News
Featured announcements

Looking for a specific topic?
- Account protection
- Behavioral finance
- Buying Real Estate
- Career Planning
- Charitable Giving
- Connecting accounts
- DIY Investing
- Debt
- Diversification
- ESG Investing
- Earning Rewards
- Education Savings
- Estate Planning
- Fiduciary Advice
- Filing Taxes
- Financial Advisors
- Financial Goals
- Funds and Investments
- Health Savings
- Inheritances
- Insurance
- Investing Philosophy
- Investing Risk
- Investment Accounts
- Investment Portfolios
- Market volatility
- Markets
- Performance
- Product news
- Public statements
- Reducing Spending
- Research
- Retirement Income
- Retirement Planning
- Robo-Advisors
- Rollovers
- Salaries and Benefits
- Saving Money
- Savings Accounts
- Security
- Shared Finances
- Tax Optimization
- Tax Planning
- Transfers
- Using IRAs
- Using a 401(k)
No results found
All News articles
-
What To Expect When You Interview With Betterment
What To Expect When You Interview With Betterment Interviewing can be a long, stressful, and sometimes confusing process. We strive to make the experience as meaningful and enjoyable as possible. Transparency and inclusivity are the heart of everything we do, especially our hiring process. We want every candidate to have access to the information they need and to feel welcomed by everyone they interact with throughout our interview process. If you are interested in working at Betterment, keep reading for an in-depth look at what to expect during the process. For engineering roles, take a look at our Engineering Interviewing with Betterment post for specific details on that process. Finding the best Betterment role for you. The very first step when interviewing with Betterment is finding an open role that fits what you’re looking for in your next career move. The best place to view current openings is the Betterment Careers page. We are constantly updating it as new roles become available. You can also find openings on LinkedIn and Built In NYC. Once you’ve found a role, read through the job description carefully. If it aligns with your skills, experiences, and goals, we encourage you to apply. Because we know the job post is only the beginning of the journey, we aim to include the most relevant information to help you decide if you should apply. For example, we do not include years of experience on our job posts, but instead work to define the exact responsibilities in detail. If you sense that you're capable of what we've outlined, and energized by our job post, you should apply! Don't let a confidence gap get in the way of submitting your application. Join our Talent Community If you do not see the right match for you at this time, don’t worry! We recommend joining our Talent Community. Our hiring needs are always changing and we would be happy to keep you in mind once a role that better aligns with your skills and interests opens in the future. Our hiring process in depth. Once you submit your application, you have officially kicked off the hiring process with us. A member of the Betterment Recruiting team will review it and be in touch. Although you will likely hear back from us sooner, we ask that you give us up to a few weeks to thoroughly review your application given the high volume of applications we receive. If we would like to spend more time with you, the following steps outline the full interview process. While the interview process may vary depending on which role you are applying for, most will look similar to this. Recruiter Interview - A recruiter will reach out to set up time for a phone call to discuss your experiences, skills, and motivations. We will also cover the interview process timeline and compensation expectation details. Hiring Manager Phone Interview - The hiring manager for the role will give you a call to further discuss your background and share in depth details about the role and the team. Round 1 Virtual Interview - This is an opportunity to meet virtually with members of the team you’ll be working closely with Technical Exercise - Across all roles, we may look to evaluate job specific skills in the form of a written exercise or pair programming. We seek to collect a robust set of data points, and find that these exercises can round out what we learn about you from behavioral interviews. If it’s a take home test, you will be given 2-3 days to complete. If not, you will complete this exercise during your scheduled interviews and be instructed on how to prep. Final Round Virtual Interview - This is an opportunity to meet virtually with members of the team, and may include leadership and cross functional stakeholders. Offer - If you make it to this step, that means you thoroughly impressed us and we would be thrilled to have you join us! Please Note: We are conducting all interviews virtually until further notice. The full interview process will take one to two weeks to complete depending on your availability to interview. If you need to expedite the process for any reason, please let your recruiter know so they can work with you to meet your timelines. While we would love to have every candidate reach the offer stage, we often only have one position available. At any stage, if we don’t plan to move forward with your candidacy, you’ll hear from a member of our Recruiting team letting you know. If you need to withdraw from the process, please inform your recruiter at your earliest convenience. We value a fair, inclusive and consistent process. No matter which role you’re interviewing for, you can expect to have the same experience as other candidates who are interviewing for the same role. We run a structured, competency based interview process at Betterment to ensure a fair and inclusive process. Consistency is key to ensure we have the insights we need to make evidence based hiring decisions for every candidate. Furthermore, we're committed to seeing a robust slate of candidates before we make a hiring decision. If you have any timeline constraints, we recommend discussing them with your recruiter. We’re committed to Diversity, Equity, Inclusion and Belonging. It’s important that our employees reflect the diversity of our customers as we’re building a service that’s for everyone. A diverse internal culture encourages innovation so much more than a homogeneous one. We want each candidate to have a pleasant and welcoming experience at every point of the interview process. It is our goal to have those values of inclusion shine during every candidate interaction. We hope all candidates feel welcomed, valued, and included no matter the outcome of their candidacy. On our applications, you will find a field asking you to share your preferred pronouns. While this section is optional, it is our goal to make sure we are being respectful to all candidates by knowing and addressing them by the pronouns of their choice. We are also dedicated to providing accommodations to candidates with disabilities. If you need accommodations at any point throughout the interview process, please reach out to interview.accommodations@betterment.com. -
The Pandemic is Redefining Company Perks
The Pandemic is Redefining Company Perks Our latest research shows workers value financial wellness support over benefits like extra vacation and office luxuries Amid the pandemic and “Great Resignation” of 2021, many workers have been seeking greater financial stability and support, particularly as they face rising healthcare costs, towering student debt, and uncertainty around retirement. This is one among several findings from new research by our 401k team. The new report, titled "The Impact of The Great Resignation on Benefits Needs and Expectations," polled 1,000 full-time U.S. employees to better understand their current financial situations, how they prioritize financial wellness benefits, and how those perks might impact talent acquisition and employee retention. Other highlights include: More than a year and a half into the pandemic, workers’ financial situations have yet to fully recover. More than half (54%) are more stressed about their finances than they were before the pandemic. Against this backdrop, financial wellness offerings have become more coveted. 401(k) plans and matching programs still take top billing, but employees are also seeking benefits like wellness stipends and student loan repayment programs. Expectations are rising. Nearly 3 in 4 of polled employees (74%) would likely leave their job for an employer that offered better financial benefits — a number that jumps to 85% for student loan borrowers. “Faced with new realities and shifting work environments, employers are reconsidering what provides value to their employees,” says Kristen Carlisle, general manager of our 401(k) team. She sees interest in student loan repayment benefits, for example, only growing once the freeze on federal student debt repayments ends this upcoming January 31. Employers can also do more in the meantime, Carlisle says, to help employees take advantage of the benefits they already have. Our research finds roughly 1 in 3 employees (36%) surveyed aren’t sure what financial wellness benefits their employer currently offers. -
Our Customers Donated Over $2 Million Dollars To Charity in 2020
Our Customers Donated Over $2 Million Dollars To Charity in 2020 In 2020, our customers donated over $2 million dollars to charity through their appreciated shares. Let’s aim for even more in 2021. 2020 was an unprecedented year in many regards, with the COVID-19 pandemic leaving millions of Americans out of work as businesses were forced to close and many states issued shelter in place orders and other restrictive measures. It was also an unprecedented year for Betterment’s Charitable Giving feature, with new records in both the number of donations and the amount donated by our customers who chose to give back to those who are most in need. Many of our customers make generous gifts to charities in a variety of ways—whether it’s by spending their precious time, or by donating their hard-earned money. Our customers also have the choice to donate their invested securities to charities through their Betterment accounts. When securities are donated, the value of those assets is transferred directly to the charity. This is advantageous because the donor doesn’t pay taxes on the gain, and the recipient organization generally doesn’t pay taxes on the gain, either. In 2020, our customers donated over $2 million dollars to charity through their appreciated shares. Let’s aim for even more in 2021. Skip to the instructions for how to donate. Since launching our Charitable Giving feature in 2017, our customers have donated over $7.5 million dollars in appreciated shares to support causes near and dear to them. We are proud to support a community of smart investors with big hearts. This year, consider a smart giving strategy that can help you maximize your gifts while minimizing your tax liability. We’ll walk you through how it works. Donating securities should be as easy as donating cash. You’re trying to make a positive difference, so we believe you shouldn’t have to do any math or sign any forms. We want to keep it easy—as easy as giving cash. No snail mail, and no walking into an office. Here is a behind-the-scenes look at how we help make it easy. On your behalf, we track how much of your account is eligible to give to charity. You typically should only donate assets that you’ve held for more than one year, but we don’t expect you to sort through all the assets and pick which ones you can give. We’ll track those assets for you. We’ll estimate the tax benefits of your gift. Before you complete your gift, we’ll let you know the estimated tax benefits, including the expected deductible amount and potential capital gains taxes saved. We move assets from your account to a charitable organization’s account without any paperwork. With a traditional broker, a charitable gift has to move from your account to the organization’s brokerage account, which can take time and paperwork. Betterment is offering charities investment accounts without any advisory fees—on up to $1 million of assets—to make the gift process seamless. After the donation is complete, we provide a tax receipt. The receipt is emailed to you, and it will also be available in your Betterment account at all times. What’s more, we take much of the heavy lifting in reporting off of our partner charities. This means they can devote their resources more efficiently to the causes you are supporting, rather than to administrative tasks. Donating securities helps maximize your charitable impact. There are two tax advantages investors may be able to take advantage of when donating eligible shares. Eliminate capital gains taxes on donated shares. Deduct the value of the gift on your annual tax return. As long as you itemize your deductions, the entire value of your donated securities is deductible on your income tax return, just like any cash donation would be—as long as you’ve held the securities for more than one year. As an example, let’s say you make $150,000, are single, and live in New York. Your income places you into the current (2021) 15% long-term capital gains bracket, the 24% federal bracket, and the 6.41% state bracket. If you donate $3,000 worth of shares to a charitable organization, and you bought those shares two years ago for $2,100, then you would save $192.69 in capital gains taxes. The full $3,000 could then be deducted on your tax return, saving you an additional $912.30. Overall, you end up with $1,104.99 in tax savings, which is about 21% more than if you had just donated the cash and taken the deduction. You can then use the extra tax savings towards future donations, helping to further maximize your impact. Value now Purchase value, two years ago Capital gains tax saved Deductible amount on tax return Total potential tax savings Donating shares $3,000 $2,100 $192.69 $3,000 $1,104.99 This is 21% more than a cash donation. Donating cash $3,000 n/a n/a $3,000 $912.30 The table above assumes the following about a hypothetical person donating to a charity: (1) The person itemizes the deductions on their tax return, and (2) The federal Alternative Minimum Tax does not apply to the person. Charitable giving works in tandem with our other tax-smart strategies. Our charitable giving capabilities automatically work in tandem with our other tax-smart strategies, such as Tax Loss Harvesting+. Imagine you started using Betterment two years ago. If any holdings in your portfolio took a loss in the first year—which is common—Tax Loss Harvesting+ (TLH+) would kick in, if you have it turned on. TLH+ would benefit you by harvesting those losses and selling the assets, which allows you to deduct up to $3,000 from your income at tax time. This practice essentially defers the tax liability from any future gains to a later date. If by the calendar year after the harvest, those same shares appreciated above the original purchase price, then they would be eligible to donate to charity. You could then avoid the taxes altogether because you will not owe the standard capital gains taxes you would otherwise be subject to. Donate while also keeping your financial goals on track. Once you donate shares from an investing goal, your goal’s overall account balance will naturally be lower. Immediately after you donate, we will ask you if you’d like to make a new cash deposit to promptly replenish your investment goal. If you redeposit, we can smartly rebalance your portfolio and help keep it on track to meet its goal. If you think of your replenishing deposit as the cash you otherwise would have given to charity, the process of giving and then redepositing ends up serving as a tax-optimized and cost-efficient cycle for transferring funds to charity. The graphic below, which visually represents this cycle, is for illustrative purposes only. If you do not redeposit after your donation, your account balance will, of course, remain lower—and we may rebalance your account as usual. Smart Investors + Big Hearts = Effective Altruism. You may already be familiar with effective altruism, which is the simple idea that you can increase how much value you create when you help others if you more thoughtfully apply your resources. We offer access to a dozen charities, including GiveWell.org which carefully vets and directs donations to the most impactful causes, and Against Malaria Foundation, which protects low-income families from one of the largest killers in the world—mosquitos that carry malaria. See a full list of supported charities. Please note that we give no special preference to or endorse any one charity in particular, and the activities of each charity are not directly associated with or connected with Betterment. How to Donate Shares From Your Betterment Account To donate shares from your Betterment account, simply navigate to “Transfers” on the left and select “Give to Charity” under “Transfers from Betterment.” If your account has appreciated shares that have been held for more than a year, you can specify an amount to give, and then select which charitable organization(s) will receive your donation. Shortly after the transfer completes, you’ll receive a tax receipt via email. You can choose from the following charities: Against Malaria Foundation Big Brothers Big Sisters of NYC Boys and Girls Clubs of America Breast Cancer Research Foundation Brooklyn Community Bail Fund DonorsChoose.org Feeding America GiveWell Hour Children NAACP Empowerment Programs Save The Children The Trevor Project UNICEF USA World Wildlife Fund Wounded Warriors Family Support Don’t see your charity? See below... If you don’t currently see a charity you’d like to donate to, you can request a new charity be added. When you’re instructed to select a charity, there is an option to request a new one at the bottom of the page. In time, we will work with the requested charities to try to add them as an option. Qualified Charitable Distributions Qualified charitable distributions can be made from most IRAs (excluding SEP and SIMPLE) if the owner is age 70½ or over. These distributions can be used to satisfy part or all of your required minimum distribution and these donations will not be counted as taxable income. Betterment can support QCDs from IRAs if you meet certain criteria. Please reach out to our team for further instructions. 2021, Here We Come Let’s maximize our ability to give back together, and help support those who are most in need this year. Our altruistic and tax-smart customers have donated over $7 million dollars to charity, with over $2 million dollars donated in 2020 alone. Can we beat that for 2021? For more information, see IRS Information for Charitable Contributions. Betterment is not a tax advisor, nor should any information herein be considered tax advice. Please consult a qualified tax professional. -
The Fiduciary Rule Is on Life Support – We Must Act Now
The Fiduciary Rule Is on Life Support – We Must Act Now Whether or not the fiduciary rule survives could directly impact you. Because if it dies, and your money manager is no longer required by law to act in your best interest...are they going to anyway? You give your retirement money to a money manager. You expect them to look at all the investment options out there and make decisions based on what’s best for you, your portfolio, and your money’s growth over time. You expect them to act in your best interest—to do the right thing for you. You expect them to charge reasonable fees, try to minimize taxes, and make decisions that are going to get you the returns you deserve. You expect all of this because it’s their job. It’s what they’re paid to do. They’re the expert, the professional. Surely they’re going to advise you on the best investment decisions for you...right? I wish it were that simple, and I can’t believe it isn’t. But today, many money managers are not doing what’s best for you. They recommend funds because they make money selling them. They charge confusing fees that you can’t see. They push you into investments that are in their best interest—not yours. And the one thing that was going to help stop it might not survive. President Donald Trump on Feb. 3 signed a memorandum directing the Department of Labor (DOL) to reconsider its fiduciary rule, which would require money managers who provide retirement advice to act in their clients’ best interests. The rule was set to go into effect on April 10, but the DOL on Feb. 10 reportedly filed for a 180-day delay, putting the rule at risk of being diluted beyond recognition or, worse, thrown out completely. Whether or not this rule survives could directly impact you. Many companies were planning to make positive changes in response to the rule and publicly supported it, back when they were going to be required by law to do what was best for their clients. But now that the Trump administration is threatening the rule’s existence, we expect many of those institutions to remain silent, indicating that their former support was solely for public display. We believe that, in some ways, silence from those institutions is as bad as lack of public support. Because if your money manager is not openly supporting the rule, then they may not be willing to fight for you. And once the rule is gone for good, it could mean reverting to business as usual. We encourage you to reconsider your money manager or, at the very least, push them to clarify their stance. Because if the rule dies, and they’re no longer required by law to act in your best interest...are they going to anyway? The State of the Industry (Also Known As “Why This Rule Must Live”) The fiduciary rule’s six-year history has coincided with a secular shift in the industry that has felt promising and good. We’ve seen positive evolutions, like easier access to low-cost investments (e.g., exchange-traded funds) and heightened awareness of how financial providers are compensated. As the Washington Post’s Barry Ritholtz put it, “The fiduciary rule is not shaping investor behavior, it is now catching up with it." But now that the rule has the potential to be thrown out, we have to reexamine the conflicts of interest that are costing American workers and their families $17 billion a year—and that could persist without the proper regulations in place. Many money managers (brokers) are not currently required to make investment recommendations based on your best interests, and instead only need to pick “suitable” investments. They are allowed to consider whether a particular recommendation will result in a higher commission or kickbacks to them. As a result, you are likely to end up in a less-than-ideal portfolio—one that’s higher-cost and lower-return than it should be. This Is What Firms Are Allowed To Do. Is It Happening to You? Here’s the Way It Should Be We believe in low, transparent fees. We believe that when you give your money to a money manager, they should choose funds based on what’s best for you, the customer—not your money manager. A Defective Argument: The Fiduciary Rule “Limits Investors’ Choice” There have been various arguments opposing the fiduciary rule. The most recent came from Gary Cohn, the White House National Economic Council Director, who said that the rule would limit investors’ rights to choose their investments. He told The Wall Street Journal in an interview: “We think it is a bad rule. It is a bad rule for consumers…. This is like putting only healthy food on the menu, because unhealthy food tastes good but you still shouldn’t eat it because you might die younger.” It’s an interesting analogy, but it’s flawed. The rule isn’t about limiting choice (all the choices are still there); it’s about empowering consumers with information to make better decisions and forcing advisors to give straightforward advice. The right analogy would be both options are still on the table—you want to eat a cheeseburger instead of a salad, you can still do that—but you’ll know exactly how many calories are in it and how much it’ll cost you. In the case of financial services, if you want to put your money in a worse investment product, you can still do that—and the advisor has to disclose all the fees associated with it, and can’t tell you it’s the best option for you (unless it truly is). The text of the rule itself is clear on this point; it simply requires advisors to make an investment recommendation that they can demonstrate is in an investor’s best interest. Sure, that may be the lowest-cost option, but not necessarily. If advisors are not able to defend the investment products they are recommending, including their cost, investors will not suffer from their absence. If you want a good analogy for what this rule could do for financial services, consider the medical industry. Doctors aren’t allowed to get paid by drug companies for pushing drugs on you. That would be ridiculous, right? Why should it be different in financial services? Why should so-called financial advisors be allowed to be compensated for pushing certain products on you? It’s ridiculous! They shouldn’t. And, if we have our way, they won’t. Former Rule Champions, Where Are You Now? We’ve been closely following which big financial firms are committed to the positive changes represented by the fiduciary rule. Last fall, when it was expected that the rule would go into effect this April, many firms publicly trumpeted their support. Merrill Lynch came out with an ad campaign that declared, “We’re committed to your best interest. Not the status quo.” Other firms, like J.P.Morgan and Commonwealth Financial Group, announced they’d be cutting commissions in their retirement accounts to comply with the rule. Now that the rule’s future is in doubt, Merrill Lynch is retreating from its support of the rule and has indicated it may not complete the changes it previously committed to making. Many other firms have likewise gone silent on their support for the rule and their intent to follow through on earlier commitments. Some firms are even gloating over the fact that they didn’t take a position on the rule or commit to changes. AdvisorHub.com quoted UBS Chief Financial Officer Kirt Gardner saying, “There is some indication that [the DOL Rule] will, at a minimum, be delayed and potentially not be implemented at all. And because we delayed our announcement…that’s proved to be very effective given some of the commitments that our competitors have made.” It’s become extremely difficult to get individual firms to commit to a clear public position on the fiduciary rule. In January, Sen. Elizabeth Warren, D-Mass., a longtime supporter of the rule, sent a letter to 33 financial institutions that had already begun making changes designed to satisfy the rule’s regulations. She warned them that the rule was under attack, while also questioning whether they supported it and would continue to work toward implementing changes. This was an opportunity for these firms to speak out in support of the rule. Twelve firms ignored the letter. Of the 21 that responded, many provided a general statement about the importance of the rule's objectives, but declined to make a clear commitment to its actual implementation. Make no mistake, though, the fiduciary rule is the only realistic hope for prompt action to improve the quality of retirement advice. If firms genuinely support the rule's objectives, they should also support the rule. In the coming weeks, we encourage you to watch closely to see which firms are willing to take a clear public stand on behalf of investors, and which are silent or hide behind trade groups. What You Can Do to Protect Your Right to Honest Financial Advice Today, I’m sad for retirement savers. I’m disappointed that so many of us have trusted people we’ve chosen to manage our money, to prepare us for the future, and yet we still can’t be sure if they’re doing the right thing for us. I’m angry that the one ruling that could make us feel confident again is under attack. Why would anyone want to get rid of something that could do so much good? We encourage you to advocate for yourself and your future by submitting a public comment in support of the fiduciary rule here. You can also contact your elected representative and/or financial provider to share your support for the rule. Then it might be time to ask your money manager these questions: Why are your services and investments right for me and my situation? Who makes money from my account—and how much? Do you make more money recommending some investments over others? Are you committed to acting in my best interests for all my accounts, at all times? We’re not giving up on this. We stand for our customers and their best interests, and we always will. We don’t take political sides, but we are fighting for this rule until all investors receive advice they can trust. Because if the rule dies, whether it’s quick or slow, it’s sure to be painful. A version of this article originally appeared on CNBC. -
Meet $VOTE: Channeling Our Values Through Shareholder Engagement
Meet $VOTE: Channeling Our Values Through Shareholder Engagement We're adding the new $VOTE ETF to our Socially Responsible Investing portfolios. Here's why it gives investors more power to advocate for their values. Today, we are excited to announce that we will begin integrating the $VOTE ETF, recently launched by Engine No. 1, into all of Betterment’s Socially Responsible Investing portfolios. This new ETF invests in 500 of the largest U.S. companies, weighted according to their size, with a management fee of only .05%. You might think that this sounds a lot like a garden variety index fund tracking the S&P 500—a commodity for many years now. So, why the excitement? In short, $VOTE represents a highly innovative approach to pushing the economy towards sustainability via index fund investing. It may be “passive” in the traditional sense—buying shares in companies purely based on an index—but it is “active” when it comes to engaging with those companies as a shareholder. Beyond Divestment: What’s Shareholder Engagement? Historically, values-aligned investing has often been synonymous with avoiding the purchase of certain stocks—a practice often referred to as “divestment.” The alternative to divestment is “engagement.” By owning a stock, and using your rights to vote on shareholder resolutions, you can attempt to change the company’s activities from the inside. Vanguard, BlackRock, and State Street—the “Big Three” largest fund managers—are collectively the biggest shareholders in most companies, but have historically been reluctant to rock the boat and aggressively challenge management. As a result, when it comes to investing through index funds, the full potential of shareholder engagement to drive change hasn’t been tapped. Engine No. 1’s new $VOTE ETF promises to change that. To understand why, it helps to understand the mechanics of how shareholders can push for change. Proxy Voting Purchasing stock in a company grants you not just a share of its profits, but also the right to influence its decision-making. This process is called “proxy voting,” which can be a powerful tool with the potential to transform the entire economy, company by company. Publicly traded companies operate like quasi-democracies, accountable to their shareholders. They hold annual meetings, where shareholders can vote on a number of topics. Shareholders who disagree with some aspect of how a company’s business is conducted can engage with management, and if they feel they aren’t being heard, can present an alternate course of action by making a “shareholder proposal.” If they can persuade a majority of all shareholders to vote in support of the proposal, they can overrule management. When more drastic change is warranted, such “activist” shareholders can seek to replace management entirely, by nominating their own candidates for the company’s board of directors. Shareholder Activism: Social Change Through Engagement Social change via shareholder activism has a storied history. As early as 1951, in a seminal case, civil rights leader James Peck took the fight to the proxy arena, by filing a shareholder proposal with the Greyhound Corporation, recommending that the bus operator abolish segregated seating in the South. Seventy years later, on May 26, 2021, activist hedge fund Engine No. 1 stunned the corporate world by winning a proxy battle against the current leadership of ExxonMobil, persuading a coalition of shareholders to elect three of its own candidates to the board—the first ever climate-centered case for change. Engine No. 1 argued that Exxon’s share price was underperforming that of its peers because the company was unprepared for the transition away from fossil fuels. It nominated candidates for the board that would push the oil giant to embrace renewable energy. Against all odds, holding just .02% of Exxon’s stock, Engine No. 1 prevailed. Corporate boardrooms across the entire S&P 500 are buzzing, asking what the Exxon coup means for them. Where will environmentally and socially conscious investors strike next? These questions are warranted: The Exxon campaign was a first, but it surely won’t be the last. “Index Activism”: Bringing Power To The People Individual investors are increasingly aware of proxy voting as a domain by which their portfolios can channel their values. In a recent Morningstar report, 61% of those surveyed said that sustainability should be factored into how votes attributable to their 401(k)s are cast. However, most Americans, including Betterment customers, don’t buy stock of companies like Greyhound or Exxon directly, but through index funds. When you buy a share of an index fund, the index fund manager uses your money to buy stocks of companies on your behalf. As a shareholder of the fund, you benefit financially when these underlying stocks rise in value, but the index fund is technically the shareholder of each individual company, and holds the right to participate in each company’s proxy voting process. As more investors tell the industry that they want their dollars to advance sustainable business practices, the Big Three have been feeling the pressure to work these preferences into their proxy voting practices. This year, they are showing some signs of change. Notably, the Big Three ultimately joined Engine No. 1’s coalition, which could not have prevailed against Exxon without their support. However, even if the Big Three, who manage trillions on behalf of individual investors, continue to side with the activists, what’s missing is a way for individuals to invest their dollars not just to support these campaigns, but to spearhead them as well. What Makes $VOTE Special Activist shareholder campaigns are generally led by hedge funds, and what happened with Exxon was no exception. However, by launching an ETF that anyone can invest in, Engine No. 1 is looking to break that mold. In 2020, investors poured $50 billion into sustainable index funds—double that of 2019, and ten times that of 2018. The $VOTE ETF should bring even more investors off the sidelines, and into sustainable investing, for two reasons. First, rather than dilute its efforts, $VOTE intends to spearhead a handful of campaigns, pushing companies to improve their environmental and social practices. A focus on the highest impact, and most powerful narratives, will continue to raise awareness for the power of shareholder activism. Second, $VOTE is designed for mass adoption, not as a niche strategy. With a management fee of only .05%, and tracking a market cap weighted index, $VOTE is designed to ensure no trade-off to long-term returns. It is also well-suited for those investing for retirement—and as of today, it will make its way into its first ever 401(k) plan, via Betterment for Business. What Does $VOTE Mean For Investors? We know that many of our customers want to invest for real impact, especially if they can do so without sacrificing their long-term financial goals. If you’re investing through any of Betterment’s three Socially Responsible Investing portfolios, $VOTE will have a target weight equal to 10% of your exposure to the U.S. stocks. With $VOTE in your portfolio, you’ll know that your dollars are directly supporting whatever engagements Engine No. 1 launches next. As their subsequent work unfolds, we will be monitoring their efforts, and updating our customers on the impact their investments are driving. Now that $VOTE exists, anyone—not just Betterment customers—can invest in it, which is a great thing. The bigger it gets, the more it can drive change, and you, as an investor, get to help write the next chapter. -
How Memestocks Affected Investors’ Actions And Emotions
How Memestocks Affected Investors’ Actions And Emotions In April, Betterment surveyed 1,500 investors to examine “the rise of the day trader,” and how ‘memestocks’ affected their actions and emotions when it comes to making financial decisions. Money and emotions have long gone hand-in-hand, and this is no more apparent than during significant financial crises. From the 2008 market crash to COVID-19’s economic impact, we’ve seen first hand how money has the ability to impact our stress levels, mental health and personal relationships. And yet in times of particular financial strife—or likely because of it— many people take actions with their money that often undermine their emotional wellbeing, sacrificing long-term happiness for short-term pleasure without even realizing it at the time. This trend toward short-termism grew in 2020: people stuck inside, on screens all day and kept from their normal activities sought new ways to fill their time and energy. Many took up day trading, culminating in one of the wildest rides at the beginning of 2021 (and recent surges demonstrating people are still trying to head to the moon) with Gamestop, AMC, Blackberry and other retail stocks caught in the middle of a clash between amateur retail and institutional investors. Following this eventful start to the year, Betterment was curious to see both the immediate and long-term impact this had on investors, particularly those involved in the action. In this report -- a survey of 1,500 active investors conducted by a third party -- we took a look at the rise of day trading activity and the impact it did (or didn’t have) on people’s behavior. From their own forecasts, it looks like “the rise of the day trader” is here to stay -- but forecasting is hard. None of us would have bet on the pandemic and the changes it's causing. People actually aren't very good at forecasting their own preferences and behavior in the future, so it will be interesting to see if said forecasts actually come to fruition. Regardless, at Betterment we welcome the addition of consumers looking to learn more about the markets and, ultimately, how to balance their portfolios for the long-term too. Section One: The Rise Of Day Trading Activity With movie theaters, stadiums, bars and restaurants closed, many people took up day trading during the COVID-19 pandemic. Half of our total respondents said they actively day trade investments, and nearly half of those day-traders (49%) have been doing it for 2 years or less. While most day traders indicated their main reason for doing so was that they believed they could make more money in a shorter period of time (58%), many (43%) also indicated it was because it is fun and entertaining. Of those who look to day trading for fun/entertainment, half (52%) said it was to make up for the bulk of their other hobbies—like sports, live music, social gatherings, gambling—not being available due to COVID-19. And these day traders have fully acknowledge that COVID-19 played a big impact role in their market activity overall: 54% indicated they trade more often as a result of COVID-19; and interestingly, 58% said they expect to day trade more as normal activities return and COVID-19 restrictions are lifted, likely as a result of what they learned during this downtime. Only 12% said they expect to trade less. More than half (58%) are using less than 30% of their portfolio to actively trade individual securities or stocks. Nearly two thirds also allow an advisor (either online or in-person) to manage a separate part of their portfolio. Betterment's Point Of View: It is interesting to see more respondents expect to day trade more after the pandemic than are currently day trading: we imagine it is hard for people to forecast themselves into the future and imagine doing things differently than they are now. However, what is positive to see is these people aren’t using an excessive amount of their portfolio to day trade. The majority of investors day trade with a minority of their total investing balance, and delegate day-to-day management of the larger portion of their portfolio to an advisor. Passing hobby or not, how educated is the average day trader on what they’re buying and what they stand to gain—or lose? Sixty one percent rely on financial news websites to decide which stocks to buy, but nearly half (42%) are influenced by social media accounts, showing just how powerful “memestocks” can be. Betterment's Point Of View: More than half of the respondents suggested they buy stocks based on company names they’re familiar with, but we’ve seen this lead to issues in the past—with “ticker mis-matches,” where people trade the ticker of a stock that isn't the correct company. For example, after a tweet from Elon Musk about Signal (a non-profit messaging app), a different company’s stock was sent soaring 3,092%. We also asked day trader respondents if they consider capital gains taxes when deciding to sell their investments. While the majority (60%) indicated that it influences them to hold onto stocks longer to avoid short-term capital gains, 14% said they weren’t aware there was a difference in taxes based on how long they hold a stock. Another 17% said they simply don’t care about the short-term capital gains tax. Who invested their stimmys? Almost all (91%) respondents received some stimulus money, and nearly half (46%) invested some of that money; of those who did invest it, 70% invested half or less of their stimulus. Day trader and male respondents were more likely to invest then their counterparts, as represented in the graphic below. This is in contrast to our COVID-19 investor sentiment survey from 2020, where only 9% of respondents indicated they put some of their stimulus money towards investment. Last year’s response pool was primarily focused on building out their emergency funds, with 40% putting money into a safety net. This is a good indication that respondents are more comfortable with their financial situations this year, compared to the throes of the pandemic. Section Two: Memestocks Understanding And Involvement We asked all respondents how well they understood what occurred in the stock market in January & February surrounding “memestocks” like GameStop, AMC, BlackBerry and other retail investments. Most indicated having some level of understanding, but nearly a quarter (24%) of all respondents said they didn’t understand it well at all; and only half (51%) of day trader respondents said they understood what happened very well. Nearly two-thirds (64%) of all survey respondents said they did not actively purchase any popular retail investments (GameStop, AMC, BlackBerry, etc.) during the stock market rally in January or February. But those that DID were primarily day traders. Of all respondents that did buy in actively, 55% are still holding onto all their investments. Only 2% of those that sold these investments sold everything at a loss; 44% sold all for a profit and 54% sold some at a profit and some at a loss. Of those that bought into memestocks, there is a near universal consensus that they will continue investing in stocks like these that get a lot of attention in the future—97% said they’re at least somewhat likely to invest. Betterment's Point Of View: It is interesting to see the majority of respondents holding onto their investments - are they expecting another high or holding on because they don't want to admit they made a bad investment? Disposition Effect says people tend to hold on until they get back to zero loss; but seeing so few sell entirely for a loss is encouraging. However, 60% previously said thinking of short-term capital gains taxes encourages them to hold onto their investments longer, which is good to see. Section Three: Money And Stress Factors It’s no secret that money and stress are linked, so we wanted to take a look at respondents’ money habits and how that may be impacting stress levels. The consensus is that for better and for worse day traders and younger generations are more engaged with their finances. We asked respondents how much they stress about their finances on a daily basis—three quarters said they stress to some degree. Interestingly, when we looked a layer deeper, day traders are much more stressed than non-day trader—86% indicated they stress to some degree, vs 65% of their counterparts. Unsurprisingly, younger generations are more stressed about their finances than older ones. In looking at the causes of the stress: respondents are nearly equally concerned about money in the short term, near term future, and long term future with the top 3 financial stress factors being their daily expenses (43%), how much money they will have in retirement (43%), and how much money they have saved (42%). We asked respondents how often they are checking their bank account and investment portfolio balances - 39% are looking at their bank account balances every day, with 11% of those checking multiple times a day; 37% also check their investment portfolio balances every day, with 16% of those checking multiple times a day. When we look a layer deeper, we find that day traders are checking both their bank account and investment portfolio balances significantly more than non-day traders. Interesting Bank Account Habits 50% of day traders indicated they check at least once a day (18% multiple times) vs 29% of non-daytraders (5% multiple times). Men check their accounts more often—41% at least once a day (13% multiple times) vs 36% of women (8% multiple times). 46% of Gen Z/Millennials and Gen X both said they check their accounts at least once a day, whereas only 28% of Boomers said the same. Those making more money actually check their accounts more often—42% respondents making $100K or more check every day, compared to 39% of those making between $50-100K and 35% of those making less than $50K. Interesting Investment Account Habits Unsurprisingly, 56% of day traders said they check their investment portfolio balances every day (25% multiple times a day), whereas only 18% of non-day traders said the same. 41% of men check every day, compared to 30% of women. 47% of Gen Z/Millennials check every day, compared to 41% of Gen X and 22% of Boomers. 42% of those making 100K or more check every day, compared to 35% making between $50-100K and 30% of those making less than $50K. Betterment's Point Of View: The differences between men and women here are in line with research we’ve seen elsewhere. Women are less focused on market performance, and more focused on the end financial outcome. They also tend to invest at lower risk levels, so are less likely to see extreme ups and downs. Additionally, Women tend to be less competitive/score based in general, so are less interested in monitoring the game. Encouragingly, when we asked people how they felt checking these accounts, the positive responses outweighed negative options for both. Interestingly, day traders were significantly more excited for both (21% for bank accounts, 25% for investments) than non-day traders (4% and 12%, respectively) as well. Most respondents (89%) indicated they’re putting some money away every month, but it's equally split as to where that money is actually going. Conclusion At Betterment, we have often compared day trading to going to Vegas—have a great time, enjoy yourself, but be prepared to come back home with fewer dollars in your wallet and a hangover. The trends outlined in this report seem to indicate that more people are dipping their toe into the investing pool and (so far) few have decided to walk away. Whether this trend will continue—and the long term impact it will have on people’s finances, health, stress, etc.—remains to be seen. And for those who want to avoid the FOMO of the next big memestock, but aren’t sure of the best way to get started—a simple alternative is investing in a well diversified portfolio. That way, whenever someone asks if you own the hottest thing, you can say “yes”, regardless of what it is. Methodology An online survey was conducted with a panel of potential respondents from April 26, 2021 to May 3, 2021. The survey was completed by a total of 1,500 respondents who are 18 years and older and have any kind of investment (excluded if only 401k). Of the 1,500 respondents, 750 of them actively day traded their investments while the other 750 did not. The sample was provided by Market Cube, a research panel company. All respondents were invited to take the survey via an email invitation. Panel respondents were incentivized to participate via the panel’s established points program, regardless of positive or negative feedback. Participants were not required to be Betterment clients to participate. Findings and analysis are presented for informational purposes only and are not intended to be investment advice, nor is this indicative of client sentiment or experience. Any links provided to other websites are offered as a matter of convenience and are not intended to imply that Betterment or its authors endorse, sponsor, promote, and/or are affiliated with the owners of or participants in those sites, unless stated otherwise. -
The Pursuit Of Betterment’s New CEO (And Finding Happiness Along The Way)
The Pursuit Of Betterment’s New CEO (And Finding Happiness Along The Way) Betterment Founder Jon Stein announces the appointment of Sarah Kirshbaum Levy as his successor and new CEO of Betterment. It’s the fall of 2007 on the Lower East Side. My Betterment clock starts not when we launch in 2010 but as I hash out the concept in conversations with roommates and friends. I have a crazy idea: to pursue my happiness via helping Americans pursue their happiness. I write a mission statement: empower customers to do what’s best with their money so they can live better. Investing feels complicated to most people, but the best practices are known and straightforward. Why not take the smart services used by the wealthy and institutions and make them accessible to every American? People like this crazy idea, some join me, and with sweat and sacrifice, a tiny, hungry, customer-impact-obsessed company is born. I pursue Betterment’s mission doggedly. My wife (whom I met in 2006—not coincidentally—her encouragement begets a startup) calls Betterment my “first child.” I say often (usually sincerely): “I’m the luckiest person, I have the best job in the world.” At times, it feels like all of my being, every waking hour, every dream, is intertwined with my company. I am Betterment. There is nothing else. Teammates become best friends (and each other's family: I officiate weddings of Bettementers who later have Betterment babies). I star in TV ads—never imagined that career turn. Early customers email me personally for support (and some still do—love y’all, customers). We grow to $25B AUM, more than 500,000 customers, a team of more than 300, and we move the industry forward. And yet, I know we can achieve more; we have millions more Americans to reach. The Pursuit Of Our Potential For some time, I look to bring in an experienced, dynamic operating leader to help drive the company forward. The search is not initially focused on one specific role to fill; it is about finding amazing talent that could help lead Betterment to realize our full potential. The time at home this year affords more time to devote to the search process, to talk to senior operating leaders and to think about what might be needed for the next leg of the journey. I spend time with hundreds of diverse candidates. I realize that the best way to achieve our mission might be to invite a successor to lead Betterment in the next phase of growth. Due to good fortune and intense effort in a most challenging year, the company has never been in a stronger position. Each line of business is reaching new heights in 2020. We’re beating targets, well-capitalized, with wind at our backs. It’s a good time to hand over the reins. Over the summer, I connect with Sarah Kirshbaum Levy. There is something enthralling about her. I don’t want to jinx or overload it, but outside of meeting my wife, it’s hard, at present, to think of a more consequential introduction. And this is over video conference! The Pursuit Of The One Over the next few months, I spend more time with Sarah and she begins engaging with members of the team and our board. I bring her in full-time as a consultant in a trial run. What a privilege not only to recruit my successor, but to observe her building relationships, to work side by side with her as she iterates on her plan, and to see her making every meeting more open and efficient. I give her my authority to work with the team to architect plans for 2021 and beyond, and she excels. My admiration grows as she starts effectively running the company, with my proxy. My execs tell me they have so much to learn from her. The only thing that is missing is the title—and today, we give her the title. Sarah’s Pursuits Sarah started out at Disney and spent the last 20 years at Viacom, home to beloved brands including Nickelodeon, BET, MTV, and Comedy Central. Through a series of senior leadership roles, culminating in Chief Operating Officer, she’s shepherded global phenomena, from SpongeBob to The Daily Show with Trevor Noah, connecting with audiences in meaningful ways. With her experiences leading large public companies, Sarah is the right executive to lead Betterment now, as we contemplate a transition from private to public in the coming years. For someone with a “big company” pedigree, she’s remarkably down to earth and scrappy. She’s launched and grown businesses, bought and sold businesses, managed the bottom line, and driven consumer brands to win. I appreciate her “outsider” perspective. Betterment is a unique company—not just finance, not just tech, 100% customer-impact obsessed. Take it from one who’s looked: It’d be hard to find someone who’s both spent a career in financial services and can credibly lead the change we envision: to empower customers to do what’s best with their money, so they can live better. The Pursuit Of Happiness I’ve done the best work of my life at Betterment, and I have worked too hard to stop giving it my all to realize this company’s mission, whatever form those efforts may take. From my role on the board, I’ll be supporting Sarah and her team, whether it be via recruiting, investor relations, telling our story, or upholding company culture and values. A dream for me since that Lower East Side fall in 2007 has been to build a sustainable institution, to build something that will outlast me. I’ve never taken a larger step toward that accomplishment than I am today in passing the torch to Sarah. I asked Sarah what mattered most to her in her next role, and she said, without hesitation, “A brand and mission I believe in.” She’s evidenced this for me in every interaction since. I believe that she’ll more fully realize the vision I laid out years ago, and make Betterment the most beloved, most essential financial brand for this generation. And in so doing, she’ll power the pursuit of happiness for millions of Americans. -
How The Presidential Election And COVID-19 Impact Investor Sentiment
How The Presidential Election And COVID-19 Impact Investor Sentiment Betterment examines how investor sentiment has evolved since the beginning of the COVID-19 crisis, as well as the impact of the upcoming election on consumer finances. In March, Betterment surveyed a group of investors to examine how the COVID-19 crisis has impacted their financial security and spending habits, as well as gauge their reactions to the market turbulence. In June, after stimulus checks had been sent out and the markets continued to react to the news cycle, we followed up with those investors to look at whether people executed on the savings and investing actions they previously indicated. In the last of our three-part series, we return to those same investors to see how their sentiment and actions have changed since March, their thoughts on the upcoming election, as well as what the future might have in store for them financially. Methodology The third installment was an online reconnect to a panel of potential respondents that completed the two previous surveys. The recruitment period was 9/22 to 9/29. The survey was completed by a total of 1000 respondents who took all three surveys, are living in the United States and who are invested in the markets. The sample was provided by Market Cube, a research panel company. Panel respondents were invited to take the survey via email invitation and were incentivized to participate via the panel’s established points program. Investors are smarter and savvier than when COVID-19 began. With our third checkpoint, we wanted to again see how investors’ sentiments and actions are evolving over recent months. Encouragingly, more investors have an emergency fund in place than the last two times we checked in. They also continue to be less stressed and are less likely to take money out of the markets or tap into their long-term savings. Changes in investor sentiment as a result of COVID-19 Betterment’s Take “Investors seem to be settling into this “new normal.” It is great to see the number of people removing money from the market in the face of volatility trickling downward. But ideally, the number of people withdrawing from the market should be even lower: investors who react to volatility this way may be doing themselves a disservice in the long-run, potentially costing themselves gains by waiting for the market to recover.” Political beliefs and the potential impact of the election on investors. With the presidential election on the horizon, markets are gearing up for a myriad of potential results and almost guaranteed turbulence. As a result, we wanted to see if there were any changes investors might be making to their portfolios. The good news is investors seem to be looking past the short-term noise and volatility, and plan to stick to their long-term saving and investing goals. Do you plan to take any action in anticipation of the November 2020 election? Do you anticipate taking any actions after the election results? Betterment’s Take “With so much uncertainty surrounding the general election, it is encouraging to see investors taking a wait and see approach. To add, it’s even more encouraging to see that if they anticipate making any changes, it is to add money to their investment portfolios after the election.” We also asked investors for their thoughts on the government’s stimulus program. Overall, 71% indicated they were either unsatisfied or neutral on the government’s handling of the stimulus program. Only 15% of Democrats indicated they were satisfied, while 51% of Republicans were satisfied. Changing Perceptions Of Universal Basic Income (UBI) And Retirement How has the pandemic changed your perception about a universal basic income (UBI)? Following the national stimulus program, we were also interested to see if investors’ perception of a universal basic income (UBI) shifted in any way. Nearly one in five (18%) said they are more in favor of UBI than they were before the pandemic, while just 3% are less in favor of UBI. How has the COVID-19 pandemic changed investors’ approach to saving for retirement? While 35% indicated that they have added to a savings account recently—and this number trended up across our three surveys—we also asked investors how the pandemic has changed their approach to saving for retirement. The majority intend to keep saving as they have been, and only 5% of respondents indicated they intend to save less from now on, while 29% said they’d save even more. Betterment’s Take “Seeing more investors adding to their savings while mostly leaving their approach to retirement unchanged is exactly the balance we would hope to see. Having accounts to meet short-term goals means that accounts to fund longer-term goals—such as retirement— can remain untouched and continue to grow. While short-term volatility caused by the pandemic can feel hard to stomach, ultimately investors are weathering the storm and setting themselves up for long-term gains.” What are investors’ most popular investment products during this time period? The most popular investment our respondents had was an IRA, at 66%. More than half (56%) of respondents have individual stocks but only 16% indicated they invest in ETFs outside of or in addition to their 401K. And despite having higher expense ratios, mutual funds (46%) are a more popular choice than ETFs. Betterment’s Take “It is great to see the diverse vehicles that our respondents are invested in, beyond just a traditional 401K or IRA. We would encourage more investors to look at ETFs though, as they are typically cheaper than mutual funds. Investors pay, on average, 0.35% more for an index-tracking mutual fund than for an index-tracking ETF, based on the expense ratio. Any savings that accrue from owning vehicles with lower expense ratios like ETFs are more likely to provide a persistent boost in returns.” More respondents are invested in individual stocks than a 401K or IRA. Investors have adjusted to the “new normal” we live in today. Over the last six-plus months and three reports, we’ve tracked how investor sentiment has evolved during the COVID-19 pandemic, whether people executed on the savings and investing actions they initially outlined, and how it has changed their perception of retirement, finances, and more. Although this is the last of our three-part series tracking investor sentiment, the COVID-19 pandemic is far from over and its impact on many investors will likely be felt for years to come. It will be interesting to watch the long-term effect it has on investors, but for now we’re encouraged to see so many sticking to their long-term goals. From a financial markets perspective, smart investors know to keep their head down and focus on the long term rather than short term volatility. At Betterment, we’re here to help investors stay the course. Founded in the wake of a major financial crisis, Betterment believes financial institutions should work harder for you. Learn more about our commitment to putting your money to work for you. -
Betterment’s Employee Demographics And Our Commitments To Doing Better
Betterment’s Employee Demographics And Our Commitments To Doing Better We share details on the makeup of Betterment’s employees, our initiatives for diversity and inclusion, and how we’re encouraging progress within the fintech community. TABLE OF CONTENTS Betterment’s Employee Demographic Data Scaling Our Diversity And Inclusion Efforts Conclusion In June, our CEO and Founder Jon Stein made a statement: “Betterment will not stand for the unequal treatment of people of color in our company, in our communities, or in our country. We will advocate for our Black colleagues, friends, and fellow citizens and work harder to build a nation that’s just for all, where we all can pursue happiness, without fear, oppression, or unequal treatment.” Over the last two months, we’ve been hard at work learning how to live up to that promise and take a stand against racial injustice. We’ve formed a coalition with the broader fintech community, we’re increasing our transparency with our employees and our customers, and we’re investing in resources for our employees of color. We acknowledge that these initiatives are a work in progress, but we want to share them with the Betterment community. Betterment’s Employee Demographic Data First, we’d like to share the demographic data of our full-time Betterment team (293 employees as of July 7, 2020). The demographic data below is collected using the Equal Employment Opportunity Commission (EEOC) questions and selections during an employee’s onboarding process. Because of this, the type of information we collected is limited. Starting in 2020, we will provide optional opportunities for additional demographic selections (including but not limited to gender, race, and ethnicity) that are more inclusive for both employees and candidates. Full-Time Employees Leadership Team* *(defined as Director-level or higher): Product, Design, Engineering, And Analytics Teams Engineering Teams We've made progress with gender representation over the past few years, but we still have a long way to go. And our progress in racial and ethnic representation—particularly within our leadership cohort—is not where it should be. We have work to do here, and are committed to ensuring that our team better reflects the communities and customers we serve across the U.S. Scaling Our Diversity And Inclusion Efforts The conversations we’ve had internally as a community, and with your input, are helping inform and drive the sustained change we’re looking to make. We’re working toward a new normal in several ways: Fintech Coalition We recognize that the fintech industry needs to improve access to jobs, career advancement, and financial services, not only for underrepresented groups, but especially for people in the Black and brown community. To hold us and other fintech companies accountable to making this change, we spearheaded the creation of the fintech coalition. Each company that joins the coalition will publish individual plans and provide regular updates on progress toward our commitments to enhancing access to financial services, as well as job and career advancement for people in the Black and brown community. As part of the coalition, we are committed to publicly sharing our representation data on an annual basis each July. Betterment’s Call-to-Action Initiative Immediately following the murder of George Floyd, our employees formed a Call-to-Action (CTA) group. These employees have been brainstorming and executing a number of efforts to unbias our product, increase community outreach, and begin internal educational forums such as book clubs and speaker series. This group is committed to creating change over time, beginning with the following: Betterment is supporting our Black employees in “Calling Out Black” every Friday throughout the summer. Calling Out Black acknowledges the exhaustion, pain, and emotional weight our Black employees might feel in the workplace, especially during times of civil unrest due to police violence. These days provide space for our Black employees to reclaim their mental, emotional, and physical wellbeing. Beginning in 2021, Betterment will recognize Juneteenth as an annual paid holiday to commemorate the ending of slavery in the U.S. We are running a summer education series for our non-Black employees about racial inequality and anti-racist allyship, featuring guest speakers as well as small-group discussions. We’ll be working with Paradigm for a three-part Inclusive Leadership Training series beginning in late July. All managers will go through these sessions that are focused on objectivity, belonging and voice, and the growth mindset. In August, Netta Jenkins will provide company-wide training with her business Holistic Solutions, which will include a discussion forum for Black and brown employees, a session for people managers on how to manage during Black and brown trauma, and two town halls for the entire company. Improve Our Hiring Process Over the last few years, our Recruiting Team has taken steps to expand our new hire sourcing efforts and diversify our interview process. Some of these steps include: Partnering with Jopwell, the leading career advancement platform for Black, Latinx, and Native American professionals to support targeted sourcing of diverse candidates. Allocating funds on a monthly basis to post on underrepresented job boards (e.g., Women In Tech, Women In Product, Black Women in Tech, /dev/color, The Mom Project, etc.) Increasing our geographic diversity by building a remote workforce. We recognize that these efforts have failed to impact the percentage of employees of color at Betterment. Because of this, we have amplified our commitment to this area in four ways: With an employee population that is 70% white, we acknowledge that most folks refer others who look like them. We're pausing our cash referral bonus program to reallocate those funds to support diversity, equity, and inclusion (DEI) hiring initiatives. Implementing a more streamlined application process where all candidates only need a resume to apply. Continuing to reduce bias in our job descriptions by investing in technology that decodes gendered language; by excluding education requirements; and by including must-have qualities and experience only. Researching and partnering with companies that help us increase our sourcing reach. Increasing Internal Data Collection This summer, we will launch internal surveys to collect broader representation information for both employees and candidates. These surveys will include additional optional self-identification opportunities for racial and ethnic groups, as well as gender. We will share this information with leadership, ERSGs, and our Community Council on a quarterly basis, and will use this information to inform our progress and let us know where we need to focus our efforts. Amplifying Our Employee Resource Strategy Groups (ERSGs) We currently have seven active ESRGs: Black at Betterment, Latinx at Betterment, Asians of Betterment, Women of Betterment, Women in Tech, Betterparents, and Betterpride. Representatives from these groups act as facilitators between their communities and Betterment leadership, as well as participate in our Community Council, a group that meets on a regular basis to further diversity and inclusion initiatives. Through our partnership with Netta Jenkins, we’re investing time in evaluating and improving the structure and reach of our ERSGs. We want to create more open communication between these groups and company leaders, and ensure that these groups are represented as stakeholders in company initiatives. Conclusion Fintech—and Betterment—has been heralded for providing broad and equitable access to financial services, regardless of how much money someone has. While this access is a step forward, it doesn’t directly address the wealth and financial knowledge gaps felt by many people of color—particularly members of the Black and brown community—at the hands of a system that does not treat them equally. We know we haven’t done nearly enough for our community and our employees, and we must do more. Thank you for your feedback and support as we work to do just that. -
How Investor Sentiment Has Evolved During Covid-19
How Investor Sentiment Has Evolved During Covid-19 In the second part of a three-part series, Betterment examines how investors used their income and stimulus checks throughout the COVID-19 crisis. In March, Betterment surveyed a group of investors to examine how the COVID-19 crisis has impacted their financial security and spending habits, as well as gauge their reactions to the market turbulence. In part two of our three-part series, we surveyed that same group to see how investor sentiment has evolved. Four months into a nation-wide lockdown and record unemployment, we looked for whether people executed on the savings and investing actions they previously indicated, or if the impact of the virus has only caused investors to dig deeper into emergency funds and retirement accounts. Methodology An online reconnect to a similar survey conducted 7 weeks prior took place with a panel of potential respondents. The recruitment period was June 3 to June 16, 2020. A total of 2,450 respondents, who took both surveys, living in the United States, who are invested in the markets, completed the survey. The sample was provided by Market Cube, a research panel company. Panel respondents were invited to take the survey via email invitation and were incentivized to participate via the panel’s established points program. COVID-19's Financial Impact Over Time As COVID-19’s impact continues to be felt, we wanted to see how investors are reacting over time as we all adapt to the “new normal” that has consumed our daily and financial lives. The good news is that respondents seem to have a better grip on their finances since we last asked. Since March, investors feel less stressed about their financial situation. More investors have added to savings and fewer people have taken out debt. At least somewhat stressed out when it comes to their financial position and outlook: Took money out of the market in the last two weeks: Have no plans to tap into their long-term savings: Added to savings: Increased debt: Emergency funds are growing. When the financial impacts of COVID-19 first hit in March, 34% indicated they did not have a sufficient emergency fund in place. Since then, many investors looked to increase their financial buffer. A third of respondents indicated that since the first survey in March they have started an emergency fund and in the past few weeks, 39% of all respondents have either added to or opened a new savings account. Those who have kicked off an emergency fund in the past few months aren’t just those with the luxury to save. In fact, this group is more likely to say their income was impacted by COVID than those who still don’t have an emergency fund in place: 59% of those with new emergency funds reported having their income impacted by COVID in some way, vs. 49% of those who still don’t have an emergency fund. The stimulus check may have been a jumping-off point. Of those receiving a stimulus check, 41% indicated in March that they planned to put the check toward an emergency fund, and nearly everyone carried through on that plan. In June, 40% indicated that they did indeed put stimulus check funds toward their savings. How Investors Used Their Stimulus Checks In our first survey, investors who expected to receive a federal stimulus check outlined a variety of ways they planned to use that money. In part two, we asked how they ultimately did spend their checks. While most stuck to their word, by saving or stashing their check away in a safety net fund (40%), the data shows that investors who said they planned to invest it, pay off debt, or put it toward retirement may not have followed through on those intentions. Investors were also asked how they would primarily use a second check, should the government announce another stimulus package. Similar to how they used their first check, over a third of respondents (34%) indicated they would save it or put it towards an emergency fund. -
Taking Action Against Racial Injustice
Taking Action Against Racial Injustice Betterment shares with our customers how we’re taking action against systemic racial injustice. -
If We Aren’t Changing The System, We’re Perpetuating It
If We Aren’t Changing The System, We’re Perpetuating It Betterment will not stand for the unequal treatment of people of color in our company, in our communities, or in our country. -
Jon Stein: Thoughts on 2020's Volatile Market
Jon Stein: Thoughts on 2020's Volatile Market Much of what Betterment has worked toward the past 10 years has been purpose-built to endure all the worst and the best the market has to throw at us. I started today like I imagine a lot of people around the world might have: Wondering about the latest news. Helping my wife come up with new ideas to entertain our two young daughters. Thinking about how fortunate we are to be together and healthy, and about those most vulnerable during these uncertain times. Connecting with coworkers remotely (and missing our in-person interactions). I’ve also been thinking about my family’s and our customers’ finances. I’ve been thinking about how we all can make smart decisions to make the most of our current situation. Relatives (who are also Betterment customers) have told me brokers are calling them, saying, “Now’s the time to buy,” and “Let’s transition your portfolio,” and, to all of them I reiterate the same thing I always say: “Invest appropriately for your goals. Invest regularly. Stay the course (aka, don’t try to time the market).” Betterment was born in the aftermath of the last financial crisis. Our vision, a smarter way to manage money for everyone, was based in no small part on what I saw during that time: Too many people making rash (often bad) financial decisions and struggling to make sense of the economic turmoil, because of a lack of good, outcome-oriented, fiduciary advice. Much of what Betterment has been working toward over the past ten years—the services we’ve built, the products we’ve launched, the customer-outcome-obsessed company we strive to be for you—has been purpose-built for times like these, to endure all the worst and the best the market has to throw at us. How we’re working for you in these challenging times. Betterment has migrated to fully remote operations, and our teams are all up and running. We are fortunate that we were well prepared for this; in 2019, we opened new offices in Philadelphia and Denver and onboarded a dozen remote employees living across the country. This experience has served us well in our current environment, and made it relatively easy for us to institute a mandatory work from home policy early on. Today, all of our team, all over the U.S., is working for you. Just like you, we have parents juggling meetings with at-home kids, and supportive teammates picking up extra work to allow those who need it to take time to care for loved ones. They’re answering your calls, building and launching our new checking account, or analyzing our trading, advice, and operations, and working hard to give you the service and advice you expect and deserve. That we’ve seen record call volumes might be no surprise. Our call hold times have been elevated: ~30 minutes in the recent, dramatic days of market volatility. For me, this was a positive surprise. It’s longer than I’d like it to be, but better than the busy signal I might have feared after hearing about it elsewhere. Our services have remained open and up through record trading volume. We’ve harvested billions of dollars of tax losses and rebalanced hundreds of thousands of customers smartly, and tax-efficiently, working to make the most of even down days. We’re also launching new ways to answer your questions and connect with you, including advice videos and live Q&A on platforms like Twitter and Reddit. We hear you, and we’re working as hard as we can to respond to your feedback and concerns. “Empower people to make the most of their money so they can live better.” That’s our mission at Betterment—the reason each of us joined and what brings us together. It’s our mission when the market is up and when it’s down. One of the things about working at Betterment is that every single one of us is a customer as well. It means that we’re working for you, and we’re working for our families. We celebrate with you when we reach our financial goals, and we hurt with you when the markets are in turmoil. We’re with you, working hard to help navigate spending, saving, investing, and retirement with confidence. We’ve known from the start that there will be good days and bad days in the market, as in life. We are invested in the world and with the world, in a global portfolio. As the world goes, so we go. Smart investing is the confidence to endure. On average and over time, being broadly and globally diversified is wise, today and every day. Historically, it has led to the most consistent returns, with the least amount of risk, of any widely available investment strategy that we have identified. Implementing it well requires discipline, smart automation, and appropriate identification of goals and time horizons. This approach and our advice are designed to help you make smart decisions today that help you reach your goals in the long-term. Everything we do is built with the intention of helping you achieve better results than you could without us, than anyone could without us. Just as importantly, everything we do is built to help you have peace of mind. But just because some may be better off, or more fortunate, doesn’t make anyone immune to the pain going on around us. As friends and loved ones are vulnerable or exposed and the worldwide economy goes through a rough patch, we feel it, too. Smart investing is not the absence of dark days, or the absence of fear, it’s the confidence to endure. We will get through this, and the economy will be stronger in the long run. Things will get better, for the world, our customers, our team—and you. Invest appropriately for your goals. Invest regularly. And stay the course. We’re here for you, should you want a hand to hold (or, better make that, a person to talk to), and we’ll get through it better, together. -
Introducing Betterment’s Cash Management Products
Introducing Betterment’s Cash Management Products Betterment helped redefine investing with automated guidance built for you. Now, we’re reshaping another part of your financial life: your cash management. When I started Betterment, the goal was to help people answer a basic, but universal, question: “What should I do with my money?” In my early career as a bank consultant, working for large banks across the United States, I noticed fundamental conflicts in the financial industry that made great financial advice inaccessible to most Americans. In creating Betterment, I sought to change the industry and to build the most customer-centric smart money manager. That desire for change evolved into our mission: To help you make the most of your money so that you can live better. And we focused all of Betterment’s efforts on that mission. We listened diligently to our customers. Developed personalized retirement guidance. Built our suite of Tax Smart tools. Incorporated personal choice into our investment options. Built and evolved our mobile app. Across our work, we listened and learned from you. We heard that while investing is a major challenge, it’s often not your first one—instead, it’s saving. For many of our customers (whose average age is 37), having more money tomorrow means managing your money better today. You want tools that make you confident you’re doing the smart thing: Increasing financial security for you and your family by setting savings goals and creating a plan to achieve them. To not worry about whether you are incurring unnecessary fees that might take advantage of you at inconvenient times. Ultimately, we believe that managing your everyday cash is essential to realizing your long-term goals. This is why we built cash management products: for your money today that can help you save and earn more for tomorrow, all in one place. Cash Management: A Solution That Helps You Save The problems we see in the banking industry today are the same fundamental flaws we saw in investing when we started Betterment: Companies aren’t customer-centric. Rather than suggesting what’s right for customers, they’re instead encouraged to do what makes the company the most money (which can often be a poor financial decision for the customer). Instead of investing for the long term, trade on the short term, some say. Instead of saving for your goals, spend what you make and borrow money later, others say. We’ve designed our cash management products to meet you where you are in your financial journey and to encourage saving that grows over time. Our first step is Cash Reserve, a cash account that can help you earn a variable rate of 1.10%*, is FDIC-insured for up to $1,000,000 once deposited at our program banks (or $2,000,000 if using a joint account)†, has no minimum balance, and only requires a $10 deposit to get started. Our second step is Checking—meant to help you manage the heartbeat of your financial life, your everyday cash flow. With this checking account, users will receive a Betterment Visa Debit Card and all ATM fees, worldwide, will be reimbursed; you won’t see any monthly maintenance fees or minimums and you’ll get access to advice on your full financial life. The same reason that we don’t put our own ETFs into portfolios is the same reason Betterment is not a bank—because we can offer you value and help you build a better life as your advisor and advocate. We want to help you make the most of your money, and a cash account is an important part of that. With Checking, we’re taking a similar approach. No checking fees‡, and all ATM fees reimbursed worldwide. A partner that works for youーeveryday. We’re pushing the boundaries of how finance serves you, helping you save more with less hassle, so that ultimately, you can live better. We’re on the path to building your self-driving wallet. When I think about what the future holds for my two young daughters and children across the United States, I can’t imagine that they’ll ever have to spend time figuring out how to intelligently allocate their paychecks across various accounts—I want them to have easy access to the right answers, from a trusted advisor. I want them to know that they’re on-track to meet goals important to them—and if not, how to get on track. I believe that technology will help make smart money management accessible to all Americans. To get there, come join us. Tell us what you want to do with your money. We can make it easy, then help you automate the most frequent, distracting, and tedious (but nevertheless valuable) tasks—just as we have with investing. With our cash management products, we bring our role as your financial advisor into your everyday life, turning your daily choices and transactions into saving for the future. We’ve built the framework for where we believe the industry can (and should) move. We believe the future is smart money management, and we’re helping lead the way. Months ago, I described why the financial industry fails to help people save: We place the responsibility to save more money on the customer, rather than taking on that challenge as investment managers and banks. Ultimately, I believe institutions that survive into the future will be accountable for what real people struggle to do: Automate their savings. We are striving for a future of smarter financial behaviorーfor a stronger middle class, empowered to thrive and pursue happiness, with the true peace of mind that comes from having a smart money manager always working for you. This brings us a significant step closer to that goal. -
The Senate Is Planning a Tax Hike on Retail Investors. It Should Be Removed.
The Senate Is Planning a Tax Hike on Retail Investors. It Should Be Removed. The Senate’s current tax bill includes a mandate that would be punitive for everyday investors. Without a doubt, the FIFO mandate should be removed from consideration. Congress is currently working on a massive overhaul to our tax code, and the Republican-led majority appears committed to signing a bill into law before the end of the year. While the proposals have far-reaching impact, one provision proposed by the Senate would be particularly punitive for retail investors: the so-called “first in first out” (FIFO) mandate. This provision mandates that when retail investors sell a portion of an investment, they must sell their oldest shares first—that is, the first shares “in” must be the first shares “out.” While this technical change may sound innocuous, the FIFO mandate would dramatically harm millions of retail investors. It would raise taxes in unintuitive ways, distort investment behavior, and deprive investors of the opportunity to plan efficiently for retirement. Investing would become more complex and more time consuming—disempowering and disenfranchising everyday people who need to invest for their future. The Senate has already recognized that the FIFO mandate is bad news. In the first draft of the bill, the FIFO mandate applied to investments made by investment funds, but the Senate exempted them after an intense lobbying effort. As a result, investment companies will continue to have the freedom to decide which shares they want to sell. Retail investors unequivocally deserve the same opportunity. What a FIFO future could look like Imagine an investor who, for the last 20 years, has been putting $100 each month into an hypothetical index fund that has returned 10% on average. After 20 years, her deposits from the first year are now up approximately 600%. Say the market has been down this year, but she smartly continues her monthly investments, knowing that in the long term, consistency is the best strategy. Now assume that, before the index fund has recovered its value, our investor has an unforeseen expense of $600. She covers it by withdrawing from her portfolio. Under current tax law, she would be able get the $600 she needs by selling the shares that she purchased earlier in the year. Since these shares are currently trading at less than what she paid for them, she wouldn’t owe any taxes because she actually lost money on those shares. In fact, she could use her losses on the shares to offset other income, reducing her overall tax burden. In contrast, under the proposed FIFO mandate, she would not be able to sell her most recently purchased shares. Instead, she would be forced to first sell the shares that she purchased 20 years ago, which would mean that $500 of the appreciated value would be considered taxable gains. Assuming a combined federal/state long-term capital gains rate of 25%, she will owe $125 in taxes. In trying to withdraw $600, she will be left with $475, net of the tax she owes. To get the full $600 out of her portfolio, she would have to sell about $760 worth of shares, even though the most recent $600 she invested has actually lost value.1 The FIFO mandate might cause her to attempt complex and burdensome strategies to avoid this harsh result. Or, more likely, she would simply decrease her investments in the market, impairing her own investment goals and the growth of the overall economy. FIFO triple-taxes investment income and distorts investor behavior According to the GOP Tax Reform Framework released earlier this fall, tax reform seeks to establish a “simpler, fairer” tax code “built for growth.” The FIFO mandate will actually undermine these goals by distorting investing behavior as investors take extraordinary measures to avoid taxes or avoid investing altogether. Middle-class savers and retirees will fare the worst. By depriving investors of the freedom to choose which shares they want to sell, the FIFO mandate effectively raises taxes on investment income, resulting in a new era of triple taxation for retail investors. Under current law, retail investors already pay personal taxes on investment returns, and the companies they invest in pay corporate taxes. By greatly increasing the impact of the capital gains tax, which could otherwise be deferred (or possibly avoided) under current law, the FIFO mandate essentially imposes a third layer of taxation. Under the FIFO mandate, investors would have to take extraordinary measures, divorced from economic reality, to avoid a large tax bill. Decisions made decades earlier could lead to potential tax consequences that would prevent investors from making what would otherwise be the best investment decisions. Investors would have to maniacally focus on the tax lots they purchase and sell. They might be encouraged to purchase countless versions of similar funds to preserve the ability to access their money in response to unplanned needs. They could seek to open a multitude of accounts at different financial institutions to avoid the FIFO mandate. But, these complicated strategies are likely to be impractical for ordinary retail investors, many of whom already struggle to find the time to properly manage their finances. Only wealthy investors are likely to successfully avoid the FIFO mandate; others are more likely to pay higher taxes—or worse, invest less. Thus, the FIFO mandate will be particularly punitive precisely for middle class savers who have done everything right: picking an investment strategy and sticking to it consistently. They are the ones who would find themselves with fewer and more expensive options when they need to access their savings, including in the face of an unplanned emergency. This is plainly unfair. Retirees would suffer disproportionately. In a world where corporate pension plans have largely disappeared and Social Security benefits are set to be increasingly uncertain (the Social Security Administration says it is “three quarters funded for the long term”), saving for retirement is already a challenge for most Americans. FIFO further complicates retirement savings because older investors will disproportionately face higher taxes early in retirement, as the first shares they will be required to sell will likely have the largest gains. In a future where retirees are personally responsible for their retirement, every penny matters and depleting retirement savings is counterproductive. Furthermore, the many unanswered questions about the mandate could have major consequences for investors. For example, would the FIFO mandate apply across spouses, meaning there might be a marriage penalty? Would it apply across different brokerage accounts, leading to complex accounting or gaming by opening multiple accounts? Would the FIFO mandate apply to charitable giving? Depending on how these questions are answered, the FIFO mandate could inflict additional harm. FIFO clearly hurts investors. But it doesn’t really help Congress either. So, given all the consequences of a FIFO mandate, why is it in the Senate’s tax plan today? The probable answer is, of course, the mandate’s potential to raise revenue—$2.7 billion over 10 years, according to the Joint Committee on Taxation. That $2.7 billion will come primarily from middle-class investors early in retirement. Yet, the revenue generated from the FIFO mandate is miniscule compared to the Senate tax plan of $1.5 trillion in overall deficit spending. The FIFO mandate’s paltry revenue generation is hardly a solution to Congress’ larger budgetary problem. It would cause collateral harm and create unfairness that is not nearly justified by the additional revenue. If Senate Republicans are truly looking to establish a “simpler, fairer” tax code “built for growth” they should eliminate the FIFO mandate. Given that it adds relatively little revenue in the overall scheme of the tax plan, and is extremely punitive to individual investors, removing FIFO should be a straightforward fix everyone can agree on. Citations 1 The tax rate on the capital gains could end up being much higher due to the capital gain being a component of AGI (Adjusted Gross Income). A higher AGI may reduce tax credits, limit tax deductions, and increase the portion of Social Security subject to income tax. This editorial was originally published on Investment News.
Meet some of our Experts
-
Corbin Blackwell is a CERTIFIED FINANCIAL PLANNER™ who works directly with Betterment customers to ...
Read More -
Dan Egan is the VP of Behavioral Finance & Investing at Betterment. He has spent his career using ...
Read More -
Mychal Campos is Head of Investing at Betterment. His two-plus decades of experience in ...
Read More -
Nick enjoys teaching others how to make sense of their complicated financial lives. Nick earned his ...
Read More