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Betterment (company)

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Betterment
Company typePrivate
IndustryInvestment services
Founded2008; 16 years ago (2008)
Founders
  • Jon Stein
  • Eli Broverman
Headquarters
New York City
,
United States
Key people
  • Sarah Levy (CEO)
ProductsFinancial services, asset management, portfolio management, trust services
AUMUS$50 billion (2024) [1]
ParentBetterment Holdings, Inc.
DivisionsBetterment at Work Betterment for Advisors
SubsidiariesMTG, LLC.
Websitewww.betterment.com

Betterment is an American financial advisory company which provides digital investment, retirement and cash management services.[2]

The company is based in New York City, registered with the Securities and Exchange Commission,[3] and a member of the Financial Industry Regulatory Authority. It is a registered investment advisor and broker-dealer.[4]

As of September 2024, Betterment had more than $50 billion of assets under management and over 900,000 customer accounts.[5][6][7]

History

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Foundation and launch

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Betterment was founded in 2008 in New York City by Jon Stein, a Columbia Business School MBA graduate,[8] and Eli Broverman, a lawyer out of NYU School of Law.[9]

Betterment, LLC was established as a Delaware corporation on April 7, 2009.[3] The parent company for Betterment LLC and Betterment Securities, Betterment Holdings, Inc. was established in Delaware on January 29, 2008.[10][11]

The company launched at TechCrunch Disrupt New York in June 2010, and won the award of "Biggest New York Disruptor".[12][13] Within 24 hours, Betterment had attracted nearly 400 early customers, and the company began talks with early investors.[14]

Operations

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Betterment's business model includes three areas of business: retail investment, a platform for advisors, and a 401(k) product for businesses.[15]

The company's personalized financial advice uses principles-based robo-advisor technologies such as computer algorithms. Licensed financial advisors provide over-the-phone consultations to customers who opt for additional support.[16] Betterment's primary retail platform offers taxable and tax-advantaged investment accounts, including traditional and Roth individual retirement accounts (IRAs).[17][18]

In October 2014, Betterment launched a business-to-business offering called Betterment Institutional, subsequently renamed Betterment for Advisors, a digital platform for managing client assets using Betterment's built-in financial advice.[19] In January 2017, the Financial Planning Association (FPA) and Betterment for Advisors ran a program on digital investment advice for the association's members.[20]

In January 2016, the company launched Betterment for Business—a 401(k) platform aimed at small- to medium-sized businesses.[21] It is built on the same underlying investment strategy and generally costs less than most traditional 401(k) plans.[22] In February 2022, the business rebranded to Betterment at Work and announced the acquisition of the partner and customer relationships of Gradvisor, a platform that provides personalized college savings plans.[21][23]

In December 2020, Betterment's founder Jon Stein stepped down as CEO and was succeeded by Viacom Media Networks's former COO Sarah Levy.[24]

In November 2021, Betterment released a new logo with an icon representing a rising sun.[25]

In February 2022, Betterment announced it had acquired Makara, a cryptocurrency portfolio manager.[2] In October 2022, Betterment launched a crypto offering Crypto Investing by Betterment, in which customers can invest in crypto assets.[26][27]

In December 2022, Betterment made an adjustment to their pricing structure.[28][29][30]

In December 2023, a survey by Betterment at Work delved into the retirement preparedness of the U.S. workforce. The study, comparing data from 2022, surveyed 1,000 full-time U.S. employees to analyze changes in retirement readiness and financial wellness over the past year. It also explored shifts in employee benefit preferences and how these trends correlate with the economic landscape.[31][32]

In January 2024, Betterment at Work introduced a new commercial product enabling small business employers to automatically match employee student loan payments with a 401(k) contribution.[33][34]

Betterment for Advisors, its RIA custody division, expanded its custom portfolio construction menu by incorporating thousands of mutual funds for the first time. This initiative aligns with the mutual fund's 100th anniversary.[35][36]

In April 2024, Betterment announced the acquisition of Marcus Invest from Goldman Sachs. Marcus Invest will start transferring these accounts to Betterment.[37][38]

In July 2024, Betterment introduced the Goldman Sachs Tax-Smart Bonds portfolio, aimed at high-tax-bracket clients seeking a bond strategy with potential tax advantages and lower risk compared to equity investments.[39] This launch acknowledged that while high-interest cash savings products offer benefits for short-term needs, their yields can be diminished by taxes over time.[40][41]

On September 12, 2024, Betterment's RIA custody division, formerly known as Betterment for Advisors, was renamed Betterment Advisor Solutions.[42][43] This change reflected the inclusion of additional features such as enhanced portfolio management capabilities, high-yield cash solutions, and an open architecture bundled retirement plan product.[43] Alongside the rebranding, Betterment published an independent RIA survey highlighting current industry trends, with a particular focus on how technology can enhance client outcomes for the emerging generation of financial advisors.[44][45]

Finances

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Betterment has received funding from Bessemer Venture Partners, Menlo Ventures, Anthemis Group, Kinnevik, Francisco Partners, Globespan Capital Partners, Citi Ventures, The Private Shares Fund, Aflac Ventures and ID8 Investments.[46][47][48]

In September 2021, the company secured $160 million in growth capital, consisting of a $60 million Series F equity round led by Treasury and a $100 million credit facility, established with ORIX Corporation USA’s Growth Capital group and Runway Growth Capital. This financing valued the company at nearly $1.3 billion.[49][48][50]

References

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  1. ^ "Pioneering Robo-Advisor Wealthfront Tops $50 Billion in Assets". barrons.com. Retrieved 2024-10-03.
  2. ^ a b "Digital Advisory Firm Betterment Enters Crypto With Makara Acquisition". Investopedia. Retrieved 2022-03-15.
  3. ^ a b "Betterment LLC SEC Registration". sec.report. Retrieved 2021-08-04.
  4. ^ "Investment Safety and Security at Betterment". Betterment. 2014-03-03. Archived from the original on 2017-08-23. Retrieved 2017-06-01.
  5. ^ Welsch, Andrew. "Pioneering Robo-Advisor Wealthfront Tops $50 Billion in Assets". www.barrons.com. Retrieved 2024-10-03.
  6. ^ "Betterment Launches "Pursue Better" Campaign in Partnership With World-Class Athletes". Yahoo Finance. 2024-09-10. Retrieved 2024-10-03.
  7. ^ "Is Betterment Safe for 2024?". Investopedia. Retrieved 2024-10-03.
  8. ^ School, Columbia (2014-04-09). "Jon Stein '09 on the Entrepreneurial Experience". Video Library. Retrieved 2021-08-04.
  9. ^ Cohan, Peter. "Growing At 300% To $8.5 Billion, Betterment Offers Fee, Tax Edge". Forbes. Retrieved 2021-08-04.
  10. ^ "Betterment Holdings, Inc. SEC Registration". sec.report. Retrieved 2021-08-04.
  11. ^ "Division of Corporations - Filing". icis.corp.delaware.gov. Retrieved 2017-06-01.
  12. ^ "Betterment Launches On Stage At TechCrunch Disrupt - Betterment". Betterment. 2010-05-25. Retrieved 2017-06-01.
  13. ^ Arrington, Michael. "The TechCrunch Disrupt Final Five: Betterment, Movieclips, Publish2, Soluto And Ujam". Retrieved 2017-06-01.
  14. ^ "How We Got Funded: Betterment". Inc.com. March 6, 2013. Retrieved 2017-06-01.
  15. ^ Nair, Lavanya (29 March 2019). "Betterment Drops Account Minimums on Custom Portfolios". Retrieved 29 March 2019.
  16. ^ "Robo-Advisor 'Betterment' Adds Human Advice". CNBC. 31 January 2017. Archived from the original on 12 March 2017. Retrieved 19 May 2017.
  17. ^ "Betterment vs. Wealthfront: Which is Best for You?". Investopedia. Retrieved 2022-03-15.
  18. ^ "7 Best Financial Advisors in Tampa, Florida • Benzinga". Benzinga. 2020-05-12. Retrieved 2020-06-17.
  19. ^ Kane, Libby. "Betterment Allies With Fidelity To Bring Financial Advisers Into The 21st Century". Business Insider. Retrieved 2020-05-07.
  20. ^ Powell, Robert. "The robots are coming for your investments — why that might not be a bad thing". MarketWatch. Retrieved 2017-06-01.
  21. ^ a b Konish, Lorie (2021-11-05). "Betterment sees 370% retirement plan growth bolstered by financial wellness efforts". CNBC. Retrieved 2022-03-15.
  22. ^ "Robo-Advisor Betterment Launches 401(k) Plan for Employers". NerdWallet. 2015-09-11. Retrieved 2017-06-01.
  23. ^ Konish, Lorie (2022-02-23). "Betterment adds new student loan, 529 college savings features to its 401(k) business". CNBC. Retrieved 2022-03-15.
  24. ^ "Betterment's founder Jon Stein replaced by Sarah Levy as CEO". 2020-12-08.
  25. ^ "Betterment brand identity". 2021-11-16.
  26. ^ Kim, Crystal (2022-10-12). "Betterment offers four pricey and similar crypto portfolios". Axios. Retrieved 2023-02-18.
  27. ^ Ramaswamy, Anita (2022-10-12). "Roboadvisor Betterment launches crypto offering with four themed portfolios". TechCrunch. Retrieved 2023-02-18.
  28. ^ "Betterment's Pricing". www.betterment.com. Retrieved 2023-02-18.
  29. ^ "Betterment raises fees on small investors". InvestmentNews. 2022-11-18. Retrieved 2023-02-18.
  30. ^ Breen, Oisin. "Wealthfront pounces after Betterment jacks up prices on small investors, but Betterment claims last laugh -- 'thousands' of new customers, it says". RIABiz. Retrieved 2023-02-18.
  31. ^ "Betterment at Work Survey Finds Less Than Half of US Workers Confident in Their Retirement Readiness". Savannah CEO. Retrieved 2024-04-25.
  32. ^ "2023 Retirement Readiness Report | Betterment at Work". www.betterment.com. Retrieved 2024-04-25.
  33. ^ "Betterment at Work Launches Industry-First Small Business Student Loan 401(k) Matching Solution". Yahoo Finance. 2024-01-25. Retrieved 2024-04-25.
  34. ^ "Betterment Unveils Small Biz Student Loan 401(k) Matching Solution".
  35. ^ "Betterment adds mutual funds for custom portfolio builders".
  36. ^ Welsch, Andrew. "Betterment Starts Offering Mutual Funds. Here's Why It May Win Over More Advisors". www.barrons.com. Retrieved 2024-04-25.
  37. ^ Team, Editorial (2024-04-25). "Goldman Sachs sells Marcus Invest accounts to Betterment". bobsguide. Retrieved 2024-04-26.
  38. ^ "Goldman sells Marcus Invest accounts to Betterment". Banking Dive. Retrieved 2024-04-26.
  39. ^ "Betterment and Goldman Sachs Launch Industry-First Tax-Smart Bonds Portfolio | GS Stock News". www.stocktitan.net. 2024-07-18. Retrieved 2024-10-03.
  40. ^ Gupta, Lekha. "Goldman Sachs and Betterment Launch Tax-Smart Bonds Portfolio for Savvy Investors: Details - Goldman Sachs Gr (NYSE:GS)". Benzinga. Retrieved 2024-10-03.
  41. ^ Welsch, Andrew. "Betterment Brings Goldman's Tax-Efficient Bond Portfolios to Main Street". www.barrons.com. Retrieved 2024-10-03.
  42. ^ Breen, Oisin. "Betterment changes its RIA custody brand to 'Advisor Solutions' -- a sign that digital innocence and niche marketing are now passé -- but its RIA clients are applauding | RIABiz". Betterment changes its RIA custody brand to 'Advisor Solutions' -- a sign that digital innocence and niche marketing are now passé -- but its RIA clients are applauding | RIABiz. Retrieved 2024-10-03.
  43. ^ a b Welsch, Andrew. "Betterment Doubles Down on Push to Win RIAs for Custody Business". www.barrons.com. Retrieved 2024-10-03.
  44. ^ "Betterment Advisor Solutions - Advisor Survey 2024". www.betterment.com. Retrieved 2024-10-03.
  45. ^ "Insights from the Betterment Advisor Solutions' 2024 Advisor Survey". www.xyplanningnetwork.com. Retrieved 2024-10-03.
  46. ^ "Betterment Valuation Rises to $1.3 Billion on Funding Round". Bloomberg.com. 29 September 2021. Retrieved 2022-03-16.
  47. ^ "ID8 TO Platform Betterment Series F, a Series of ID8 Investments Master, LLC SEC Registration". sec.report. Retrieved 2022-03-16.
  48. ^ a b "Robo-advisory firm Betterment reaches unicorn valuation". Finextra Research. 2021-09-30. Retrieved 2022-03-16.
  49. ^ "Betterment raises funds at $1.3bn valuation". citywireusa.com. Retrieved 2022-03-16.
  50. ^ "Betterment Secures $160 Million in Growth Capital | Finance Magnates". Financial and Business News | Finance Magnates. Retrieved 2022-03-16.
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