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Betterment’s Framework for Building a Better Product

Our five product principles ensure we provide the best, most consistent, and customer-first experience while giving our team the freedom to innovate.

Articles by Anthony Schrauth

By Anthony Schrauth
Former Chief Product Officer, Betterment  |  Published: May 27, 2015

We have five core principles that guide everything from product development to company culture.

Our principles ensure we provide the best, most consistent, and customer-first experience while giving our team the freedom to innovate.

When we were building Betterment in 2009 and early 2010, we knew that success would come from being customer-focused and doing things differently than financial products had been done in the past. It involved making a lot of hard decisions, very rapidly, with little outside validation because what we were doing was both new and complex. Thankfully, the four of us who worked on Betterment in that first year were of the same mind, and when we made a big decision we all agreed it felt right.

As the company quickly grew, we wanted to empower everyone on the team to make decisions about the product and the company, but we wanted those decisions to be consistent with the ones that made Betterment what it was when it began. We realized that we needed a framework to help guide decisions and to ensure that our product continued to put our customers at the center of the experience.

After much discussion and debate, we created our five product principles—principles we live by every day, and that all new employees embrace when they come on board. Now, as we celebrate the fifth anniversary of Betterment’s launch, these principles still remain at the core of what we do, and have allowed us to grow the team and release more features while keeping true to ourselves and our customers.

Transparency

At Betterment, we are building an institution to help our customers reach their long-term financial goals, so it’s very important for us to build honest and lasting relationships with them. Of course, the best relationships are built on transparency, trust, and communication, which is why transparency is core to what we do.  We avoid the black boxes adopted by traditional financials services companies, and we are upfront about everything going on in a customer’s account. Our fees are simple and direct, and we clearly tell people everything that goes into our portfolios and why we chose them—even before a customer sends us their money.

2015-04-09-Web_Portfolio

Accessibility

Accessibility means a lot of things to us. We wanted to take something that has historically been confusing, expensive, and reserved for a select segment of the population—investing and financial advice—and make it accessible to an even wider audience through technology.

Not only do we want our service to be accessible to as many people as possible, but we also want every customer to have access and control over his or her money at all times. Even though we are your financial advisor, and will give you the appropriate guidance for your goals, at the end of the day, it is your money and you should be able to do what you want with it. That means we allow you to change your allocation and withdraw your money without fees or penalties. It also means you should have access to your investments wherever you are—whether you are on a desktop computer or your favorite mobile device.

Efficiency

Betterment is all about efficiency—that is how we are able to make such a great service available to so many people.  When we remove a step, for our customers or behind the scenes, we create a more streamlined experience that we expect will save our customers time and money. We are what people refer to as a full-stack, vertically integrated solution, which means we are both an investment advisor and a broker dealer. We handle everything from building elegant app interfaces to moving money, executing trades, and generating statements. Owning every aspect of the process and experience means we can tie everything together and realize efficiencies that wouldn’t be possible if we outsourced our work.

For example, we make it a priority to release our tax forms as early as possible. We generate beautiful tax statements and make our information available to TurboTax and H&R Block—often weeks ahead of the IRS deadline. This allows our customers to file taxes earlier and get their refund money faster, simply because we have built an efficient process that isn’t dependent on third-party resources.

Automation

Managing money can be difficult and burdensome and, despite their best efforts, human beings make many irrational decisions when it comes to money. Our goal is to help relieve the burden of managing money, and reduce the negative impact of irrational investment decisions, by encouraging our customers to “set it and forget it,” rather than spend their nights and weekends worrying about whether they are doing the right thing with their money.

We do this by automating everything that makes sense, and building behavioral “nudges” into our product to move people in the right direction when they may be going off course. For example, when someone begins withdrawing money that could be in reaction to market movements, we reveal a friendly tip that asks if the customer is worried about the market, and provide helpful information to keep the customer on course. Our research has shown that this simple, non-intrusive nudge reduces withdrawals, and refocuses people on their proper long-term objectives.

When we automate things, we can also become smarter investors and create even better results.

When we automate things, we can also become smarter investors and create even better results. For example, by automating processes like portfolio rebalancing and tax loss harvesting, we’ve taken what used to be burdensome undertakings and optimized them to go beyond what is possible to do manually—all without any effort from our customers.

Delight

Delight is a cornerstone of what we do and balances the other principles that guide our product. When you are running a transparent, efficient, accessible, automated business, it can become very easy to overlook delight—even though it forms the basis of any good experience. That’s why it’s important for customer delight to be a part of everything we do and a consideration in the decisions we make.

Delight means having an amazing experience every time you touch Betterment, whether that is through our desktop app, mobile apps, or talking to us on the phone. Delight is making things straightforward, easy to use, and fun to explore. It makes you smile and feel like you are having a conversation with a close friend.

How Does It Actually Work?

Whenever we make decisions about the product and the company, we do it through the lens of our product principles. If a potential policy violates a principle, we will revise it. If a feature doesn’t feel like it’s satisfying one of the principles, we will find a way to bolster it in that area.

Sometimes it’s hard to satisfy all the principles because there is a natural tension among them. For example, sometimes when we are trying to be transparent and communicate everything we are doing, we may overcomplicate things and risk our accessibility. Other times, automating things and removing steps to be more efficient can cause confusion and reduce delight.

However, having the product principles as our framework means we will have a conversation about it, and if we have to compromise a little delight or efficiency in an early version, everyone has to acknowledge it. After we acknowledge a compromise, we then work out a path to make sure we can augment that principle in a future iteration of the product. Without the principles, there wouldn’t be an understanding that our standards weren’t met, there wouldn’t have been a conversation about it, there wouldn’t be a plan to rectify it, and our customer would be worse off.

As we continue to grow rapidly in many different ways—whether it’s by the number of customers, our assets under management, the addition of new product features, or the growing ranks of the Betterment team members—we will always live by our product principles as we work to provide our customers a smarter financial future.

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