Betterment: The future of robo-advisory
- Betterment’s Performance
- What makes Betterment unique
- Mixing returns and social impact
Betterment’s Strong Q1
Betterment’s strong Q1 2021 hints at the potential future for robo-advisors. The platform, which automatically adjusts portfolio strategies based on a variety of client preferences, added 56,000 new clients to the platform. Client net deposits were over $1.5 billion, a 118% increase year over year. Further, in the past year Betterment has added over $10 billion to assets under management. Betterment also announced the purchase of Wealthsimple’s US based customers and their account assets, which will add 17,000 clients and $190 million to AUM by the end of June. The company, already the largest independent digital investment advisor, is growing rapidly due to its unique business model that targets retail investors, 401(k) providers, and advisors.
The Future of Investing
Betterment is a robo-advisor, which provides “automated, algorithm-driven financial planning services with little to no human supervision.” After the client inputs information about their investing preferences, including their desired level of risk and reasons for investing, the algorithm automatically invests client assets based on the provided information. For example, investors can save for the goal of providing for their child’s education or simply to have a robust retirement plan. Betterment also offers services to employers by helping them offer 401(k) and Roth 401(k) plans, and advisors by offering portfolios prebuilt by algorithms or helping them build portfolios and custom model portfolios. To quote CFO Peter Lorimer, “At Betterment, we take our name to heart; continuously optimizing on behalf of our clients is in our DNA. Our growth is built on the combination of an innovative, tech-first culture and the experience and trust of a company that’s been delivering investment management results for over a decade.”
Betterment and Socially Responsible Investing
However, one of Betterment’s most unique and appealing features is the integration of Socially Responsible Investing into its portfolio options. Investors can choose between a variety of portfolios that support ESG in general, companies and projects trying to lower greenhouse gas emissions, and funds based on social impact, minority empowerment, and gender diversity. This robo-advised approach to ESG hints at the future of the sector, where ESG investing is as easy and automatic as it needs to be to aid the world’s transition to a sustainable future. Betterment’s rapid growth shows that robo-advisors are likely here to stay. Many up and coming investors and companies should take notice.
Here at Physis, we incorporate sustainability and social responsibility into our daily lives, and make it easy to help our clients do the same. To learn more about how to ensure your investments have a positive impact on the world, join us at Physis Investment.
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