What is Betterment?
Betterment is a fiduciary company that uses AI-based technology to make investment and financial recommendations and help customers earn more on those investments. It offers strategies to help users save for retirement, major purchases and education. The company’s technology also provides strategies for general investing and trusts.
Depending on your individual needs, Betterment portfolios are purpose-built to help you earn more and achieve your goals. When you sign up, indicate how much you want to save and by when. Betterment will use its AI technology to generate recommendations based on your goals.
For example, for customers who want to save long-term for retirement, Betterment might recommend a 90/10 stock/bond ratio. For customers who want to save for a kitchen renovation, the ratio would be 50/50. Betterment provides personalized digital investment advice.
How does Betterment work?
The Betterment platform is designed to help you build wealth by diversifying investments in the entire market. Customize a portfolio based on time horizon, risk tolerance and other factors. You can review any investment strategy’s historical performance before selecting it and monitor its performance in relation to individual goals.
The Betterment Core Portfolio focuses on low-cost, tax-efficient ETFs.
The Goldman Sachs Smart Beta Portfolio aims to outperform market-capitalization portfolios with ETFs.
Socially responsible portfolio options include Broad Impact, Climate Impact and Social Impact.
Lower-risk all-cash or all-bond options include Betterment Cash and BlackRock Target Income.
Flexible Portfolio options allow investors to adjust the weight of asset classes or choose not to invest in certain geographies or bond classes.
In general, if your goal is short-term, Betterment will recommend a more conservative portfolio. For long-term investing, it’ll advise a more aggressive portfolio with higher volatility. Clients can have multiple portfolios and strategies.
Betterment fees
Betterment has multiple pricing plans, from fee-free plans to 0.4% annual fees.
The no-fee plan costs $0 in fees and requires $0 in a minimum balance. This account includes a checking account, a cash reserve and planning tool services. Because this plan is purely digital, it doesn’t require any fees.
The 0.25% annual fee plan costs around $2.50 per year for every $1,000 in your account and has a $0 minimum balance. This plan allows for digital investing in any of the company’s portfolios or available accounts and gives users access to features like portfolio rebalancing and advanced tax strategies. It also includes all features in the no-fee plan.
The 0.4% annual fee plan costs around $400 per year for every $100,000 and has a $100,000 minimum balance. This plan provides all the features and account access of the no-fee and the 0.25% fee plan but also includes unlimited correspondence with Certified Financial Planners. These CFP professionals can give in-depth, personalized advice.
Is Betterment safe?
Yes. Betterment is a fiduciary company that’s registered with the SEC and a member of the FINRA. It hires Certified Financial Planners to give advice. While investments could lose value over time — a risk with all investing — funds in Betterment accounts are protected by SIPC in case of emergencies. Its checking accounts are FDIC-insured, and the company offers a satisfaction guarantee.
For customers who want to manage banking and investing in one place, Betterment offers checking and savings accounts along with investment portfolios. Investors who want to keep costs low by choosing a robo-advisor can trust Betterment as a fiduciary. Those who want personal attention from an advisor in person can choose Betterment’s premium plan for unlimited advice from a CFP, though this service requires a minimum investment of $100,000.
