Investment Startup Betterment Says It Can Make Savings Accounts Extinct
By Jacob Brody
The web may already have a wide array of personal investment sites, but startup Betterment believes it has something new to offer.
The company launched today at TechCrunch Disrupt. “When you go to a broker you have to pick among a menu of funds and stocks that are available,” said CEO and founder Jonathan Stein. “It’s an overwhelming experience for many people, even Columbia MBAs.”
The result is that many people simply leave their money in savings accounts, said Stein. Betterment gives users one decision to make, an allocation between Treasuries and stocks. The company, which is an SEC and FINRA licensed investment advisor, chooses which stocks to buy and puts the individual securities into each user’s account.
Betterment does not charge its customers a per transaction fee like most online brokerage accounts. Instead, it charges a management fee of 0.9 percent of the average annual balance. Betterment accounts are as liquid as a savings account, with the money transferring directly to and from users’ checking accounts.