Vanguard Strategic ETF Series Portfolio Strategy Disclosure

Betterment Advisor Solutions offers a Vanguard Strategic ETF Series portfolio strategy (“Vanguard Strategic ETF Series”), formerly named the Vanguard CRSP portfolio strategy, to advised clients who wish to invest in a model portfolio primarily composed of Vanguard managed ETFs that seek total return through broad-market global equity and investment grade fixed income exposures. While similar to the Betterment Core Portfolio strategy, Vanguard Strategic ETF Series differs in several ways.

Both the Betterment Core and Vanguard Strategic ETF Series portfolio strategies are primarily made up of asset classes to categorize the types of global market exposure included in the portfolio strategy (for example, international equity or U.S. short-term bonds) and both rely on exchange-traded funds (“ETFs”) to represent each asset class. However, the Vanguard Strategic ETF Series portfolio strategy only selects primary ETFs issued by Vanguard whereas ETFs selected for the Betterment Core Portfolio strategy are issued by a number of different issuers and are selected based on Betterment’s investment selection process, which evaluates ETFs for inclusion based on cost to trade and cost to hold the funds. Because the Vanguard Strategic ETF Series strategy is limited to Vanguard issued primary funds, it may use less liquid funds than the Betterment Core Portfolio strategy. This means that it may be more difficult to buy and sell certain ETFs in the Vanguard Strategic ETF Series portfolio without affecting their prices, relative to the ETFs in Betterment’s Core Portfolio.The Vanguard Strategic ETF Series portfolio may include additional asset classes, or exclude asset classes, relative to those held in Betterment's Core Portfolio.

Vanguard also prescribes a 2% cash allocation across all risk levels of this portfolio strategy. Betterment implements this allocation by targeting a 1.5% allocation to a combination of short-term Treasury bonds, and, in taxable accounts, health savings accounts, and individual retirement accounts (IRAs), a small, operational cash allocation targeting 0.5%. When there are fees, withdrawals, or other portfolio management actions in a client's account, this operational cash will be used first, reducing the need to sell securities to cover smaller transactions. This operational cash allocation is held through the Cash Sweep Program and does not earn interest; you will not pay Betterment’s advisory fee on this cash allocation.

There are several features of Betterment’s service that either will not work or will work differently for the Vanguard Strategic ETF Series portfolio.

Betterment will recommend an initial allocation but will not provide a glide path for goals for which the Vanguard Strategic ETF Series portfolio is elected, and Betterment’s auto-adjust feature is unavailable for the Vanguard Strategic ETF Series portfolio. With respect to rebalancing, Investing portfolios require a portfolio minimum balance in order for a rebalancing transaction to occur (which can be the aggregate of balances in a tax-coordinated portfolio); see Betterment’s portfolio minimum disclosures for further details. If your Vanguard Strategic ETF Series portfolio balance exceeds the required minimum, Betterment will perform automatic rebalancing to correct drifts in allocations, aligning back to the target weights. Vanguard provides periodic allocation updates for its Vanguard Strategic ETF Series portfolio strategy, which can increase portfolio turnover relative to the Betterment Core Portfolio strategy. Such portfolio turnover may lead to increased trading costs relative to the Betterment Core Portfolio. Although Betterment will endeavor to implement changes to the portfolio as soon as possible after they are communicated by Vanguard, Betterment retains discretion on whether and when to implement any such changes. For more details, please refer to the Rebalancing and Auto-Adjust Disclosure.

Investors considering the Vanguard Strategic ETF Series portfolio should also understand how it impacts the operation of Betterment’s tax loss harvesting feature. Betterment typically implements its tax loss harvesting feature by shifting allocations among three ETFs in each sub-asset class. The Vanguard Strategic ETF Series portfolio strategy is compatible with Betterment’s tax loss harvesting feature, but electing the Vanguard Strategic ETF Series portfolio for one or more goals in your account while simultaneously electing a different portfolio for other goals in your account may reduce opportunities to harvest losses. The primary, secondary, and tertiary ETFs in the Vanguard Strategic ETF Series portfolio may track the same index as each other, which also may result in reduced opportunities to harvest tax losses. See Betterment’s Tax Loss Harvesting disclosures for further detail.

In addition, the Vanguard Strategic ETF Series portfolio strategy is compatible with Betterment’s tax coordinated portfolio feature, but all goals in the tax coordinated portfolio must use the Vanguard Strategic ETF Series portfolio strategy. See Betterment’s Tax-Coordinated Portfolio disclosures for further detail.

Betterment or its affiliates receive compensation in the form of ongoing support payments from third-party portfolio managers, including Vanguard, to provide technology and infrastructure to support their portfolios, including the Vanguard Strategic ETF Series portfolio. For more information, please review Betterment’s Form ADV Part 2A, Item 14.