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When it comes to investing, almost every individual expects not to know what he is doing. People expect to be confused about which investment option to consider simply because the traditional players have made it confusing. However, just because traditional players have designed the financial system in a certain way, it doesn’t mean it’s right.
Betterment is an America-based company that came forward to design the financial industry into something better. It helps people manage their money and invest it profitably. Read on to learn more about Betterment, including its founders, startup story, challenges, products and services, funding, growth, and more.
Betterment – Company Highlights
| Company Name | Betterment |
|---|---|
| Headquarters | New York, New York City, United States |
| Sector | Wealth Management |
| Founders | Jon Stein and Eli Broverman |
| Founded | 2008 |
| Valuation | $1.3 billion (2021) |
| Website | Betterment.com |
Betterment – About
Betterment – Industry
Betterment – Founders and Team
Betterment – Startup Story
Betterment – Mission and Vision
Betterment – Logo
Betterment – Business Model
Betterment – Revenue Model
Betterment – Products and Services
Betterment – Challenges Faced
Betterment – Funding and Investors
Betterment – Mergers and Acquisitions
Betterment – Growth
Betterment – Partners
Betterment – Awards and Achievements
Betterment – Competitors
Betterment – About
Betterment is an app-based independent robo-advisor that provides digital investment, retirement, and cash management services. The investing and saving application offer tools for spending, saving, and developing customized plans for the future. Moreover, users often focus on investing in cash reserves and ETFs to meet their long-term financial goals.
Betterment – Industry
Wealth management is an investment advisory service combining investment and financial counseling to address clients’ needs. The industry generally involves providing strategies to achieve financial goals, plan for retirement, estate, and legal planning, portfolio management, etc.
The global size of the wealth management market was estimated at $1.25 trillion in 2020 and is forecasted to reach $3.43 trillion by 2030, with a CAGR of 10.7%. Rapid demand for alternative investments, including commodities, private equity, intellectual property act, hedge funds, real estate investment trusts, etc., is the key driving force of the global wealth management industry. However, Covid-19 hurt the industry due to economic slowdown, highly volatile markets, and unpredictable global financial sectors.
JP Morgan Chase & Co., Bank of America Corporation, Goldman Sachs, Julius Baer Group, and Citigroup are some key players in the global wealth management industry.
Betterment – Founders and Team
Jon Stein and Eli Broverman are the co-founders of Betterment.
Jon Stein
Jon Stein attended Harvard University for BA in Economics and Premedical Studies and Columbia Business School for MBA in Entrepreneurship. He is the Board Member of Demin and Valora and Advisor to the CEO at Solve Finance, SpinWheel, Setpoint.io, Concreit, Parallel Markets, and Treasury Interactive.
Jon co-founded Betterment and worked as its CEO till 2020. At present, he is the Founder and Board Member of Betterment.
Eli Broverman
Eli Broverman attended Brown University for AB in Chemistry and New York University School of Law. He is the Executive Board Member at BitFinance and Adviser at Bloom Credit, Good Money, and Masterworks. Eli co-founded Betterment and Treasury. Moreover, he is on the Board of Directors at Betterment.
Sarah Levy
Sarah Levy completed her graduation in Economics from Harvard University and post-graduation in MBA from Harvard Business School. She worked as Chief Operating Officer at Nickelodeon and Viacom. Currently, Sarah is the Board Member at Funko and Chief Executive Officer at Betterment, leading a team of around 400 employees.
Betterment Team
- Sarah Levy – CEO
- Raoul Bhavnani – Chief Communications Officer
- Peter Lorimer – Chief Financial Officer
- Kim Rosenblum – Chief Marketing Officer
Betterment – Startup Story
Jon Stein and Eli Broverman co-founded Betterment in 2008. Jon experienced bad investing behavior when he invested his money via seven different brokerage accounts. He constantly monitored his accounts and tried to time the market. But it resulted in wasting time, taxes, and transaction costs.
He wanted a service that could tell him what to do with his money and then do the same for him. But Jon realized that he needed to build this kind of service himself. He started focusing on the front end of Betterment, and his roommate Sean Owen, a software engineer, built everything, including Apache and Tomcat servers, MySQL database, and Java application for the website. Next, Jon needed to understand the regulatory landscape. It’s when he started a conversation with Eli Broverman, who was a securities attorney.
Jon and Eli met over a weekly poker game, and Eli was interested in commencing his own company. They both had lunch at a Dominican restaurant on Amsterdam Avenue, sketched a working arrangement, and suddenly were in business together. Sean, Jon, and Eli met Ryan O’Sullivan, who grew a retail clothing line called Le Tigre and sold it to Kenneth Cole. He joined Betterment as a BD partner.
In August 2008, Betterment got its four founding members, Jon, Seal, Eli, and Ryan. On January 29, 2008, the parent company for Betterment LLC and Betterment Securities, Betterment Holdings, Inc, was established in Delaware. After Ryan and Sean left the company as founding members, Jon and Eli worked on Betterment for a year.
And on May 26, 2010, Betterment was launched at the first-ever TechCrunch Disrupt and won the ‘Biggest New York Disruptor’ award. Within 24 hours, the company attracted around 400 customers. 800,000+ customers trust the company, and it has $36+ billion as assets under management in 2023.
Betterment – Mission and Vision
Betterment aims to help people live better by growing their money. Its mission is to provide the best possible solution to the question, “What should I do with my money?”
Betterment – Logo
Betterment released a new logo in November 2021 with an icon representing a rising sun.
Betterment – Business Model
Betterment is a robo-advisor that automatically determines the investor’s asset allocation based on financial goals, preferences, and risk appetite. First, an investor needs to tell the company what he wants to do with his money. Next, Betterment provides some recommendations and sets up an ideal account.
Once an investor’s account is built, the platform’s technology manages his money to help him earn more. Moreover, as the investor’s money grows and his priorities change, the platform evolves with ongoing advice and updates to help him stay on track. In last, the same investor can withdraw and use his money.
Betterment – Revenue Model
Betterment’s pricing for the “Investing” account is $4 monthly, and the “Crypto” account is 1% + trading expenses. The “Cash Reserve” and “Checking” accounts are offered for free.
Moreover, the company generates the most revenue from the portfolio management fees it charges as a percentage of total assets under management (AUM). In addition, Betterment charges interchange fees and commissions from partner banks and earns by selling phone consultations.
Preeti Karna
Betterment – Products and Services
With Betterment, users can open Investing, Crypto Investing, IRAs and 401(k)s, Roth IRAs, Checking High-yield cash, and Trusts accounts. Furthermore, it offers different types of Investments, including Portfolio Options, Socially Responsible Investing, Charitable Giving, Tax-Smart Investing, 401(k) Rollovers, and Retirement Income.
The application provides access to multiple tools, such as Retirement Planning, All-in-one Dashboard, Track Your Goals, Rewards, and Refer-a-Friend Program.
Betterment – Challenges Faced
In April 2023, The Securities and Exchange Commission charged Betterment for material misstatements and omissions concerning its automated tax loss harvesting service (TLH), not providing clients with the notice of contract changes, and not maintaining certain necessary books and records. The company agreed to pay a $9 million penalty and distribute funds to affected clients as a settlement.
Betterment – Funding and Investors
Over 10 funding rounds, Betterment raised $435 million. Its latest funding round – Debt Financing Round, was conducted on September 29, 2021. 26 investors fund the company, including Kinnevik, Aflac Global Ventures, ID8 Investments, Citi Ventures, Bessemer Venture Partners, and Francisco Partners.
| Date | Round | Number of Investors | Money Raised | Lead Investor |
|---|---|---|---|---|
| September 29, 2021 | Debt Financing | 2 | $100 million | ORIX Growth Capital |
| September 29, 2021 | Series F | 12 | $60 million | Treasury |
| April 30, 2021 | Venture Round | 2 | – | SharesPost Investment Management |
| August 29, 2017 | Secondary Market | 1 | – | – |
| July 21, 2017 | Series E | 4 | $70 million | Kinnevik |
| March 29, 2016 | Series E | 8 | $100 million | Kinnevik |
| February 17, 2015 | Series D | 5 | $60 million | Francisco Partners |
| April 15, 2014 | Series C | 5 | $32 million | Citi Ventures |
| October 3, 2012 | Series B | 4 | $10 million | Menlo Ventures |
| December 1, 2010 | Series A | 9 | $3 million | Bessemer Venture Partners |
Betterment – Mergers and Acquisitions
Betterment acquired 3 companies, including Gradvisor on February 23, 2022, Makara on February 8, 2022, and ImpulseSave on October 18, 2013.
Betterment – Growth
Betterment’s revenue surged to $100 million in 2021, marking a remarkable 30% growth compared to the previous year. Moreover, the company’s AUM grew by 50% in 2020 and 18.5% in 2021. However, its AUM growth slowed to 1.2% YOY in the second quarter of 2022. Betterment’s post-money valuation in 2021 stood at $1.3 billion.
Betterment – Partners
Betterment has partnered with:
- Goldman Sachs
- BlackRock
- Gemini
- Benefits
- capitalize
- Bancorp, Inc.
Betterment – Awards and Achievements
Betterment is honored with many prestigious awards:
- Named as one of the Best Robo-Advisors of 2022 by Morningstar and Wall Street Journal Buyside.
- Kristen Carlisle, GM, won the “Excellence in Benefits” award by EBN in 2022.
- “Best for Cash Management” award by Investopedia in 2020.
Betterment – Competitors
Some of Betterment’s main competitors are:
- Schwab
- Vanguard
- Wealthfront
- Personal Capital
- Acorns
- Chime
- Robinhood
FAQs
What does Betterment do?
Betterment is an app-based independent robo-advisor that provides digital investment, retirement, and cash management services.
Who are the founders of Betterment?
Jon Stein and Eli Broverman co-founded Betterment in 2008.
Who is the CEO of Betterment?
Sarah Levy is the CEO of Betterment.
What is the pricing of Betterment accounts?
Betterment’s pricing for the “Investing” account is $4 monthly, and the “Crypto” account is 1% + trading expenses. The “Cash Reserve” and “Checking” accounts are offered for free.