose you with too much information.
Downsides of Betterment:
Nothing is perfect and so where there are benefits to a product, there has to be downsides. If you open an account with Betterment, you won’t be able to invest in individual stocks or bonds, and you can’t invest in mutual funds either, through the software. If you prefer to pick your own stocks or bonds, then betterment is not for you.
Incentives For Joining Betterment:
Betterment currently offer a bonus on your first deposit. If you deposit $5,000 or more up to $24,999 they will give you 3 months free, if you deposit £25,000 or more up to $99,999 they will give you 4 months free and if you deposit over $100,000 they will give you 6 months free. Considering their fees are some of the lowest around, that is a good incentive. There are of course terms and conditions with this incentive, such as to qualify you need to deposit your funds within 30 days of opening your first account and not withdraw that initial deposit for 90 days. Full T&C’s are on their sign up page, which you will see if you click this link: up to 6 months of service free if you sign up here.
Who it is for / Who it is not for:
Unless you have some disposable income each month to put into your Betterment account, you find you will receive monthly charges. Unless you auto deposit $100 a month you will be hit with a $3 a month fee. Also if you are just starting out, as good as Betterment is, there are investment tools you can use that will be better for you, especially with lower fees. If you have over $100,000 to invest, then Betterment is probably the best tool on the market and you should seriously consider it.
- Management Fees
- Account Fees
- Account Minimum
- Promotional Offer