Betterment (company) explained

Betterment
Type:Private
Industry:Investment services
Founders:
  • Jon Stein
  • Eli Broverman
Key People:
  • Sarah Levy (CEO)
Location City:New York City
Products:Financial services, asset management, portfolio management, trust services
Aum:US$45 billion (2024) [1]
Parent:Betterment Holdings, Inc.
Divisions:Betterment at WorkBetterment for Advisors
Subsid:MTG, LLC.
Location Country:United States

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 August 2023, Betterment had more than $45 billion of assets under management and over 850,000 customer accounts.[5] [6] [7]

History

Foundation and launch

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. 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

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.[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. 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]

Finances

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.[39] [40] [41]

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.[42] [43]

Notes and References

  1. Web site: As Betterment AUM balloons to $45 billion, Tom Moore ends DFA's exclusive mutual fund deal for RIAs and opens the floodgates; PIMCO, T.Rowe, Fidelity and Vanguard get first crack at DFA 'menu' hegemony. 2024-04-25 . riabiz.com . en-US.
  2. Web site: Digital Advisory Firm Betterment Enters Crypto With Makara Acquisition . 2022-03-15 . Investopedia . en.
  3. Web site: Betterment LLC SEC Registration. 2021-08-04. sec.report.
  4. News: Investment Safety and Security at Betterment. 2014-03-03. Betterment. 2017-06-01. en-US. 2017-08-23. https://web.archive.org/web/20170823203938/https://www.betterment.com/resources/inside-betterment/our-story/investment-safety-and-security-at-betterment/. dead.
  5. Web site: Breen . Brooke Southall, and Oisin . As Betterment AUM balloons to $45 billion, Tom Moore ends DFA's exclusive mutual fund deal for RIAs and opens the floodgates; PIMCO, T.Rowe, Fidelity and Vanguard get first crack at DFA 'menu' hegemony RIABiz . 2024-04-24 . As Betterment AUM balloons to $45 billion, Tom Moore ends DFA's exclusive mutual fund deal for RIAs and opens the floodgates; PIMCO, T.Rowe, Fidelity and Vanguard get first crack at DFA 'menu' hegemony RIABiz . en.
  6. Web site: Muhn (@julieschicktanz) . Julie . 2024-04-23 . Betterment to Acquire Marcus’ Digital Investing Accounts . 2024-04-24 . Finovate . en-US.
  7. Web site: Betterment to Acquire Robo-Investing Accounts from Goldman Sachs PLANADVISER . 2024-04-24 . www.planadviser.com.
  8. Web site: School. Columbia. 2014-04-09. Jon Stein '09 on the Entrepreneurial Experience. 2021-08-04. Video Library. en.
  9. Web site: Cohan. Peter. Growing At 300% To $8.5 Billion, Betterment Offers Fee, Tax Edge. 2021-08-04. Forbes. en.
  10. Web site: Betterment Holdings, Inc. SEC Registration. 2021-08-04. sec.report.
  11. Web site: Division of Corporations - Filing. icis.corp.delaware.gov. 2017-06-01.
  12. News: Betterment Launches On Stage At TechCrunch Disrupt - Betterment. 2010-05-25. Betterment. 2017-06-01. en-US.
  13. Web site: The TechCrunch Disrupt Final Five: Betterment, Movieclips, Publish2, Soluto And Ujam . Arrington. Michael. 2017-06-01.
  14. News: How We Got Funded: Betterment. March 6, 2013. Inc.com. 2017-06-01. en.
  15. News: Betterment Drops Account Minimums on Custom Portfolios. Nair. Lavanya. 29 March 2019. 29 March 2019.
  16. Web site: Robo-Advisor 'Betterment' Adds Human Advice. 31 January 2017. CNBC. 19 May 2017. 12 March 2017. https://web.archive.org/web/20170312164754/http://www.cnbc.com/2017/01/31/reuters-america-robo-adviser-betterment-adds-human-advice.html. dead.
  17. Web site: Betterment vs. Wealthfront: Which is Best for You? . 2022-03-15 . Investopedia . en.
  18. Web site: 2020-05-12. 7 Best Financial Advisors in Tampa, Florida • Benzinga. 2020-06-17. Benzinga.
  19. Web site: Betterment Allies With Fidelity To Bring Financial Advisers Into The 21st Century. Kane. Libby. Business Insider. 2020-05-07.
  20. News: The robots are coming for your investments — why that might not be a bad thing. Powell. Robert. MarketWatch. 2017-06-01. en-US.
  21. Web site: Konish . Lorie . 2021-11-05 . Betterment sees 370% retirement plan growth bolstered by financial wellness efforts . 2022-03-15 . CNBC . en.
  22. News: 2015-09-11 . Robo-Advisor Betterment Launches 401(k) Plan for Employers . en-US . NerdWallet . 2017-06-01.
  23. Web site: Konish . Lorie . 2022-02-23 . Betterment adds new student loan, 529 college savings features to its 401(k) business . 2022-03-15 . CNBC . en.
  24. News: 2020-12-08 . Betterment's founder Jon Stein replaced by Sarah Levy as CEO . en-US .
  25. News: 2021-11-16 . Betterment brand identity . en-US .
  26. Web site: Kim . Crystal . 2022-10-12 . Betterment offers four pricey and similar crypto portfolios . 2023-02-18 . Axios . en.
  27. Web site: Ramaswamy . Anita . 2022-10-12 . Roboadvisor Betterment launches crypto offering with four themed portfolios . 2023-02-18 . TechCrunch . en-US.
  28. Web site: Betterment's Pricing . 2023-02-18 . www.betterment.com . en.
  29. Web site: 2022-11-18 . Betterment raises fees on small investors . 2023-02-18 . InvestmentNews . en-US.
  30. Web site: Breen . Oisin . Wealthfront pounces after Betterment jacks up prices on small investors, but Betterment claims last laugh -- 'thousands' of new customers, it says . 2023-02-18 . RIABiz . en.
  31. Web site: Betterment at Work Survey Finds Less Than Half of US Workers Confident in Their Retirement Readiness . 2024-04-25 . Savannah CEO . en.
  32. Web site: 2023 Retirement Readiness Report Betterment at Work . 2024-04-25 . www.betterment.com . en.
  33. Web site: 2024-01-25 . Betterment at Work Launches Industry-First Small Business Student Loan 401(k) Matching Solution . 2024-04-25 . Yahoo Finance . en-US.
  34. News: Betterment Unveils Small Biz Student Loan 401(k) Matching Solution .
  35. Web site: Betterment adds mutual funds for custom portfolio builders .
  36. Web site: Welsch . Andrew . Betterment Starts Offering Mutual Funds. Here’s Why It May Win Over More Advisors. . 2024-04-25 . www.barrons.com . en-US.
  37. Web site: Team . Editorial . 2024-04-25 . Goldman Sachs sells Marcus Invest accounts to Betterment . 2024-04-26 . bobsguide . en.
  38. Web site: Goldman sells Marcus Invest accounts to Betterment . 2024-04-26 . Banking Dive . en-US.
  39. News: Betterment Valuation Rises to $1.3 Billion on Funding Round . 2022-03-16 . Bloomberg.com. 29 September 2021 .
  40. Web site: ID8 TO Platform Betterment Series F, a Series of ID8 Investments Master, LLC SEC Registration . 2022-03-16 . sec.report.
  41. Web site: 2021-09-30 . Robo-advisory firm Betterment reaches unicorn valuation . 2022-03-16 . Finextra Research . en.
  42. Web site: Betterment raises funds at $1.3bn valuation . 2022-03-16 . citywireusa.com.
  43. Web site: Betterment Secures $160 Million in Growth Capital Finance Magnates . 2022-03-16 . Financial and Business News Finance Magnates . en.

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