Mo’ Money, Mo’ Problems? Not with Betterment.

By Ben Crane


At a recent Share in New York, Wolff Olins had the chance to meet Jon Stein, CEO, and Eli Broverman, COO, the cofounders of Betterment, a startup that wants to bring simplicity, design, and a dose of behavioral economics to personal investing and saving.

Disrupting your savings account.

So how does it work? First, a user easily transfers money between their checking account and the Betterment tool. Then Betterment invests the money across a diversified range of options.  Those options take into account a person’s net worth and income as well as modern portfolio theory. At any time, a user can adjust the risk that informs their investing strategy—if you’re more comfortable with risk your money can be invested in more stocks than bonds, and vice versa.

Jon and Eli, the duo behind Betterment, launched the company at the 2010 TechCrunch Disrupt, beating out 500 other startups to be named Biggest New York disruptor. Not bad for an SEC Registered Investment Advisor and a broker dealer regulated by FINRA and the SEC.

Betterment sticks out in three notable ways. 

— First, Betterment’s design sensibilities are refreshing considering the cluttered and confusing user interfaces that populate many investing services. Jon describes this minimalist approach to financial services as “Apple meets Vanguard.

— Second, the cost of using Betterment is extremely attractive for anyone interested in growing their savings—there are no minimum balances, transaction fees, holding periods, or hidden costs. The only fee a user pays is a low annual management fee between 0.15% and 0.35%. To put this in perspective, the average mutual fund fee is close to 1.4%

Now, mind you, competitors can quickly emulate these two qualities. Banks can hire design firms to redo their website, and lean startups with enough funding can perform the same services for less.

— The third factor, and where this start up truly stands apart, is that it lets its users set goals which inform Betterment’s investing strategy. The ‘goals’ feature, implemented by Betterment after carefully listening to the feedback of their users, treats you like a human being, rather than a dollar sign.

Let’s say you want to purchase a car in 3 years. With a few simple clicks to provide basic information, such as how much you’d like to save, you can quickly set that as a goal. Next, Betterment recommends an investment strategy for you, considering your total net worth, salary, and investment goals. Goals range from the specific—purchase a new $40,000 car in 3 years—to the more nebulous—retire by the age of 60.

The purpose of money management is only superficially to make more money. At its core, the driving force of money management is to make more money todo things.Helping someone achieve their goals requires a deep level of trust, and a genuine interest in their circumstances.

Users and brands can work together.

The recent scandal (at Barclay) over the manipulation of the London Interbank Offered Rate, or Libor, is only the latest in a series of events—perhaps beginning with the subprime mortgage crisis of 2007—to deepen the distrust citizens feel toward financial behemoths.

Betterment thinks users and brands can work together to better each other’s lot. It is this sensibility, that a company’s value is evaluated not only by its bottom line, but by its social impact, that we take to heart here at Wolff Olins. Ultimately, it is this sensibility that will separate the game changers, from everyone else.

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This article originally published August 1st, 2012 on Wolff Olins Blog.