Betterment is an American financial advisory company founded in 2008 by MBA graduate Jon Stein and lawyer Eli Broverman. Betterment makes money via investment plans, financial advice packages, betterment for advisors, betterment for business, cash reserve, and checking accounts.
Business Model Element
Analysis
Implications
Examples
Value Proposition
Betterment’s value proposition is centered on providing a user-friendly and automated solution for investing. For Investors, Betterment offers: – Automated Investing: A platform that builds and manages a diversified portfolio based on individual goals and risk tolerance. – Goal-Based Planning: Customized investment strategies aligned with specific financial goals. – Tax Optimization: Tax-efficient investing to maximize returns. – Low Fees: Competitive pricing compared to traditional financial advisors. – Accessible: Easily accessible through a user-friendly digital platform. Betterment focuses on simplifying the investment process and making it accessible to all.
Simplifies investing through automation and personalized strategies. Attracts investors seeking an easy and hands-off approach to building wealth. Provides tax-efficient investing to optimize returns. Offers competitive fees compared to traditional financial advisors. Appeals to individuals looking for accessible and user-friendly investment options. Offers an alternative to traditional investment services.
– Automated portfolio management based on individual goals. – Customized investment strategies aligned with specific financial goals. – Tax-efficient investing for maximizing returns. – Competitive pricing compared to traditional financial advisors. – Accessible through a user-friendly digital platform. – Appeals to investors seeking easy and hands-off investing. – Provides an alternative to traditional investment services.
Customer Segments
Betterment serves multiple customer segments, including: 1. Individual Investors: Individuals looking to invest for their financial goals. 2. Joint Account Holders: Couples or partners investing jointly. 3. Retirement Savers: Individuals planning for retirement. 4. Trust Accounts: Trusts looking for investment management. 5. Financial Advisors: Professionals using Betterment for advisory services. Betterment caters to a range of users with varying investment objectives and preferences.
Focuses on diverse customer segments with different financial goals and needs. Customizes investment strategies based on individual goals and risk profiles. Provides a platform for various customer types, including individual investors, couples, retirement savers, trusts, and financial advisors. Offers a versatile solution for wealth-building and financial planning.
– Serving diverse customer segments broadens the user base. – Customized investment strategies cater to individual financial goals. – Provides a platform for various customer types. – Offers a versatile solution for wealth-building and financial planning.
Distribution Strategy
Betterment’s distribution strategy relies on its online platform, mobile apps, and partnerships with financial advisors. Users can access Betterment’s platform through its website and mobile apps, making it accessible across devices. Betterment also partners with financial advisors who use the platform to offer advisory services to their clients. The company leverages these partnerships to expand its reach and collaborate with professionals in the financial industry.
Utilizes its website and mobile apps for direct access to its platform, catering to users’ device preferences. Collaborates with financial advisors to expand its reach and offer advisory services. Provides users with convenient access across various devices. Leverages partnerships to increase its market presence and serve a broader audience. Maintains a multi-channel distribution strategy for accessibility and convenience.
– Website and mobile apps cater to users’ device preferences. – Partnerships with financial advisors expand its reach and collaboration. – Provides convenient access to Betterment’s offerings. – Leverages partnerships to reach a broader audience. – Multi-channel distribution enhances accessibility and convenience for users.
Revenue Streams
Betterment generates revenue primarily through management fees based on assets under management (AUM). Its primary revenue streams include: 1. Annual Management Fees: Revenue from fees charged as a percentage of AUM. 2. Premium Plan Fees: Revenue from fees associated with premium plan offerings. 3. ETF Expense Ratios: A portion of ETF expense ratios is passed on to Betterment. Management fees are a significant source of revenue.
Relies on management fees as a primary source of income, charging investors based on the assets they have under management. Earns additional revenue from premium plan fees, which provide access to enhanced features and services. Gains revenue through a portion of ETF expense ratios. Prioritizes management fees for sustaining operations and supporting its business model. Utilizes premium plan fees and ETF expense ratios for additional income.
– Management fees provide a steady and scalable revenue stream. – Premium plan fees offer additional income from enhanced features. – A portion of ETF expense ratios contributes to revenue. – Prioritizes management fees for its business model. – Utilizes premium plan fees and ETF expense ratios for additional income.
Marketing Strategy
Betterment’s marketing strategy includes online advertising, content marketing, partnerships with financial advisors, and educational resources. The company advertises its platform through online channels and social media platforms to reach a broad audience. Content marketing provides educational materials on investing and financial planning. Partnerships with financial advisors promote collaboration and expand the platform’s reach. Educational resources offer insights and knowledge to investors.
Utilizes online advertising and social media to reach a wide audience interested in investing and financial planning. Provides educational materials and resources to empower investors with knowledge. Collaborates with financial advisors to expand the platform’s reach and serve more investors. Promotes a sense of community and learning among its user base.
– Online advertising and social media reach a wide investing-focused audience. – Content marketing empowers investors with educational materials. – Partnerships with financial advisors expand the platform’s reach. – Educational resources offer insights and knowledge to investors. – Promotes a sense of community and learning among its user base.
Organization Structure
Betterment’s organizational structure includes teams dedicated to technology development, portfolio management, customer support, partnerships, data analytics, and marketing. Technology development teams focus on platform enhancements and feature development. Portfolio management teams oversee investment strategies. Customer support teams assist users with inquiries and transactions. Partnerships teams collaborate with financial advisors. Data analytics teams provide insights for investment strategies. Marketing teams handle promotional efforts and content creation. This structure supports platform excellence, investment performance, customer satisfaction, collaborations, data-driven strategies, and marketing effectiveness.
Employs specialized teams for technology development, portfolio management, customer support, partnerships, data analytics, and marketing. Prioritizes platform enhancements and feature development through technology teams. Ensures the effectiveness of investment strategies through portfolio management teams. Assists users with inquiries and transactions through customer support teams. Collaborates with financial advisors through partnerships teams to expand the platform’s reach. Utilizes data analytics for investment insights and strategy improvements. Manages promotional efforts and content creation effectively through marketing teams. Ensures platform excellence, investment performance, customer satisfaction, collaborations, data-driven strategies, and marketing effectiveness.
– Specialized teams drive platform excellence and innovation. – Ensures the effectiveness of investment strategies for investors. – Assists users with inquiries and transactions for enhanced satisfaction. – Collaborates with financial advisors to expand the platform’s reach. – Utilizes data analytics for investment insights and strategy improvements. – Manages promotional efforts and content creation effectively. – Ensures platform excellence, customer satisfaction, and data-driven strategies.
Competitive Advantage
Betterment’s competitive advantage stems from its user-friendly platform, personalized investment strategies, tax optimization, and partnerships with financial advisors. User-Friendly Platform: Offers a straightforward and accessible platform for investors. Personalized Investment Strategies: Creates customized portfolios aligned with individual goals and risk profiles. Tax Optimization: Utilizes tax-efficient strategies to maximize returns. Partnerships with Financial Advisors: Collaborates with professionals in the financial industry to expand reach and expertise. Betterment stands out as a platform that simplifies investing, provides tailored solutions, optimizes taxes, and offers access to expert advice.
Derives a competitive advantage from: – A user-friendly platform for investors. – Personalized investment strategies aligned with goals and risk profiles. – Tax optimization for maximizing returns. – Partnerships with financial advisors for expertise and reach. Stands out as a platform that simplifies investing and offers tailored solutions, tax optimization, and access to professional advice.
– Offers a user-friendly platform for investors. – Creates personalized investment strategies aligned with individual goals. – Utilizes tax optimization for maximizing returns. – Collaborates with financial advisors to expand expertise and reach. – Stands out as a platform that simplifies investing and offers tailored solutions, tax optimization, and access to professional advice.
Table of Contents
Origin Story
Betterment is an American financial advisory company. Based in New York City, it was founded in 2008 by MBA graduate Jon Stein and lawyer Eli Broverman.
Initially, Stein and Broverman wanted to create an investment and broker-dealer advice service for customers. After securing the relevant regularly approvals, the Betterment platform was launched in 2010.
The company quickly expanded its product range to include goal-based investment advice, auto-deposit and rebalancing, checking and savings accounts, and individual retirement accounts (IRAs).
As of 2012, Betterment has more than $29 billion in assets under management across 600,000 customers.
Betterment revenue generation
Betterment generates revenue via multiple channels.
Let’s take a look at them in more detail.
Investment plans
Betterment offers two investment plans, with each offering a different level of features and professional advice:
Digital – where the company charges an annual fee of 0.25% of the account balance.
Premium – where the annual fee is 0.40% of the account balance.
Financial advice packages
To help simplify the often bewildering world of finance, Betterment customers can gain access to accredited financial advisors.
For the privilege, customers pay a one-time fee of $99 or $299 for a one-hour consult. However, it should be noted that these advisors do not work for Betterment directly. It must be assumed the company only receives a portion of the total fee.
Betterment for Advisors
To strengthen the relationship between the company and its financial advisors, Betterment offers them a SaaS application. This application incorporates a range of features designed to help manage client wealth.
To access this platform, Betterment charges a monthly fee of $150 plus a tiered fee ranging from 0.12-0.20%.
The exact fee is dependent upon the aggregate assets of the advisor in question.
Betterment for Business
Betterment for Business is the name given to Betterment’s proprietary 401(k) plan for companies and their employees.
Betterment offer tailored advice specific to retirement through their network of financial advisors. The company also offers integration with several payroll management systems, including Ceridian and Rippling.
Pricing for this service depends on the number of employees and the monetary assets deployed. Add-on features and the payroll system chosen also influence the total price.
Cash Reserve
With Cash Reserve, Betterment customers have access to high-interest, fee-free bank accounts.
Since the company does not derive revenue from fees, it instead receives compensation from partnering banks such as Citi and Barclays.
Checking accounts
For those who prefer a simple checking account with an attached debit card, Betterment has them covered also.
Like the Cash Reserve facility, there are no fees associated with the use of Betterment checking accounts. The company instead splits the transaction fee of around 2-3% with the merchant a customer has made an eligible purchase from.
Key takeaways:
Betterment is an American financial advisory company founded in 2008 by Jon Stein and Eli Broverman. It offers a range of investment, banking, and retirement services and advice.
Betterment drive revenue from two investment plans, charging a flat fee based on the total investment balance.
The company also makes money in an advisory capacity, offering individuals and businesses sound financial advice and access to a host of tools. Betterment also makes a less significant amount of money via fee-free checking and high-interest bank accounts.
Key Highlights
Founding and Expansion: Betterment, an American financial advisory company, was founded in 2008 by Jon Stein and Eli Broverman. Initially launched as an investment and broker-dealer advice service, it expanded its product range to include goal-based investment advice, auto-deposit and rebalancing, checking and savings accounts, and individual retirement accounts (IRAs).
Significant Assets Under Management: As of 2012, Betterment managed more than $29 billion in assets across 600,000 customers.
Multiple Revenue Streams: Betterment employs various channels for revenue generation, including investment plans, financial advice packages, Betterment for Advisors (SaaS application for financial advisors), Betterment for Business (proprietary 401(k) plan for companies and employees), Cash Reserve (high-interest, fee-free bank accounts), and checking accounts.
Investment Plans: Betterment offers two investment plans, Digital and Premium, each with different features and professional advice. The company charges an annual fee of 0.25% for Digital and 0.40% for Premium based on the account balance.
Financial Advice Packages: Customers can access accredited financial advisors for personalized advice. They pay a one-time fee of $99 or $299 for a one-hour consultation, with Betterment likely receiving a portion of the total fee.
Betterment for Advisors: Financial advisors can access Betterment’s SaaS application for managing client wealth. The company charges a monthly fee of $150 plus a tiered fee based on the advisor’s aggregate assets.
Betterment for Business: Betterment offers a tailored 401(k) plan for companies and employees, providing retirement-specific advice through financial advisors. Pricing varies based on the number of employees, monetary assets deployed, add-on features, and chosen payroll management systems.
Cash Reserve: Betterment offers high-interest, fee-free bank accounts through Cash Reserve. The company receives compensation from partnering banks like Citi and Barclays instead of charging fees to customers.
Checking Accounts: Betterment provides fee-free checking accounts with attached debit cards. The company splits the transaction fee of around 2-3% with the merchant for eligible purchases made by customers.
Focus on Simplification: Betterment aims to simplify finance and investment for customers, offering accessible services, personalized advice, and a range of user-friendly tools.
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Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
