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The New York Times

Betterment Slashes Fees and Adds IRAs




When I last wrote about Betterment, an online investment adviser that doesn’t mind if you don’t have a lot of money, I noted its promise but fretted over its relatively high prices, lack of international investments and lack of Individual Retirement Accounts.

Since then, it has added international funds to the menu of exchange-traded funds it puts its customers in. And on Wednesday, it added regular, Roth and rollover I.R.A.’s to the mix.

It also cut its prices. By a lot.

Customers will now pay 0.35 percent of their balance annually in fees if they have less than $10,000 invested with Betterment, 0.25 percent of the balance if it ranges from $10,001 to $100,000 and 0.15 percent for balances higher than that.

This includes all trading costs, though it doesn’t include underlying annual fees from the E.T.F. manager, which do tend to be low. Before Wednesday, customers paid Betterment 0.30 percent to 0.90 percent, with the average about 0.75 percent.

When prices fall that far, it usually means that the boss is trying to save the company. But Jon Stein, Betterment’s chief executive, said this was not a move born of desperation, though the company has just $23 million or so in assets under management thus far.

Still, after polling customers, the company found that about three quarters of them said that if the fees dropped, they would deposit significantly more money. “To be the no-brainer, the thing that anyone can recommend without reservation, you have to win on every point,” he said. “And one of those is price.”

Even at this price, there will plenty of do-it-yourselfers who scoff at those who hand over fund selection and rebalancing responsibilities to someone else. But everyone else out there may well be waiting for someone else take care of it and do it at the right price. Many of these potential Betterment customers likely know that they can’t be trusted on their own to sell winners, buy losers and not pull their money altogether when markets get shaky.

The new rates come with some new rules. If you have less than $10,000 at Betterment, it’s going to ask that you commit to automatically depositing $100 a month. Otherwise, you’ll pay a $3 monthly fee. At the high end, customers with more than $100,000 will get customized advice from Mr. Stein himself, who can add things like municipal bond funds to the mix that are not part of the standard portfolio.

For more on how Betterment works, you can view the demo on its site. Would any of you put your money with the company now that its fees have fallen so far?

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This article originally published February 22nd, 2012 on The New York Times