There’s an ongoing joke around the office that I love giving away business. It’s not totally accurate, but I do have a habit of telling people they don’t need my services. At this point in my life and career, I’ll take quality over quantity every time, so anyone who’d be better served by a different wealth management option will hear as much from me.
Therefore, while it might seem like I’m plugging the competition, I’m happy to offer a review of Betterment. I’ve championed this company since it arrived on the scene; the low fees and simplicity make it a perfect option for all income and investment experience levels. I don’t doubt that Betterment has single-handedly increased the percentage of Americans with growing retirement accounts, and that’s a very good thing.
The company sprouted in 2008, just as the economy plunged into depths some thought we might never return from. Amidst the uncertainty of the recession, consumers gave money to financial advisors with the same level of trust they’d have handing a baby to a tiger. The change that customers needed to see, which Betterment argued and eventually proved, was less money lost by way of fees and more transparency when it came to how retirement funds were being invested.
Part of my admiration for this company stems from the fact it operates as a fiduciary, like myself. Legally bound to do what’s right for you and your money, you don’t have to worry that Betterment advisors are secretly putting all your money into underperforming indexes in exchange for a kickback, or making dozens of moves each day to ratchet up your maintenance fees.
When explaining how Betterment came to be, it comes down to a thirst for trust during tough economic times. Americans were horrified of losing their retirements and skeptical of the traditional outlets. Betterment stepped into that void and quickly established itself as an industry leader. With a mix of algorithmic intelligence and compassionate CEOs, customers found a place offering the service and care they were looking for.
If you have no retirement account, you need Betterment. If you have a bad retirement account or a questionable 401(k), you need to roll over to Betterment. Unless you’re working with me, there’s a good chance you could use Betterment.
Of all the places you can put your dollars, Betterment offers arguably the widest spread of features to accommodate the broadest range of investors. Each account factors in your personal goals, based on income, age, projected retirement and a handful of other details. The operation is savvy enough to understand the vast differences from one investor to the next, and the programming and account options address that.
Too many managers, online or otherwise, require a hefty buy-in from anyone looking to have their retirement funds curated. Unless you’ve got $100,000 from which advisors can pull their percentage, your future isn’t worth their time. This type of practice has no place at Betterment, where standard accounts come with no minimum deposit. In an age where 30- and 40-year-olds are just starting to think about putting money away for the future, it’s important people be allowed to start from scratch.
For those of you sitting on gobs of money and just looking for an easy, trustworthy management tool, your $100,000 deposit can get you a Betterment Premium account. You’ll have unlimited access to real people and, while you’ll pay a slightly higher percentage, you’ve got more money working to cover those fees.
Even though Betterment is a robo-advisor, there’s plenty of room for you to be hands-on. There are a number of tools and calculators available on the site, helping you decide what to do with your money and also how to adjust your career and retirement planning if need be. It comes up a little short of having a personal wealth advisor, but you get a lot more than an account in which you store your cash.
If easy-to-use and effective sound like investment qualities you can get behind, you’ll appreciate how Betterment handles your funds. Should you want to take a more active approach, drop me a line and we’ll talk about the joys of self-directed IRAs.
A decade since our financial institutions had to pull themselves from the ashes, plenty of robo-advisors and alternative financiers have joined the game. To stay out in front, Betterment simply continues offering exceptional service at an affordable rate. Investors have no reason to leave this company and every reason to join.
What exactly makes the service so useful and dependable? Quite a few things.
Every month, algorithms assess and re-balance funds to keep you on track for specified goals. This ensures you stay positioned for the slow, steady, growing gains you need from your retirement account, as opposed to the harsher peaks and valleys that might muddle your earnings. The monthly routine leans on less risky strategies just before each re-balancing, aiming to keep gains safe and limit unnecessary exposure.
Whereas the broker overseeing your 401(k) wouldn’t ever take the time or even think to do a monthly re-balance, you’ve got a cold, calculating computer playing 3D chess on your behalf. While I can’t fault anyone who says they’d rather work with a human advisor who can help them understand complex issues, there’s no denying that the speed and programmability of a robo-service has strong advantages.
Betterment provides five choices for portfolio class, catering to financial and personal goals.
● Goldman-Sachs Smart Beta
● Socially responsible
We’ve generally covered the standard portfolio, a strong option for most investors that consists of diversified stock and bond ETFs. Each standard operates differently depending on personal information but they all function under the same principles.
The income-focused portfolio is exclusive to bonds packaged in BlackRock ETFs. A good option for retirees or those who have multiple accounts, it mitigates risk and aims to provide a consistent source of cash. You can’t expect 10-12% gains from this account as you would something that included stocks, but that’s not the point. This option is relatively new, made available in September of 2017 as an option for people wary of the stock market taking a turn and struggling to capitalize because of low interest rates. Probably not the best choice for the average reader, but still a great option for those wanting to turn savings into a steady trickle of income.
The Smart Beta option wants to win the day, attempting to outearn the market and make you rich. Some years, this is the best place to have your money. Other years… I think you know where this is headed. Taking this approach all depends on where you are in your career, how much you have invested in your portfolio and your ability to weather a storm without panicking. Give it a shot if you’re 25 and earning six figures, but maybe hold off in you’re closer to 50 and afraid of a market setback.
One of the most popular portfolios, and one that’s caught on with investment agencies around the globe, is the socially-minded platform. You’ll have a little more say in what types of companies, industries and countries you put your dollars behind with this option, though it’s not as straightforward as getting a bunch of Green Peace stock. You’ll get ETFs with large-cap firms and emerging market environmental, social and governance funds (ESGs). It’s not quite as idealistic as the title suggests, but you can claim a little peace of mind knowing your money avoids some of the environmental and social pitfalls that come with blind investing.
The flexible option is just the standard portfolio with a little more user input. The algorithm that manipulates your investment strategy takes into account whatever distribution criteria you choose to impose. It’s your money, and Betterment is flexible about that.
Upon creating your account, Betterment walks you through a series of questions that help define your future goals. The process is pretty straightforward and doesn’t require you to make big life decisions on the spot, but rather helps you create a general focus for your retirement assets. The more involved you get in the goal-setting process, the more that will affect how your money gets invested and the guidance Betterment offers. If your contributions lag and your retirement timeline starts to stretch, you’ll get some gentle encouragement to deposit more money.
Most of us would rather not do the math every day to make sure our retirement accounts are on track. That’s another useful benefit of a well-run robo-advisor, as you always know where your account stands and whether or not your outlook is sunny.
You’ll see this topic in the cons section of many Betterment reviews, but it’s worth remembering that the fees stay low because you don’t have a handful of brokers constantly fiddling with your investments and waiting to field your calls. The digital communication works just fine for most modern investors, with live chat during regular business hours and speedy email responses. Should you really need an advisor’s time, you can pay to get the assistance you require.
With the basic account charging users .25% of the balance annually, Betterment remains one of the most affordable options on the market. You don’t pay a fee every time your account needs to be re-balanced, so the people and computers monitoring your money have no incentive other than making you rich. It’s as straightforward as can be and exactly how all of us financial advisors should operate.
For those interested in the premium account, the fee bumps up to .40% annually, which covers unlimited phone calls and access to a team of certified financial planners. In either case, you know what you pay, know what you get, and don’t have to worry about fees undermining your investment goals. Investors at every level can open accounts at Betterment without fear of getting gouged.
In addition to thoughtful investing, users can open a high-yield savings account with Betterment that, as of this writing, delivers an APY of 2.16%. There’s a decent chance that’s better than what you’re earning with your current account, and with the option to open a Betterment checking account, you might just want to move everything into one place. Don’t bother if you’re already happy with your bank or credit union, but it’s nice to know you have easy access to an interest rate that’s high enough to earn you a buck or two.
True to robo-advisor form, opening an account with Betterment is fast and simple. I’ve helped clients and friends open and arrange accounts and never had trouble. Whether it’s a rollover or a fresh start, it takes little time and effort on your part, with Betterment doing everything possible to facilitate. If you are rolling over an existing IRA or 401(k), make sure you have everything in order with the previous provider to help the transition go smoothly.
If you don’t have any retirement savings, the time to put money away is yesterday. The fact that Betterment doesn’t have an account minimum takes away your only excuse for not having an account. Start setting money aside now so it has time to grow, and don’t worry about fees or mismanagement because those problems simply don’t exist within the Betterment universe.
Fortunately, Betterment doesn’t aim to hide any of the features that people might take issue with; it’s all front and center and open for discussion.
For the casual investor, this isn’t a big deal. For those of you who want to get your hands dirty and pick individual stocks, you don’t have that option with Betterment. The software incorporates your personal goals and allows for socially-conscious directives, but portfolios consist of ETFs and no single securities. It makes the service a bit limiting when it comes to your purchase power.
While the speedy email communication and online chat options are a pro, the lack of phone support doesn’t sit well with everyone. If you have the money for a premium account this becomes a non-issue, but anyone utilizing the basic service shouldn’t expect one-on-one assistance from a human being over the phone.
With as easy as Betterment makes it to set up an account, it can feel like pulling teeth should you try to move on. There’s nothing shady or fishy about it, you just have to deal with physical mail and signings and it’s all much more burdensome than when you first get started. Fortunately, most customers are happy and this issue doesn’t arise that often.
This is an easy company for me to recommend to virtually anyone. Because of the transparency, low fees and fiduciary status, I don’t have to worry that investors will get in over their heads or sign off on something that doesn’t actually work for them. If you have money to grow for retirement, Betterment will help you accomplish that goal.
If you want more information, check out the resources at Betterment.com. The site is user-friendly and full of helpful tidbits. You can also make an inquiry and get your account questions answered directly by Betterment support.