Betterment (company)

Betterment is an American financial advisory company which provides digital investment and cash management services.[4]

Betterment
TypePrivate
IndustryInvestment services
Founded2008
Founder
Headquarters
New York City, New York
,
United States
Key people
  • Sarah Levy (CEO)
ProductsFinancial services, asset management, portfolio management, trust services
RevenueUS$50 million (2019) [1]
AUM US$33 billion (2022) [2]
Number of employees
293 [3] (2020)
ParentBetterment Holdings, Inc.
DivisionsBetterment at Work Betterment for Advisors
SubsidiariesMTG, LLC.
Websitewww.betterment.com

The company is based in New York City, registered with the Securities and Exchange Commission,[5] and a member of the Financial Industry Regulatory Authority. It is a registered investment advisor and broker-dealer.[6]

As of December 2021, Betterment had more than $33 billion of assets under management and over 700,000 customer accounts.[4][7]

History

Foundation and launch

Betterment was founded in 2008 in New York City by Jon Stein, a Columbia Business School MBA graduate,[8] and Eli Broverman, a lawyer out of NYU School of Law.[9] Stein and his roommate Sean Owen, a Google software engineer, started building the first online platform for Betterment in 2008 using a Java application and MySQL database on Apache Tomcat servers with an Adobe Flash- and Flex-based front-end design. Initial prototype designs were provided by Stein's then-girlfriend, Polina Khentov. Facing regulation associated with starting a financial company, Stein began negotiations to bring on Eli Broverman, then a securities lawyer he met over regular poker games, as a co-founder in 2008.[10]

Broverman and Stein were prepared to offer financial advice online as an SEC-registered investment advisor, and also decided to offer broker-dealer services for advice to customers. Betterment added Ryan O'Sullivan, a "serial entrepreneur",[10] to establish Betterment's broker-dealer operation.

From 2008 to 2010, the founding team continued to develop the platform for launch. Betterment gained approval from FINRA for membership. In 2009, Anthony Schrauth, a former colleague of Stein's joined Betterment as chief product officer, and Owen was replaced by Kiran Keshav of Columbia University's Center for Computational Biology. O'Sullivan left his role as president in 2010.[10]

Betterment, LLC was established as a Delaware corporation on April 7, 2009.[5] The parent company for Betterment LLC and Betterment Securities, Betterment Holdings, Inc. was established in Delaware on January 29, 2008.[11][12]

The company launched at TechCrunch Disrupt New York in June 2010, and won the award of "Biggest New York Disruptor."[10][13][14] Within 24 hours, Betterment had attracted nearly 400 early customers, and the company began talks with early investors.[15][10]

Current operations

Betterment's current business model includes three areas of business: retail investment, a platform for advisors, and a 401(k) for mid-market business.[16]

The company's personalized financial advice uses principles-based robo-advisor technologies such as computer algorithms. Licensed financial advisors provide over-the-phone consultations to customers who opt for additional support.[17] Betterment's primary retail platform offers taxable and tax-advantaged investment accounts, including traditional and Roth individual retirement accounts (IRAs).[18][19]

In October 2014, Betterment launched a business-to-business offering called Betterment Institutional, subsequently renamed Betterment for Advisors, a digital platform for managing client assets using Betterment's built-in financial advice.[20] In January 2017, the Financial Planning Association (FPA) and Betterment for Advisors ran a program on digital investment advice for the association's members.[21]

In January 2016, the company launched Betterment for Business--a 401(k) platform aimed at small- to medium-sized businesses.[22] It is built on the same underlying investment strategy and generally costs less than most traditional 401(k) plans.[23] In February 2022, the business rebranded to Betterment at Work and announced the launch of a new student loan management solution, as well as the acquisition of the partner and customer relationships of Gradvisor, a platform that provides personalized college savings plans. Betterment at Work currently has over 1,000 companies on the platform.[22][24]

In December 2020, Betterment's founder Jon Stein stepped down and was succeeded by Viacom Media Networks's former COO Sarah Levy.[25]

In November 2021, Betterment released a new logo with an icon representing a rising sun.[26]

In February 2022, Betterment announced it had acquired Makara, a cryptocurrency portfolio manager.[4]

Finances

Betterment has received funding from Bessemer Venture Partners, Menlo Ventures, Anthemis Group, Kinnevik, Francisco Partners, Globespan Capital Partners, Citi Ventures, The Private Shares Fund, Aflac Ventures and ID8 Investments.[27][28][29]

In September 2021, the company secured $160 million in growth capital, consisting of a $60 million Series F equity round led by Treasury and a $100 million credit facility, established with ORIX Corporation USA’s Growth Capital group and Runway Growth Capital. This financing valued the company at nearly $1.3 billion.[30][29][31]

References
  1. https://www.owler.com/company/betterment
  2. "Digital Advisory Firm Betterment Enters Crypto With Makara Acquisition". Investopedia.
  3. "Betterment's 2020 Employee Demographics". 14 August 2020.
  4. "Digital Advisory Firm Betterment Enters Crypto With Makara Acquisition". Investopedia. Retrieved 2022-03-15.
  5. "Betterment LLC SEC Registration". sec.report. Retrieved 2021-08-04.
  6. "Investment Safety and Security at Betterment". Betterment. 2014-03-03. Retrieved 2017-06-01.
  7. "Owning stocks 'a privilege of the few': Betterment CEO". finance.yahoo.com. Retrieved 2021-08-04.
  8. School, Columbia Business (2014-04-09). "Jon Stein '09 on the Entrepreneurial Experience". Video Library. Retrieved 2021-08-04.
  9. Cohan, Peter. "Growing At 300% To $8.5 Billion, Betterment Offers Fee, Tax Edge". Forbes. Retrieved 2021-08-04.
  10. "The History of Betterment: How We Started a Company That Changed an Industry - Betterment". Betterment. 2016-07-20. Retrieved 2017-06-01.
  11. "Betterment Holdings, Inc. SEC Registration". sec.report. Retrieved 2021-08-04.
  12. "Division of Corporations - Filing". icis.corp.delaware.gov. Retrieved 2017-06-01.
  13. "Betterment Launches On Stage At TechCrunch Disrupt - Betterment". Betterment. 2010-05-25. Retrieved 2017-06-01.
  14. Arrington, Michael. "The TechCrunch Disrupt Final Five: Betterment, Movieclips, Publish2, Soluto And Ujam". Retrieved 2017-06-01.
  15. "How We Got Funded: Betterment". Inc.com. March 6, 2013. Retrieved 2017-06-01.
  16. Nair, Lavanya (29 March 2019). "Betterment Drops Account Minimums on Custom Portfolios". Retrieved 29 March 2019.
  17. "Robo-Advisor 'Betterment' Adds Human Advice". CNBC. 31 January 2017. Retrieved 19 May 2017.
  18. "Betterment vs. Wealthfront: Which is Best for You?". Investopedia. Retrieved 2022-03-15.
  19. "7 Best Financial Advisors in Tampa, Florida • Benzinga". Benzinga. 2020-05-12. Retrieved 2020-06-17.
  20. Kane, Libby. "Betterment Allies With Fidelity To Bring Financial Advisers Into The 21st Century". Business Insider. Retrieved 2020-05-07.
  21. Powell, Robert. "The robots are coming for your investments — why that might not be a bad thing". MarketWatch. Retrieved 2017-06-01.
  22. Konish, Lorie (2021-11-05). "Betterment sees 370% retirement plan growth bolstered by financial wellness efforts". CNBC. Retrieved 2022-03-15.
  23. "Robo-Advisor Betterment Launches 401(k) Plan for Employers". NerdWallet. 2015-09-11. Retrieved 2017-06-01.
  24. Konish, Lorie (2022-02-23). "Betterment adds new student loan, 529 college savings features to its 401(k) business". CNBC. Retrieved 2022-03-15.
  25. "Betterment's founder Jon Stein replaced by Sarah Levy as CEO". 2020-12-08.
  26. "Betterment releases new brand". 2021-11-16.
  27. "Betterment Valuation Rises to $1.3 Billion on Funding Round". www.bloomberg.com. Retrieved 2022-03-16.
  28. "ID8 TO Platform Betterment Series F, a Series of ID8 Investments Master, LLC SEC Registration". sec.report. Retrieved 2022-03-16.
  29. "Robo-advisory firm Betterment reaches unicorn valuation". Finextra Research. 2021-09-30. Retrieved 2022-03-16.
  30. "Betterment raises funds at $1.3bn valuation". citywireusa.com. Retrieved 2022-03-16.
  31. "Betterment Secures $160 Million in Growth Capital | Finance Magnates". Financial and Business News | Finance Magnates. Retrieved 2022-03-16.
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