Is Betterment Safe?

Betterment, a robo-advisor headquartered in New York City that launched in 2010 and services around 900,000 users with its impressive technology, is a fiduciary fintech company. Since robo-advisors are relatively new, investors may wonder if Betterment is safe compared to using a human investment advisor. This guide will review what makes Betterment safe. Betterment uses various security measures. Transparency: Its robo-advisor tool designs portfolios using verifiable securities from brokers like iShares and Vanguard. Investors can see exact holdings and updates. Transparency also applies to dividend reports and tax statements. Two-factor authentication: Highly recommended by Betterment. Adds an extra layer of security. For example, even if a hacker cracks the password, they can’t access the account due to this feature. SIPC membership: Betterment provides Securities Investor Protection Corporation (SIPC) insurance. Covers portfolio and uninvested cash in case of bankruptcy. FDIC coverage for cash reserve: Betterment Cash Reserve is a high-yield savings account. Money is kept with partner banks for FDIC insurance.


Betterment can insure deposits up to $2 million, eight times the $250,000 of FDIC coverage of a regular bank. It is FINRA registered and receives monthly reviews from FINRA regulators. As a broker-dealer, it is subject to the Investment Advisors Act of 1940 and gets an annual exam from an independent public accountant. Betterment is regularly audited by government regulators from FINRA and the SEC. It also has three separate audits from independent public accountants who check its financial condition, safety of operational controls, and procedures for keeping client assets safe. The results of government audits are publicly released to users. In 2023, Betterment agreed to pay a $9 million fine as a result of an SEC audit, though it did not admit any wrongdoing. Robo-advisors in general are safe as they follow the same regulations and safety standards as human investment advisors or traditional broker-dealer investment platforms. But like any investment, there is a risk of losing money if the portfolio does not perform well. When considering robo-advisors, check historical returns, fees (Betterment charges 0.25% per year), and other features like tax-loss harvesting and goal-planning tools. Test out a platform to see if you like it. Betterment scores highly across these categories and is one of the best robo-advisors, including for beginners. Betterment is not a licensed tax advisor. Tax Loss Harvesting+ (TLH+) is not suitable for all investors and is subject to certain conditions. If you think Betterment is safe and want to invest, you can open an account.


Betterment is designed for beginners and makes it easy to test the platform and start. As a robo-advisor, it uses technology to plan and manage investments automatically. The main platform is automated, but human support is available for an extra fee. Betterment is one of the most popular robo-advisors. You can try testing the platform before signing up. For more details, read our in-depth Betterment review.


If Betterment is right for your investing needs, follow these steps when getting started. Begin the setup process. Set up a free Betterment account by providing email and phone number to log in. This allows you to see the platform. If you want to invest, verify your identity with government ID and link a checking account to transfer funds.


Select your goals. Once you have money in your account, set up the automated investment portfolio. The platform will ask about your investing goals, like retirement or an emergency fund. It will also ask about your time horizon for needing the money and risk tolerance. If you’re investing at least $20,000, you can schedule a free call with a human financial advisor at Betterment to help set up your portfolio.


Review your goal selection. Betterment will use your selected goals to develop a portfolio of stocks, bonds, and cash using exchange-traded funds (ETFs). It will show expected returns and how your money will grow over time. However, it won’t launch the investment right away. You can change your goals and assumptions to redesign the portfolio.


Finish the account setup process. If you’re happy with the portfolio recommendation, approve it to start investing. Betterment will automatically set up the investments and manage the portfolio. You can set up additional contributions over time. You can also set up multiple portfolios for different goals, such as one for retirement and one for a home down payment.


Benefits of Investing With Betterment. Investing with Betterment has several valuable benefits. The robo-advisor tool builds and manages your portfolio like an investment advisor but at a lower cost. Betterment charges 0.25% per year of your portfolio. A human advisor might charge 1% or more. Betterment’s robo-advisors are built by a team of investment experts and economists using modern portfolio theory (MPT). Betterment provides a range of investment options. You can customize your portfolio based on your goals, risk tolerance, and timeline. You can also pick among specialty portfolios for different goals.
Betterment is an online financial advisor platform that operates a robo-advisor, automatically building and managing user investment portfolios without human assistance. It also provides virtual access to human financial advisors and a cash management account, which earns interest on your uninvested money.


Betterment offers innovative portfolio options such as the Technology portfolio, focused on investing in tech leaders, and the Climate Impact portfolio, prioritizing companies with low carbon emissions. Although the robo-advisor tool manages your portfolio, you have the ability to customize it, such as shifting the amount of your portfolio in international stocks beyond the original recommendation.


Betterment accepts new customers with no minimum opening deposit, making it accessible for all. If you don’t want to invest all your money, you can earn a high 4.25% APY (4.75% introductory rate) interest rate on your cash using the Betterment savings account. The technology is well-designed and user-friendly, making it easy and safe to start investing.


Despite the convenience of Betterment’s robo-advisor, you still accept the risk of investment losses. However, you can feel secure knowing that your money is protected against any operational or bankruptcy risk from Betterment due to its security measures like SIPC insurance, external audits, firewalls to prevent the commingling of funds, and two-factor authentication.


Betterment wouldn’t be in its current position if it didn’t properly care for its users. It has shown a strong commitment to keeping customers safe through its security measures. Betterment makes money by charging an annual asset under management fee, a percentage of the money you invest with them. For the robo-advisor, it charges 0.25% per year (or $4 per month for accounts below $20,000), and 0.40% per year for its premium service that includes access to human financial advisors for those who invest at least $100,000.


Betterment can be worth it if you want to help build and manage your investment portfolio without paying the full cost of a human financial advisor, which could charge 1% or more per year, roughly four times Betterment’s robo-advisor fee. If you’re comfortable investing on your own, you could build your own portfolio without paying the annual Betterment fees.


Yes, Betterment is legitimate. It is registered and regulated by the SEC and FINRA, like traditional investment advisors and brokers. Betterment also invests in considerable safety measures for its users and has over 850,000 users and $45 billion in assets under management.


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