Company Profile: Betterment

Name: Betterment


What it does: Betterment has one of the easiest-to-use, slickest interfaces to manage a balanced portfolio for long-term investors. Fund your account (you can automate this) and dial in your preferred risk mix and Betterment chooses a basket of exchange-traded funds (ETFs) for your portfolio in accordance to Modern Portfolio Theory. You don’t ever need to decide on what to buy if that’s not your thing.

Particular strengths: For investors who don’t want to be overwhelmed with investing decisions or jargon about individual securities, Betterment has done a really effective job removing the confusing part by getting investors to focus on what really matters: setting goals, focusing on time-frame, and risk.

How popular is it: As of November 2011, Betterment reported that it had 10,000 accounts and $36 million under management.

The Company

Management: Betterment was founded by Jonathan Stein, an experienced professional on the technology side of the financial industry.

Company Size: Betterment has 10 employees (Source)

Outside Investors: Bessemer Venture Partners led an investment round of $3 million at the end of 2010.

Competitors: As an online investment advisor, Betterment competes with Personal Capital and Wealthfront.

[presentation] optimizing your portfolio with ETFs

P2P Lending's Developing Debt Market

Wealthfront is pivoting — away from the marketplace of RIAs model like Covestor employs and towards fundamental, portfolio management delivered over the Internet.

The firm appears to be joining a growing bunch of firms focusing on the online delivery of financial advice, like:

  • Personal Capital:  a portfolio manager with A-team management, providing portfolio management over the Interwebs (see my interview with the president of Personal Capital)
  • LearnVest: Focused on a younger, female demographic, delivers financial advice, courses, bootcamps, and now, a subscription model that gives clients financial planning and access to CFPs for ongoing advice.
  • Hedgeable: up over 10% in 2011, this upstart — founded by two experienced hedge fundies — provides institutional-type strategies to individuals for insanely affordable fees (some services are free).
  • Jemstep: Plug in your portfolios at different brokers and the Jemstep platform analyzes everything and makes suggestions to help your optimize your holdings. (here’s my interview with Jemstep)
Wealthfront’s new approach is to emphasize its adherence to MPT (Modern Portfolio Theory) and this is the first presentation from the newly-focused firm. I think it’s pretty sweet.