Recensione di Betterment

In this article, I’ll be reviewing Betterment, an investment services provider based in New York. This review is meant as a guide to help you be more informed about the positives as well as the negatives of the investment platform the company offers. 

If you’d like more detailed advice, perhaps to see how Betterment’s services might work out for your personal circumstances, then don’t hesitate to contact me.

My contact details are hello@adamfayed.com and WhatsApp +44-7393-450-837.

Le informazioni contenute in questo articolo hanno un valore puramente indicativo. Non costituiscono consulenza finanziaria, legale o fiscale e non rappresentano una raccomandazione o una sollecitazione a investire. Alcuni fatti potrebbero essere cambiati dal momento della stesura.

Betterment – company overview

Founded in 2008, Betterment is a New York robo-advisor service that aims to help people to achieve their investment goals by offering automated advice to users of the service. In short, you can think of it as an artificial intelligence system designed to make it easier for ordinary investors to find their way through the often tricky world of international finance.

Betterment has grown since its early days to become one of the largest independent financial advisory services using an online platform in the United States. That fact alone makes it worth looking into. Why are so many people using it?

Jon Stein and Eli Broverman began Betterment after Stein had initially come up with a Java-based software application for providing financial advice. As soon as Stein realised he needed to be regulated by offering such a service commercially, he brought Broverman in for his legal expertise as a securities lawyer.

Since then, Betterment has grown and grown in terms of the number of users it has attracted, largely under the leadership of Stein, as CEO, and Dustin Lucien, the company’s COO. By 2017, the quantity of assets that were under the management of the company had surpassed the $10 billion mark.

In March 2019, Betterment made a significant change to its operating practices. Prior to that point, investors needed a minimum account balance of $100,000 to be maintained. This threshold was removed, thereby opening up the platform to a much larger cross-section of the population.

Financial services offered by Betterment

As mentioned, Betterment is an online service that provides so-called ‘tools’. These allow users to set their financial goals, whether that is to create an investment portfolio for their retirement or to help with their tax strategy.

The tools on offer within Betterment’s investment platform are available around the globe. They are largely made up of passive index-tracking tools which are tied to equity funds. These might be in stocks and shares in various exchanges around the globe, not just Wall Street.

Investors can take advantage of fixed income exchange-traded funds, otherwise known as ETFs, within the Betterment software investment platform. Other financial products offered are individual retirement accounts (IRAs) and certain tax-advantaged investment accounts.

Which institutions regulate Betterment and how are investors protected?

As a business that essentially provides financial advice and has investors place their money into accounts through its platform, Betterment has to be registered with the Securities and Exchange Commission in the US.

However, it should not be considered as a bank where money is simply stored. Investors still make their own decisions based on the advice they receive. As such, Betterment is also a US-registered investment advisor as well as an accredited brokerage dealer.

Finally, I should mention that Betterment also falls under the auspices of the Financial Industry Regulatory Authority (FINRA) in the US. This should give investors some reassurance but there have been questions put to the company in the past by FINRA about some specific aspects of its platform.

Who is Betterment suited to?

Betterment is a useful platform for people who have specific goals they want to achieve from their investments. The goal-oriented tools on offer within the platform are certainly geared up to this sort of approach.

Having said that, there is nothing to put general investors off – people who just want to make the most of the global financial markets to grow their nest egg. It is simply that Betterment has been designed to suit targeted growth.

If you like automated rebalancing – something that automatically adjusts a portfolio when there are market fluctuations to even them out – then Betterment may well be for you.

That said, how automatic rebalancing works and how you set the tools to make it function in a way that suits, for example, your attitude to risk does need a bit of expertise. 

Overall, I’d say that Betterment’s entry-level investment platform, known as Betterment Digital, is suited to investors who want a hands-off experience, the sort of people who are happy to sit back and allow the algorithms to take over.

Given that its tools are often targeted for long-term growth people who want to use it to save for their retirement are also likely to find it useful. Given that you can start from zero with Betterment Digital, this really means anyone of working age.

Bear in mind that with Betterment Digital, fees of 0.25 per cent of your assets under management (AUM) are levied annually. On the other hand, if you opt for Betterment Premium, then you will obtain access – by phone only – to the company’s financial planners as well as the online automated advice.

In order to gain access to those premium services, however, you can expect an annual AUM fee of 0.4 per cent. In addition, you will need to set aside at least $100,000 since this is Betterment Premium’s account minimum.

As such, although Betterment Digital will suit a wide variety of investors, Betterment Premium is only likely to appeal to wealthier individuals who want a more personalised service. 

Given that you can obtain this elsewhere without relying on all of the automation tools in the software, I’d say you can do better elsewhere. Therefore, in the interests of fairness, for the remainder of this review, I’m going to be mainly focussing on what Betterment Digital has to offer.

Betterment – the plus points

• The robo-advisor service offered by Betterment has no minimum account requirement which means you can get to know how it works before deciding if you want to make a significant investment in it. It also makes it stand out from many other robo-advisory services out there.
• The simple investment tools allow users to diversify their investments in a manner that suits their priorities and attitude to risk. For example, there are a dozen different asset classes among the ETFs on offer. That said, you still need to have an idea about the differences to get the best out of the platform.
• Socially responsible investment portfolios are possible to create using Betterment. However, what is socially responsible to one investor may not be to another, of course.
• Automatic rebalancing is a big plus point for many investors who want to set their goals and let the robo-advisor take care of managing it for them. Some competitor robo-advisor platforms charge for this sort of service but it is included within the annual AUM fees with Betterment.
• The fees charged for Betterment Digital are competitive given the current state of the marketplace for automated investment tools. When it comes to Betterment Premium, however, the augmented fees are not always justified by the additional level of service or expertise you can expect.
• Betterment’s packages allow you to target your saving and investment portfolio for specific life events, such as children reaching adulthood or your own retirement.
• Goal-oriented saving is a useful way to plan for your future even if you are not thinking about specific life events and Betterment does help you to focus on what’s most important to you as an investor.
• Betterment offers a conventional saving account that you can make use of outside of the usual portfolio of investments. It is called Cash Reserve and it currently pays interest at 0.4 per cent with up to $1 million covered under insurance if something were to go wrong.
• Both the browser-based and mobile app version of the software offers two-step authentication, a solid level of personal security that should keep hackers at bay.
• Finally, I should mention that Betterment has a charity giving tool. If you are interested in making donations and want to do so in a tax-efficient manner, then this can be a useful part of the software offering.

Betterment – the downsides

With any savings and investment platform, there are always cons to go with all of the pros, so it is important to look at some of the downsides you might experience with Betterment, too.

• Like all robo-advisory services, there is little that is personalised or nuanced about the advice you will receive from this platform. You answer questions to set your priorities but what if yours change or don’t fall into the exact categories of the software’s design?
• Personalised advice is on offer with Betterment Premium, but the charges are much higher for this plus you will need to invest a large sum. The quality of the advice you may receive is also subject to variability.
• Safety nets are advised in Betterment, usually by suggesting you invest more in bonds than in stocks. However, in a potentially unstable economic period, how these safety nets will come into play may not always suit your personal best interests.
• Closing an account with Betterment takes a considerable amount of time and effort. Certainly, it is not as simple as opening an account which is, by contrast, a speedy affair.
• Since it is a US company, it probably comes as no surprise that the whole platform works in dollars only. Investors from the UK and elsewhere will have to exchange their currency to dollars before they are able to transfer a balance to their account to begin investing.
• Investors can only transfer funds to their Betterment account via a bank transfer. In other words, you cannot load it with funds from a credit card or a PayPal account.
• There is not much by way of fee reporting that users can get their hands on using the platform.
• In terms of customer support, Betterment is only available during usual office hours which means complying with Eastern Standard Time. In fairness, email support is also provided but replies usually take a day or two to come through.
• Overall, the automated service on offer is not anywhere as tailored as the sort of advice you can obtain from a professional investment advisor.

A note on robo-advisors

The term robo-advisor has grown in usage to mean something that automatically provides financial advice. Although it should be noted that no two robo-advisors will ever be built in exactly the same way, the trading algorithms that sit behind them are nothing more than lines of code. 

In short, a robo-advisor can only ever be as good as the software developer behind it. 

Clearly, the popularity of Betterment demonstrates that many people trust the automated advice offered by the platform. It certainly suits people who want to leave it to the mathematical expertise of software developers. 

However, automated financial advice cannot always be nuanced in the way that in-person advice can be. Nor is it as good at dealing with unprecedented events in a changing world. 

The financial models that such algorithms utilise are necessarily based on the precedents of the past, not on determining what might occur if those precedents no longer stand up.

Should you invest through Betterment’s platform?

In summary, I’d say that you can do worse than experiment with Betterment Digital. Because there is no minimum account balance you need to maintain, why not try it out with a few hundred dollars and see if it is for you or not?

The goal-oriented investment tools are very practical and this makes Betterment stand out from other robo-advisors you might also be considering. 

Overall, I’d err on the side of caution before transferring all of your available investment funds into it, especially if you live outside of the US and won’t necessarily be covered by all of the financial regulations and safeguards in that country.

The biggest drawback is if you have significant amounts of money, or fall into a niche like being an expat.

These kinds of services are therefore better for newer investors with small amounts of money.

Ulteriori letture: Recensione HSBC Expat

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Adam è un autore riconosciuto a livello internazionale in materia finanziaria con oltre 830 milioni di visualizzazioni di risposte su Quora, un libro molto venduto su Amazon e un contributo su Forbes.