Recent Press Coverage - BettermentRecent PRess coveRage | Page 6 Stein sees platforms like his moving into other areas, such as tax advice and estate planning. Continued: Searching

Recent Press Coverage

Recent PRess coveRage | Page 2

Dow Jones |� new Firms taking Financial advice online ................................................................................................................................ 3

The wall sTreeT Journal |� searching for Financial advice online ............................................................................................. 5

nY DailY news |� tech startups give Wall st. Run For Its Money ........................................................................................................... 7

FasT CompanY |� the Financial Institutions Banking on occupy Wall street’s “Move Your Money Day” .................... 8

The DailY |� Breaking up the Bank ................................................................................................................................................................................ 10

The new York Times |� Betterment adds International Investments to Portfolio .................................................................... 12

The new York Times |� Investment advice for small Fry .......................................................................................................................... 13

ameriCan Banker |� Mint teams Up with Betterment to Boost Revenue .................................................................................... 17

The new York Times |� Betterment Raises $3M to give casual Investors a More accessible Portfolio .................. 19

inC. |� congratulations! You’ve closed Your First Round. now What? ...................................................................................................... 20

TeChCrunCh |� Bessemer Backs Better-savings startup Betterment with $3 Million ............................................................. 21

nY DailY news |� Former Banking consultant Jon stein Founds Betterment.com, advises Investors on smart Finances ............................................................................................................................................................................. 22

Cnn moneY |� 9 smart new Ways to Manage Your $$: Investing with the twist of a Dial ................................................... 25

invesTmenT news |� a Better(ment) Mousetrap for the Mass affluent? ...................................................................................... 26

TeChCrunCh |� a Better savings account? ......................................................................................................................................................... 29

Cnn moneY |� simple tools For savvy Investing ................................................................................................................................................ 33

TeChCrunCh |� Betterment Wants to Be Your new, Higher-Yield savings account ................................................................. 34

venTureBeaT |� Investment startup Betterment says It can Make savings accounts extinct ........................................ 36

nY DailY news |� get Financially Fit for 2012 By starting to save early and By Maxing out Your 401(k) ............... 37

CBs news |� 4 Personal Finance technology trends for 2012................................................................................................................... 38

The huFFingTon posT |� oWs: Where Rubber Meets the Road ........................................................................................................... 41

Fox Business |� ask the Readers: Which Financial Products Do You actually Use? ................................................................ 43

Crain’s |� Reinvented by technology: Financial services .............................................................................................................................. 46

nY DailY news |� Financial Planning tools Pay off ........................................................................................................................................ 47

The huFFingTon posT |� the Investment cost of Being Human ....................................................................................................... 48

Crain’s |� the endless “Disruption” eruption .......................................................................................................................................................... 51

Contents


Source: http://financialadviserblog.dowjones.com/blog/stay-ahead-of-your-clients/new-firms-taking-financial-advice-online

Jonathan Stein, founder and CEO of Betterment, sees online advisory platforms as the answer for the “99% of everyone in this country” with less than $500,000 to invest.

even as many financial advisers try to shift upward from the mass-affluent segment to a wealthier clientele, some new Internet-based start-ups are aiming their services at the not-so-rich.

While online investment platforms aren’t new, such fledgling services as Wealthfront and Betterment are trying to distinguish themselves with new programs to provide advice electronically. the investment minimums are as low as $5,000 – or even nothing at all.

generally speaking, they seek clients who are satisfied with an online, largely automated process and who don’t feel the need for face-to-face contact with an adviser. as the public gets more comfortable carrying out all kinds of activities online and as traditional advisers pursue the wealthy, this new market should grow. Jonathan stein, founder and ceo of Betterment, sees online advisory platforms as the answer for the “99% of everyone in this country” with less than $500,000 to invest.

online brokerage firm Betterment, based in new York city, has no investment minimum and charges a 0.9% fee for those with up to $25,000. at the top of its sliding scale, the fee drops to 0.3% for those with $500,000 and above.

the company has about 10,000 customers, says stein, and over $20 million in assets under management.

When a client signs up with Betterment, they fill out a questionnaire about their age, savings goals, income and timeline, with scenarios to determine their risk tolerance. Based on their responses, Betterment makes recommendations using two etF baskets: a basket of stock-focused etFs carrying higher return expectations but also higher risk, and a lower-risk basket of bond etFs. the client is then free to adjust their allocation between the baskets. accounts are rebalanced quarterly, or sooner if holdings shift more than 5% from the target allocation. that, stein says, “almost makes up for our fee in and of itself.”

“By automating our whole process, we’re able to serve even $2,000 customers,” stein said.

Betterment currently focuses on investment services, but stein see platforms like his moving into other areas, such as tax advice and estate planning.

andrew Rachleff, co-founder of Wealthfront, believes online financial platforms could reshape the advisory industry the way travel sites like expedia and orbitz

new Firms Taking Financial advice onlineBy Ruthie AckeRmAn


Continued: New Firms Taking Financial Advice Online

transformed the travel industry when they eliminated the need to use travel agents. clients are able to get a tailored portfolio through software that is “accessible and simple enough for the consumer to use directly, eliminating the need for a human being,” he says.

“When you get rid of the human being, you get rid of much of the cost without getting rid of any of the rigor,” he says.

Wealthfront, based in Palo alto, calif., has a minimum investment of $5,000 and charges no advisory fees on a customer’s first $25,000 under management. It charges 0.25% on assets over $25,000, including the cost of monitoring and periodically rebalancing the portfolio.

another online advisory platform is Personal capital, which charges a 0.95% fee to manage the first $250,000 in investable assets and scales down the more money the client has to invest. But the minimum to invest is $100,000.

the company’s founders include Bill Harris, the former chief executive of PayPal and Intuit Inc. It is different than some of the other online

platforms in that clients interact online with a financial adviser, who is assigned to them and offers individualized investment portfolio management. these advisers can be reached via email, phone, video and through the chat function on the site.

Launched in september, Personal capital said the firm has close to 5,000 clients with an average managed account size of about $300,000, a spokesman says.

one challenge for the firms is getting investors, shaken by the 2008 crisis, to be willing to experiment with new approaches to investing. even in the best of times, “financial services is not a place where people take a lot of chances on a firm that they’ve never heard of,” says Katharine Wolf, senior analyst at cerulli, a research firm specializing in the financial services industry. “the biggest hurdle we see for these platforms is getting people to trust them.” §


http://blogs.wsj.com/totalreturn/2012/01/04/searching-for-financial-advice-online/

The company has about 10,000 customers, says Stein, and over $20 million in assets under management.

even as many financial advisers try to shift upward from the mass-affluent segment to a wealthier clientele, some new Internet-based startups are aiming their services at the not-so-rich.

While online investment platforms aren’t new, such fledgling services as Wealthfront and Betterment are trying to distinguish themselves with new programs to provide advice electronically. the investment minimums are as low as $5,000 – or even nothing at all.

generally speaking, they seek clients who are satisfied with an online, largely automated process and who don’t need for face-to-face contact with an adviser. as the public gets more comfortable carrying out all kinds of activities online and as traditional advisers pursue the wealthy, this new market should grow. Jonathan stein, founder and ceo of Betterment, sees online advisory platforms as the answer for the “99% of everyone in this country” with less than $500,000 to invest.

Betterment, based in new York, has no investment minimum and charges a 0.9% fee for those with up to $25,000. at the top of its sliding scale, the fee drops to 0.3% for those with $500,000 and above. the company has about 10,000 customers, says stein, and over $20 million in assets under management.

When a client signs up with Betterment, they fill out a questionnaire about their age, savings goals, income and risk tolerance. Based on their responses, Betterment makes recommendations using two exchange-traded-fund baskets: a basket of stock-focused etFs carrying higher return expectations but also higher risk, and a lower-risk basket of bond etFs. the client is then free to adjust their allocation between the two baskets. accounts are rebalanced quarterly, or sooner if holdings shift more than 5% from the target allocation. that, stein says, “almost makes up for our fee in and of itself.”

“By automating our whole process, we’re able to serve even $2,000 customers,” he says.

Betterment currently focuses on investment services, but stein sees platforms like his moving into other areas, such as tax advice and estate planning.

andrew Rachleff, co-founder of Wealthfront, believes online financial platforms could reshape the advisory industry the way travel sites like expedia and orbitz transformed the travel industry when they eliminated the need to use travel agents. clients are able to get a tailored portfolio through software that is “accessible and simple enough for the consumer to

By Ruthie AckeRmAn

searching for Financial advice online


Stein sees platforms like his moving into other areas, such as tax advice and estate planning.

Continued: Searching for Financial Advice Online

use directly, eliminating the need for a human being,” Rachleff says.

“When you get rid of the human being, you get rid of much of the cost without getting rid of any of the rigor,” he says.

Wealthfront, based in Palo alto, calif., has a minimum investment of $5,000 and charges no advisory fees on a customer’s first $25,000 under management. It charges 0.25% on assets over $25,000, including the cost of monitoring and periodically rebalancing the portfolio.

another online advisory platform is Personal capital, which charges a 0.95% fee to manage the first $250,000 in investable assets and scales down the more money the client has to invest. But the minimum to invest is $100,000.

the company’s founders include Bill Harris, the former chief executive of PayPal and Intuit. It is different than some of the other online platforms in that clients interact online with a

financial adviser, who is assigned to them and offers individualized investment portfolio management. these advisers can be reached via email, phone, video and through the chat function on the site.

Launched in september, Personal capital, based in Redwood city, calif., has close to 5,000 clients with an average managed account size of about $300,000, a spokesman says.

one challenge for the firms is getting investors, shaken by the 2008 crisis, to be willing to experiment with new approaches to investing. even in the best of times, “financial services is not a place where people take a lot of chances on a firm that they’ve never heard of,” says Katharine Wolf, a senior analyst at cerulli, a research firm specializing in the financial-services industry. “the biggest hurdle we see for these platforms is getting people to trust them.” §


http://articles.nydailynews.com/2011-12-17/news/30529865_1_startups-wall-street-betterment

Goodbye, Wall Street. Hello, Silicon Alley.

the economic meltdown has been rough for the city’s financial services employees and with a new round of layoffs in the making, the road ahead is looking grim.

But for many young Wall streeters, new York city’s bustling tech startup scene is providing jobs — and a shot at creating their own fiefdoms.

Jon stein, 32, is one of those who made the successful leap.

the former senior consultant at First Manhattan consulting group launched Betterment.com, an online brokerage firm

Based in soho, he now has 13 employees, six of them from Wall street. the site, which went live in May 2010 has 11,400 users and is growing at a rate of 20% to 30% a month.

Here is what he had to say:

Q Why are Wall street bankers moving into the tech startup world?

a Wall street no longer holds the allure that it used to. Many Wall streeters, corporate lawyers, and the like, are sacrificing salary in the pursuit of more meaningful careers.

they want to be building productive, next-generation products like Betterment. In my career as a consultant to banks, I saw an industry that needed serious reforming. Investing

didn’t have to be that hard and inaccessible. Founding a startup created the best vehicle for genuine change.

Q are more financial types making the leap?

a Five years ago, no one in new York was thinking about startups. today, it’s a common conversation in every social circle, at every dinner, and the Wall street types I know are curious about what it’s like to work for Betterment and other startups.

Many are disillusioned with their jobs, and want to build a better way. this is especially true for the younger generation.

Q are the skills transferable? What does Wall street bring to startups?

a Betterment needs smart people to continue to deliver on our promise to customers — and bankers are smart. their analytics skills and ability to get things done can be applied to helping Betterment grow and deliver smarter investments.

Q What about pay? What do people give up?

a People sacrifice a lot. typically half their salary or more. Payout odds are slim. Mostly, this is about doing something satisfying and making a difference versus making a fat salary but feeling like a cog in the wheel. §

Tech startups give wall st. run For its moneyBy PhyLLiS FuRmAn


this saturday, nov. 5, is being promoted by several occupy-Wall-street affiliated groups, including Moveon.org, as Bank transfer Day, aka Move Your Money Day, a day for consumers to show their dissatisfaction with bailouts and billions in profits by cutting up their citibank or Bank of america debit cards in favor of a nonprofit credit union or community bank.

In recent weeks, angry protesters have surrounded bank branches on both coasts. some account holders were even arrested while trying to close their accounts – not a pleasant customer service experience on either side of the equation. some even credit the movement with Bank of america’s recent reversal on debit card fees.

But one company’s PR nightmare is another’s business opportunity, particularly for those in the financial industry who are trying to break from the pack by offering idealism, integrity, and lower costs as selling points. credit unions across the country are adding saturday hours for the 5th and reaching out to potential switchers via social media. cUna, the trade association of the nation’s credit unions, has created a t-shirt to promote Bank transfer Day, and the credit Union League of new Jersey is running radio ads.

new Resource Bank, a small bank in san Francisco with extensive green initiatives that invests in cleantech and other sustainable companies, last year became the first publicly traded company to file as a B-corp, incorporating triple-bottom-line ideals into its charter. they’re running a “Move Your Money” campaign, where those who join by november 15 will be rewarded with a $25 donation to one of several nonprofits. “From our normal 25 accounts a week, we’ve been seeing 15-20 new accounts a day,” says ceo vince siciliano. “People are coming in and saying, I’ve been thinking about this for a long time, and this occupy Wall street and Move Your Money Day have pushed me off the wall of inertia.”

and recently just blocks from Wall street, three self-dubbed “disruptive” financial services companies held a media event titled “Beyond occupy Wall street: creating Industry change for the greater good.” “our offices are just a few blocks away from Liberty Plaza,” said Jon stein, ceo of Betterment.com, who organized the event. “We took a couple people from the office to go down and walk around. I was surprised by the focus – many people were talking about the same things we were interested in when we started

The Financial institutions Banking on occupy wall street’s “move Your money Day”By AnyA kAmenetz

Demonstrators plan to withdraw money from big banks on Saturday. A handful of credit unions and other progressive institutions see it as an opportunity. But are they really any better than the banks?

Source: http://www.fastcompany.com/1792790/for-some-financial-companies-occupywallstreet- is-a-great-marketing-hook


Betterment.” stein used to consult for large banks, and witnessed lots of bad behavior, like a bank in ohio that was purposely targeting poor customers with low balances, reaping 80% of its checking account profits from overdraft and other fees; and a broker who took the opposite side of every trade that reached his desk, with the result that 90% of his customers lost all the money in their accounts. He started Betterment as an online place for ultra-low-cost, ultra-simplified investment management: Bundles of exchange-traded funds come in just two flavors, stocks and bonds, with low fees ranging from 0.3 to 0.9%. at the press conference, stein, along with Jason Henrichs of online rewards bank Perkstreet Financial and Yaron samid of antifraud service Billguard, spoke up about the “broken” financial industry and in favor of fairly priced, responsible financial services.

“everyone at our company was at first very wary of any involvement with occupy Wall street,” says stein. “We’re not down there handing out coffee or anything, but I had to make the case internally that this was something that resonated with me and that I believed we should do something about it.”

Fast company spends a lot of space covering new financial companies that claim to do things differently. often, like Betterment and Perkstreet, these startups rely on technology to cut costs and pass the savings along to customers. But it remains to be seen whether having principles can be profitable under current regulations. a cautionary tale is that of amalgamated Bank. the only union-owned bank in the United states, it’s been drawing lots of press, since it’s where the occupy Wall street movement itself has deposited over $500,000 in donations. But it’s also under FDIc investigation for falsifying how it books delinquent loans to spruce up its balance sheet – exactly the kind of bad behavior that the folks at Liberty Plaza are protesting. §

“I had to make the case internally that this was something that resonated with me and that I believed we should do something.”

Continued: The Financial Institutions Banking On Occupy Wall Street’s “Move Your Money Day”


americans love to hate their banks. alongside airlines, phone companies, and cable providers, banks rank at the bottom when it comes to pleasing the customer, according to the american consumer satisfaction Index.

some banks generate nearly half their operating revenue from fees – think overdraft fees, minimum balance requirement fees, atM fees, transfer fees, even fees for requesting paper statements. add confusing fine print and poor customer service, and the result is that just 37 percent of americans are satisfied with their primary bank, according to an ath Power survey.

Banks aren’t alone in generating frustration. Retail investing bewilders consumers. In a country where financial literacy means knowing LeBron James’ salary, concepts like balanced asset allocation and risk diversification confuse consumers who want fewer investing options, not more. the investing public wants clearer guidance on how to meet their goals (saving for retirement, paying for college), not more fees and fine print.

Despite broad dissatisfaction with status quo institutions, Warren Buffett recently deposited a $5 billion vote of confidence into the coffers of Bank of america, the country’s biggest bank. Bofa may rank among the 20 most despised

U.s. companies, as noted by a recent piece on the atlantic’s website, but Buffett’s betting on a turnaround.

as the country’s biggest bank, with $2.26 trillion in assets, Boa won’t shrivel away anytime soon. and given that Boa’s peer group includes 107 banks with $10 billion plus in assets, the banking establishment won’t be easy to shake from its comfortable perch atop the financial sector. not yet, at least.

It may take some time, but the american retail banking industry is primed for a radical shift. a growing pool of financial upstarts are poised to begin challenging the banking status quo. next week, more than 60 consumer financial start-ups are demoing at FinovateFall 2011. they’ll present new sites, services and products that aim to improve upon – or undercut – traditional financial services. We’re not just talking snazzier atM receipts. the aim is better service, better rates and better digital tools. Like the postal service, financial services are ripe for disruption.

Banksimple, one of the companies presenting next week, is set to launch by the end of the year. Unlike traditional banks, which tend to pile up fees, cut back on service and throw up byzantine sites, Banksimple promises to be

Breaking up the BankBy JeRemy cAPLAn

It may take some time, but the American retail banking industry is primed for a radical shift. A growing pool of financial upstarts are poised to begin challenging the banking status quo.

Source: http://www.thedaily.com/page/2011/09/15/091511-biz-banks-column-1-2/


service-focused, easy to navigate, and smart about technology. It won’t charge overdraft or other fees, it’ll help you track your savings and spending goals, and give you one-to-one help from real people via skype, ichat, email or the phone. the start-up has already amassed more than $13 million in venture capital and a waiting list of more than 50,000 customers eager to switch away from traditional banks.

Betterment, which launched a year ago at the techcrunch Disrupt conference, focuses on simplifying investing and a streamlined alternative to stagnant, zero-interest savings accounts. Founder and ceo Jon stein said 8,000 customers have already signed up, and that number is growing by 20 percent each month. the management fee ranges from just 0.3 to 0.9 percent. You can deposit your six-figure retirement savings if you’d like, but many people start with a $1,000 deposit and gradually quintuple that as they grow accustomed to investing sans broker.

It’s a super-simple alternative for those confused by complex mutual funds or retail investment pitches with tiny print and jumbo charges. Rather than paying for the pleasure of having someone take your money and invest it dart-style in a flavor-of-the-month mutual fund, you bank on the broad success of the market

with Betterment, reducing the odds of picking individual lemons that sink your portfolio.

stein cites excessive trading fees and bewildering complexity as evidence that industry giants are out of touch with consumers. “traditional financial institutions offer a terrible customer experience,” he said. “they’re designed to take advantage of us rather than to help us get more out of our money.”

Building a strong pool of financial industry upstarts will take time because of regulatory hurdles. establishing a new firm is costly and it takes several years to apply for licenses and meet requirements, stein said. “the barriers are tremendous. that’s why you don’t see the number of start-ups in this sector as you do building new social networks or photo-sharing applications.”

as newcomers like Betterment and Banksimple gain traction by demonstrating demand for customer-centric financial services companies, we’ll see more start-ups following suit. that’ll lead either to a hastened response from the banking giants, or a long-run reshaping of the industry landscape. Buffett’s $5 billion may be safe in the near term. Beyond that, banking may be in for a blizzard of change. §

“Traditional financial institutions offer a terrible customer experience. They’re designed to take advantage of us rather than to help us get more out of our money.”

Continued: Breaking up the Bank


Betterment, a simplified investment service for investors who aren’t multimillionaires, has expanded its portfolio to include international stock funds.

In a recent Your Money column about efforts to serve smaller investors, Ron Lieber credited Betterment, which invests in a mix of exchange-traded funds, for its openness to serve anyone, regardless of how much they have to invest. But he warned that a glaring drawback was that Betterment’s portfolio lacked international stock funds–a risky choice given the state of the american economy.

that weakness has been addressed, Jon stein, the company’s chief executive, said in a recent e-mail update. as of last month, Betterment’s portfolio includes international exposure through the addition of two new exchange-traded funds: vanguard europe Pacific and vanguard emerging Markets.

all new clients have the international funds, while existing clients are being transitioned into the new holdings over a period of months.

Does Betterment’s addition of international investments make the service more attractive to you? §

Betterment adds international investments to portfolioBy Ann cARRnS

As of last month, Betterment’s portfolio includes international exposure through the addition of two new exchange-traded funds: Vanguard Europe Pacific and Vanguard Emerging Markets.

Source: http://bucks.blogs.nytimes.com/2011/08/24/betterment-adds-international-investments-to-portfolio/


Source: http://www.nytimes.com/2011/05/28/your-money/brokerage-and-bank-accounts/28money.html

Most of us have no business managing our own investments.

We buy when prices are high and sell just as the markets are bottoming out. or we cannot bring ourselves to sell investments that have done well to buy more of what hasn’t. or we buy on impulse, picking up individual stocks of companies we like and think we understand without much regard for how they may fit into an overall investing strategy.

some of this behavior springs from a red-blooded insistence that we are all above average and can easily pick stocks and other investments that will outperform the market.

But our collective failure is also a result of the fact that we are literally left to our own devices. advice from a human being is sorely lacking when we sign up for work place retirement plans, and there is a severe shortage of moderately priced financial advisers who will help non-millionaires and put customers’ interests ahead of their own.

someone will make a lot of money by coming up with a streamlined way to serve these investors, and two services called Betterment and Flat Fee Portfolios are among the latest to try.

Betterment is notable for an almost radical simplicity and its insistence that even someone with just $1,000 is welcome. the Flat Fee Portfolios model is built around a fixed price for advice no matter how big your portfolio is – a far cry from the usual method of having customers pay, say, 1 percent of their assets each year in fees to the adviser.

neither one may have cracked the code, but they are different enough from most of what’s come before to be worth a look for those of us who recognize that we are constitutionally incapable of managing our own money.

First, a bit more about Betterment, which began operations last year. once you decide how much to invest, you have only one choice to make: the amount of risk you want

Jon Stein is the chief executive of Betterment, a firm that is notable for almost radical simplicity and its insistence that someone with just $1,000 is welcome.

By Ron LieBeR

investment advice for small Fry


to take on. once you’ve figured that out, there is just one portfolio to invest in (a mix of exchange-traded funds, which are index-fund like investments that Betterment makes in United states stocks and government bonds).

the company lets anyone use the service, which is admirable in an industry where many financial advisers won’t work with you unless you have more than $500,000 or $1 million, and even “discount” brokers may not manage your money for you unless you meet some kind of account balance minimum.

Betterment is pretty costly, on a percentage basis, for people with less than $25,000, though. customers pay 0.9 percent in annual fees, which the company takes out of their investment account. the fee declines in three incremental tiers from there. For any money beyond $500,000, the fee is 0.3 percent.

Betterment’s portfolio consists of six United states stock funds and two bond funds, which invest in short-term treasury bonds and inflation-protected bonds. the company makes its portfolio public on its Web site, so there is nothing stopping you from mimicking it on your own. the company charges no trading fees beyond its annual fees, however, and it rebalances your

portfolio for you. so Betterment is betting that enough people are willing to turn everything over to its service and will pay for the privilege.

But Betterment has two glaring weaknesses. First, there are no individual retirement accounts available, so you can’t set up a Roth I.R.a. there or roll over money from a retirement plan you have at a former employer. second, the portfolio has no international stock funds, a risky choice given all the questions about the american economy. Betterment’s chief executive, Jon stein, says the company will fix both of these problems this year.

He remains insistent, however, about sticking to just one blueprint for customers’ investments. “We don’t want to break that glass box and start having multiple portfolios,” he said. “People will start picking things that have gone up the most recently, and that is a terrible choice. We want to be simple.”

Flat Fee Portfolios offers a few more investment choices and even simpler pricing than Betterment. It’s also aimed at more affluent customers, people who have six figures in money to invest but don’t have the kind of broader financial planning needs that might merit an adviser who charges more money.

Continued: Investment Advice for Small Fry


the fee is $199 a month if you have more than $250,000, and it does not grow no matter how much money you have. If you have less than that, you can enroll in a different program with fewer choices and less service for $129 a month.

at the $199 level, you can choose among three types of portfolios. there is one made up of actively managed mutual funds, an indexed portfolio of passively managed funds like the one that Betterment offers, or a portfolio that is more tactical and temporarily moves money to the sidelines when the markets get crazy. a real human adviser reviews your investments with you twice a year, and Flat Fee does the trades for you. at the $129 level, the portfolios are simpler and fewer in number and you have only one meeting a year.

Mark a. cortazzo, Flat Fee’s founder, named the service after the price offering in an attempt to hint at its conflict-free nature. Like a growing number of investment advisers, Flat Fee earns money only from customers, not from commissions from mutual fund companies.

But even that is no guarantee of a lack of conflicts. “If you have half a million dollars and I’m charging you 1.5 percent of your assets each

year, and you call me wanting to take $100,000 to pay off your mortgage, the advice you are getting is conflicted,” he said.

that is not how pricing usually works when advisers charge annual fees to customers. a financial services software company called PriceMetrix recently surveyed its clients who charge annual fees, from Morgan stanley on down to smaller firms. It found that 37 percent of individual advisers were charging management fees of more than 1.5 percent a year on portfolios of $250,000 to $500,000 that have an even mix of stocks and bonds. Meanwhile, just 23 percent levy fees of less than 1 percent.

“there is no typical price,” said Doug trott, the president and chief executive of PriceMetrix. “It’s a well-supplied industry, but it’s not very competitive.”

Whether Betterment and Flat Fee Portfolios can afford to stay in business in the lower pricing tiers is an open question. Betterment has about 4,000 accounts but the average balance is roughly $5,000 right now. It’s hard to imagine that it will ever make money unless it attracts many more people.

Betterment is betting that enough people are willing to turn everything over to its service and will pay for the privilege.



Mr. cortazzo, of Flat Fee Portfolios, said he had already made investments in the six figures in staff and his Web site, and he figured he would be spending more than he made for at least 18 months more. His financial planning firm, Macro consulting group, has $500 million under management; profits from that line of business allow him to invest in the Flat Fee part of the operation.

But he says he believes that his challenge is more about streamlining his service and efficiently finding his target customer than it is about competition. “Most small advisory firms don’t have the staying power to get to critical mass to make this profitable,” he said. “and the big financial services firms who could do this would cannibalize their existing business by coming up with model-based solutions with lower costs.”

that said, there are some similar services. I’ve written about MarketRiders and assetBuilder in the past. Folio Investing is another one worth considering.

Meanwhile, vanguard, Fidelity, charles schwab, tD ameritrade and e*trade all have their own offerings. If you’re considering any of them, check the fees and ask whether there’s an investment minimum, whether they will trade and rebalance for you and whether they’re using the very best funds or ones that the firm has created. (as usual, links to every service I’ve mentioned are in the online version of this column.)

again, it’s not at all clear which of these services, if any, is built to last. But their proliferation is a welcome development at a time when the number of advisers and institutions interested in helping people with smaller balances continues to shrink.

“a whole segment of customers is being dislocated,” Mr. trott said. “and there will be new opportunities for companies to satisfy their demands.” §



Source: http://www.americanbanker.com/issues/176_27/mint-teams-up-with-betterment-1032680-1.html

Intuit Inc.‘s financial management website, Mint.com, is partnering with the investment site Betterment in the hopes of making a better Mint

By JeRemy QuittneR

mint Teams up with Betterment to Boost revenue

the Intuit site has long received much of its revenue from referrals for basic financial products such as credit cards through its Ways to save service. Intuit has generated more revenue by integrating Ways to save with its other products since buying Mint in 2009, but the basic business model for Mint itself has remained largely the same. analysts said the Betterment deal might change that.

specifically, Betterment might address a pain point for Mint: that most of the referral revenue it generates has been through cards and other accounts pitched when users sign up.

“Betterment gets the visibility they need, and the traffic,” said stessa cohen, a research director at gartner Inc. “Mint is looking for transactions that will generate revenue.”

Mint’s founder, aaron Patzer, told american Banker in 2009 that “we tend to make most of our revenue in the first month … you’re only going to switch your credit card so often.” Patzer and other Mint executives were not available to comment for this story.

the relationship with Betterment might help Mint nudge its seasoned users into investing, analysts said.

“once I have accumulated assets or have $20,000 or something in my savings account, I will start to think if I should do different things with it,” said Bill Doyle, vice president and principal analyst at Forrester Research.

Betterment, a new York company, launched its online investment service in May. Its model for investing mirrors Mint’s model for financial management in that it strips away the complexity in a way that appeals to consumers age 25 to 35, analysts said.

Jon stein, Betterment’s chief executive, said his company’s goal is to make investing simple and smart, and that the website, which vets exchange-traded index funds for its investors, helps new investors perform better than they would by choosing index funds on their own.

In late December, Betterment began offering its service free for the first six months to anyone who was referred by Mint. Further, “we are launching a new tiered fee structure that we have been piloting with Mint.com,” stein said, replacing his site’s flat fee of 1%.

Doyle said a 1% fee is high, particularly for large investments.


Jon Stein, Betterment’s chief executive, said his company’s goal is to make investing simple and smart.

Betterment’s new structure charges 0.9% for portfolios of under $25,000; 0.7% for portions of balances up to $100,000; 0.5% for portions of balances up to $500,000; and 0.3% after that. Betterment requires no minimum balance.

Betterment asks new investors questions about their risk tolerance, and according to the level of risk, assigns assets into either its stock or bond fund portfolios, both of which are based on exchange-traded index funds.

stein said Intuit would get revenue for the successful leads it generates. For its part, “it’s a great way for us to promote” Betterment, he said.

stein said Betterment has thousands of clients and assets under management of “several million” dollars.

“PFM providers are moving beyond presenting static account information, and they are getting more transactional and more operational by linking” to sites such as Betterment, said Ron shevlin, a senior analyst at aite group LLc in Boston.

He said that the fee structure made sense for young investors, particularly as the tacit message from the mainstream brokerages is that they would rather deal with people with more assets. §

Continued: Mint Teams Up with Betterment to Boost Revenue


The newest round of funding will be used to expand the size of the team and prepare for new product launches later this year.

Source: http://www.nytimes.com/external/venturebeat/2010/12/02/02venturebeat-betterment-raises-3m-to-give-casual-investor-99675.html

By mAtthew LynLey

Betterment raises $3m to give Casual investors a more accessible portfolio

online investing service Betterment announced today that it has raised $3 million in a first round of funding led by Bessemer venture Partners.

Betterment lets users transfer money to their accounts and decide how much of it they want invested in the stock market and government-backed treasury bonds. stocks are typically a little more volatile in the short term, whereas treasuries have a guaranteed yield but generate a much smaller return. the idea is to let users pick just how much risk they want to take on their savings.

the company, which is an sec and FInRa licensed investment advisor, chooses which stocks to buy and puts the individual securities into each user’s account. Betterment does not charge its customers a per transaction fee like most online brokerage accounts. Instead, it charges a management fee of 0.9 percent of the average annual balance. Betterment accounts are as liquid as a savings account, with the money transferring directly to and from users’ checking accounts.

the new York, n.Y.-based company’s founders invested $640,000 to pay staff, create technical infrastructure, and build capital reserves required by the sec. It launched at techcrunch Disrupt earlier this year and is already managing millions of dollars in investments. the newest round of funding will be used to expand the size of the team and prepare for new product launches later this year.

Betterment also launched a new government-backed treasury bond portfolio that is supposed to be less sensitive to interest rate changes. When the economy turns south, many investors typically flock to treasuries in order to keep their money safe. that drives interest rates down. the newest addition to its investment portfolio is likely a response to the current investment environment, which is at best a complete snafu. §


By SchuyLeR BRown

http://www.inc.com/schuyler-brown/congratulations-youve-closed-your-first-round-now-what.html

Closing a first round of funding is a major achievement. But you won’t see any cash for months. What do you do until then?

Congratulations! You’ve Closed Your First round. now what?

For an entrepreneur, closing a first round of financing is a major milestone. But what are you supposed to do next? after all, you won’t actually see any money for two, or maybe three months, while you wait for the legal diligence to be completed.

still, there’s plenty you can do to move forward while your check is stuck in limbo, say Jon stein and eli Broverman, co-founders of online investment platform Betterment.

Recruit. “It takes three months to hire a strong candidate, so get out there the day you close your term sheet, if not sooner,” says stein. He became a self-professed LinkedIn junkie, trying to identify potential hires. While he didn’t hire any of his LinkedIn finds, those early interviews helped clarify the ideal background and skill set for each role. once the team identified the appropriate skills, they screened the list for the best cultural fit. “a culture is built organically from the people around you,” says stein. “early hires have to want to build a company, not just work at one. In particular, they have to believe in what you’re doing. We ask each candidate ‘Why Betterment? Why not another startup?’”

Find office space. “You need space that employees actually want to spend time in, where they’re comfortable,” says stein. “It will pay long term dividends.” Your

team will spend way too much time in the office, and the space itself will become a key component of company culture. that means more than buying a ping-pong table. Instead, ask yourself if the space is accessible by public transportation. Is there a comfy couch to crash on for the inevitable all-nighter?

In new York, “the biggest lie going is square footage for commercial space,” says stein. “every listing inflates square footage, sometimes by as much as 100%. You have to take out the tape measure and start negotiating a reduction [in rent].” In the end, Betterment found a building they liked and worked directly with a previous tenant to secure the space before it went on the market. When the space came up for lease, Jon didn’t wait for his investors’ checks to clear. He used his own credit to get that first lease.

choose your benefits. these take a while to come online too, and now that you’ve got funding, your employees are going to expect benefits like health insurance. Betterment has a younger work force, so the company chose a high deductible health insurance plan. that can be a good option for those who don’t expect to need much medical care. Your employees might fit a different profile, but it’s still important that to have a good “fit” between your employees and your benefits. §


Since opening up earlier this year, the service has attracted thousands of customers and millions of dollars in savings.

Betterment, a financial savings startup which launched last May at techcrunch Disrupt, raised $3 million in a series a financing led by Bessemer venture Partners. the anthemis group, thomas Lehrman, and other angel investors also participated.

Betterment aims to disrupt the financial savings industry by letting customers invest their savings in a carefully-selected blend of stock and bond portfolios which are rebalanced regularly and automatically. the new York city startup is a registered broker dealer and financial adviser. the only fee it charges is a management fee that is about one percent of assets in each account (soon this fee will become tiered so that larger accounts pay a smaller percentage).

since opening up earlier this year, the service has attracted thousands of customers and millions of dollars in savings. annualized returns are tracking the s&P 500. Betterment will use the new capital to hire more engineers and roll out new products, such as an IRa. expect more game mechanics to be introduced into the service as well which will reward people for making smart financial moves. §

Source: http://techcrunch.com/2010/12/01/bessemer-betterment-3-million/

By eRic SchonFeLd

Bessemer Backs Better-savings startup Betterment with $3 million


By PhyLLiS FuRmAn

“There wasn’t anything out there that made it easy and accessible,” said Stein, 31.

He decided he could do better.

http://articles.nydailynews.com/2011-04-04/news/29398859_1_betterment-minimum-investment-requirements-investment-advisor

When John stein was in his twenties and working as a banking consultant in the city, his friends would often hit him up for some free advice: How should they manage their money?

one option was to hire an investment advisor - but these money pros often require a minimum investment, at least $100,000 - and generally charge an annual fee of 1% to 2% of assets under management.

another was to research investments and manage them on their own, something his friends didn’t have much time for.

“there wasn’t anything out there that made it easy and accessible,” said stein, 31.

He decided he could do better.

Last May, stein launched Betterment.com, a new spin on online brokerages that won top honors last year at Finovate, a conference that showcases financial technology.

Patterned after online banking pioneer Ing Direct, Betterment’s goal is to take the hard work out of investing.

You can set up a Betterment account that is linked to your checking account in a matter of minutes. Using a simple

slider tool bar, you indicate your risk tolerance. Based on that, Betterment allocates your dollars between two investment baskets: exchange traded funds invested in stocks and U.s. treasury bonds.

and there’s no need to pick those etFs, which are passively managed, low-cost funds that track a variety of indexes. Betterment has chosen six stock funds that it believes reflects the broad U.s. market, as well as two lower-risk bond funds.

Want to know how other people your age invest their money to help you choose your allocation? Betterment offers tools for that, too.

Fees range from 0.3% to 0.9%, depending on the size of the portfolio. the bigger your investment, the lower the fee. there are no minimum investment requirements – you can start with as little as $10 – no trading or transfer fees and no holding periods.

Rebalancing - buying and selling funds so that you keep your target allocation - is done automatically, at no charge.

the online broker is registered with the securities and exchange commission and is a member of the securities Investor Protection corp., meaning accounts are insured up to $500,000 should Betterment go under.

Former Banking Consultant Jon stein Founds Betterment.com, advises investors on smart Finances


Continued: Former Banking Consultant Jon Stein Founds Betterment.com, Advises Investors on Smart Finances

But unlike a savings account, a Betterment account is invested, meaning you run the risk that it could go down in value.

Betterment isn’t for sophisticated do-it-your-selfers who can scout investments on their own and would likely find less expensive ways to trade. Instead, its target is people who prefer ease and guidance.

“It’s for someone who is very smart, who is too busy to manage their investments,” stein said. “the majority of the population would rather do other things with their time. It is more of a ‘set it and forget it’ account.”

the median age of Betterment’s customers is 33 and the average account is worth $5,000. so far, more than 2,000 investors have signed up with the newfangled online broker, which has yet to ramp up its marketing.

even so, certified financial planner Bill Losey wondered why someone would spend 0.9% a year on Betterment, when they could spend slightly more and have the benefit of a flesh and blood financial advisor.

But he said the site might appeal to young investors who are starting out with small sums and who may not be able to find a financial planner willing to take them on.

“one huge plus: no investment minimums,” Losey said.

others said there are ways to do what Betterment does and pay less.

scott Brewster, a fee-only certified financial planner in Park slope, Brooklyn, noted that a number of brokerage firms, including vanguard and Fidelity, sell a large group of etFs without charging a dime in commission.

“the fact that (Betterment’s) trading costs are for free is not that big a deal since many brokerages have free trading of etFs,” Brewster said.

For people who want a diversified portfolio, but wouldn’t know how to assemble one, there are cheaper alternatives, namely target date retirement funds, Brewster added.

“Personally, I would rather small retail investors go with a good target date fund or life cycle fund that is well diversified and has fees of around 0.2%,” Brewster said. “that is a lot more cost efficient than paying a 0.9% Betterment.com management fee on top of the 0.2% etF fee.”

stein noted that the selection of etFs handpicked by Betterment can not be assembled elsewhere for free.


Stein acknowledged that there are many other choices for sophisticated investors, but said Betterment presents an option for busy people.

Continued: Former Banking Consultant Jon Stein Founds Betterment.com, Advises Investors on Smart Finances

While he likes target date funds, he said that many investors have goals beyond saving for retirement that might make a better fit with Betterment.

“Betterment lets you pick the right savings goals and horizon for you,” stein said. “Betterment is also easier and more accessible than any target date fund I’ve seen. there’s no minimum, it takes about ten seconds to initiate a deposit or withdrawal and it takes less than five minutes to get your account set up.”

the average Betterment customer return in the last year was 20.2%, stein said. the returns are based on the average customer allocation of 77% stocks and 23% bonds.

this compares to 18.9% that an investor might have earned had he been invested in the s&P and a treasury bond index with the same allocation over the same period.

Betterment’s goal is to match the market, not produce outsized returns. “We are not a hedge fund,” stein said. “What we are trying to do is give people a solid investment.”

stein acknowledged that there are many other choices for sophisticated investors, but said Betterment presents an option for busy people.

He compared choosing your own investments, without the benefir of a financial advisor, to being asked to build your own car.

“We’ll build cars centrally, standardized and ship them out pre-build,” stein said. “so people get better cars, they’re safer and people spend less time setting them up.” §


Burning to invest some money but don’t know where to start?

Source: http://money.cnn.com/galleries/2010/pf/1010/gallery.personal_finance_startups/2.html

Company: Betterment location: new York city Founded: august 2008

Burning to invest some money but don’t know where to start?

Launched in May, Betterment’s investment service lets beginners – or sophisticated investors who don’t want to deal with portfolio rebalancing – blend stocks and bonds in one easy-to-manage account.

there’s no minimum balance requirement, and just one investing choice to make: What percentage of your money do you want in stocks? Betterment parks your cash in market-tracking index funds.

as you select your investment blend, the site lets you know how much risk you are taking, gives advice, and show you how others of your age, income and gender are investing their money. §

By BLAke eLLiS

9 smart new ways to manage Your $$: investing with the Twist of a Dial


Source: http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20101010/REG/310109955

technology will be the key that unlocks the mass-affluent market for financial advisers.

only through technology will clients with Main street-level assets be profitable to advisers.

along those lines, one site advisers might want to keep an eye on is Betterment.com.

the startup online service, meant for novice investors and active traders alike, could foster the growth of whatever liquid assets mass-affluent investors have.

In a nutshell, Betterment provides users with a hybrid investment service that builds a conservative portfolio of stock and bond index exchange-traded funds that is easily managed from a simple interface yet has the liquidity of an online banking account.

the company is a securities and exchange commission-registered investment advisory firm and a broker-dealer.

It also happens to be a startup that is already off to a good start.

Betterment garnered a great deal of buzz last week at the Finovate Fall 2010 conference in new York and was named best in show. that follows a finish among the top five at techcrunch Disrupt, a high-

pressure “america’s got talent” type of event for startups in new York that took place in May.

some advisers will recall that I introduced them to another startup, Mint.com, during Finovate Fall 2007. that website and service has grown to 4 million users and was bought last year by Intuit Inc. for $170 million.

growing FasTgetting back to Betterment, the site was launched in beta five months ago and with very little in the way of marketing; it already has 1,000 users.

It costs users a quarterly management fee of 0.9% of assets under management, there is no minimum balance, transfers and trades are free, and there are no holding periods. oh, and by the way, the portfolio is automatically diversified and re-balanced.

Betterment isn’t intended for the sophisticated, hands-on, do-it-yourself consumer who is comfortable buying and selling his or her own equity and fixed-income investments, and doing the re-balancing.

It is meant for consumers who have some amount of liquid assets to invest and want to be more active with them but are either intimidated

Startup online hybrid investment service could turn small investors into adviser clients

By dAviS d. JAnowSki

a Better(ment) mousetrap for the mass affluent?


Continued: A Better(ment) Mousetrap for the Mass Affluent?

or lack the time or passion to educate themselves to the DIY level. (they also probably lack the assets to interest an adviser).

Jonathan stein, chief executive and co-founder of Betterment.com, noted that the current user has anywhere from $100 to $100,000 invested through the site’s platform, with the average being $15,000.

a committee of economics professors from columbia University and fund managers helps determine changes to the site’s portfolio mix on a quarterly basis, he said.

that mix is grounded in – and managed based on – modern portfolio theory. the stock portfolio is representative of the total U.s. stock market, Mr. stein said.

“the people we are after are the traditional savers that are looking for an entry into active investing, but one that they can set it and forget it if they want to,” he said.

Betterment suggested that we contact David aviram, a new York real estate developer whom it considers a typical user.

He said that he has been investing with the site for five months, after a decade of managing his own money on different trading platforms, including those of the

charles schwab corp., e*trade Financial corp. and tD ameritrade Holding corp.

now 31, he first heard about Betterment through the friend of a friend and decided to try it out by investing $2,000. (coincidence alert: 31 happens to be the average age of Mint.com users.)

“What I liked most was the ability to reallocate my position simply and quickly, and was impressed with automatic diversification of the account through the spectrum of stocks and bonds they offer,” Mr. aviram said.

He added that while it was possible for him to achieve this level of diversification in his accounts at the major retail brokerages, the process was more time-consuming, less automated and demanded more research on his part, and often left him with big cash positions that he then had to manage.

“For someone like me who is actively managing my allocations, this is really simple to use; with it, if I am taking money out of stocks, it goes right into a bond portfolio, and I’m able to shift that based on market fluctuations,” Mr. aviram said.

to illustrate the simplicity, he described his home page at Betterment and how he could change his allocation values with a click on the “allocation” tab.


Continued: A Better(ment) Mousetrap for the Mass Affluent?

“Right now, I have things split 70% in stocks and 30% in bonds, and if I want to change that to 65/35, I just click it, then all the orders are automatically processed,” Mr. aviram said.

He asked me not to publish the amount of his current account balance, but it dwarfs the initial one and includes most of his liquid assets, he said.

There’s an app For iTBetterment last week also announced the availability of an iPhone application and an online automatic-savings plan. after users create a Betterment account through the website, they simply download the free iPhone application from itunes. It lets them check, in real time, the status of deposits and withdrawals, their account balance and composition, and allows them to make changes to their stock and bond allocations. §


Source: http://www.mint.com/blog/investing/a-better-savings-account-07202010/

Arguably, no service has made investing simpler than Betterment, a New York-based startup which launched in May.

It’s one of the most common questions on Mint answers and around water coolers everywhere: “I have a little money to invest. Where should I put it?”

Let’s face it: the average person, no matter how educated, finds the world of stocks, bonds, and mutual funds to be about as easy to understand as the national electrical code. “For most people, opening an online trading account and figuring out what to buy and who to listen to, there’s so much noise out there,” says Zack Miller, an expert on web-based investing and author of tradestream Your Way to Profits.

confused investors plus new technology equals opportunity, and startups have swarmed into the investing market. trade mirroring sites, like covestor, let you mimic the trades of investment professionals. online brokerages like e*trade feature investing advisories that walk you through an online survey and then select a package of funds tailored to your needs. and social lending sites like Lending club put your money directly into the hands of borrowers—no bank required.

But, arguably, no service has made investing simpler than Betterment, a new York-based startup which launched in May. Betterment is betting that simplicity is a feature

investors will pay for, and they’ve created a web-based product that makes investing as easy as opening a savings account. In doing so, they’ve earned plenty of fans (the company hit its summer goals in its first week), but also critics who say the site is misleading and overpriced.

Let’s take a look.

streamlined to the boneopening an account with Betterment takes about five minutes. When you make a deposit, your money will be invested in a mix of exchange-traded funds (etFs), seven in all, with an emphasis on value stocks. the complete list of funds can be found in the Betterment client agreement.

once you’ve signed up and transferred money from your checking account to your Betterment account, you allocate your money between stocks and treasury bonds on a percentage basis (60% stocks, 40% bonds, for example), and that’s the only investing decision Betterment asks you to make. the dashboard looks like this:

By mAtthew AmSteR-BuRton

a Better savings account?


There’s no deciding which stocks or which funds to buy: every Betterment customer owns exactly the same investments.

Continued: A Better Savings Account?

customers fill out a very short survey about their risk tolerance, and the site suggests an allocation between stocks and bonds. Most customers accept the suggestion. “they’re coming in, they’re using our advice tools, and they’re setting their allocation according to that,” says Betterment founder and ceo Jon stein.

there’s no deciding which stocks or which funds to buy: every Betterment customer owns exactly the same investments. Betterment automatically rebalances your account so that if you select, say, a 50/50 split between stocks and bonds, it will remain at 50/50 even if the stock market goes up and bonds go down.

a “savings” account?the simplicity of Betterment’s tools isn’t what has the company’s critics exercised, of course: it’s that they’ve been marketing it as an alternative to a bank savings account.

“they took a process that’s inherently scary and overwhelming for people and used technology to simplify it,” says Miller. “I think that’s an honorable thing. But to market it again and again, to talk about a savings account, is just disreputable. It’s scary, actually.”

Dallas salisbury, President of the alliance for Investor education, agrees. “this website appears

to confuse the two concepts, appearing to use saving language to describe an investment that carries the risk of principal loss,” he said in an email.

Betterment has responded to that criticism, up to a point. “We announced this as the replacement for your savings account, because that’s how we saw it,” says stein. “that said, we took that criticism very seriously, and obviously we don’t want to mislead and we want to appropriately market this. so we went through all of the text on the site to make sure that it was clear that this was an investment, and we’ve changed that positioning just slightly.”

Betterment’s site still invites you to “start saving now,” and says it’s “better than a bank.” But they’ve changed some of their text and graphics to make it more clear that your Betterment account can actually lose money. Yet, on one page of their site they promise that “your money is safe and secure with Betterment,” and trumpet their sIPc insurance. sIPc is completely different from FDIc insurance: it protects your money if an investment company commits fraud or goes bankrupt. It’s no help at all if the stock market tanks.

stein says his customers get it. “the market is up and it’s down since we launched, and those



customers who have lost money, not one of them has come back to say, ‘Hey, there’s risk in this product; I had no idea what I was getting into.’ not one.”

“Most of our customers aren’t first-time investors,” stein adds. “this is an investment for the medium to long-term.”

simplicity, at a costBetterment makes money by charging a management fee: 0.9% of your average balance per year. (on a balance of $10,000, for example, that’s $90.) there are no per-trade fees or any other fees; you can add or withdraw money at any time.

When you factor in the expenses inherent in the underlying funds, though, things quickly add up – to a total expense ratio of about 1.09%. In comparison, the average moderately aggressive balanced fund, which maintains a constant stock-to-bond ratio (typically 60/40), charges 1.01%, according to Morningstar. vanguard’s Balanced Index Fund (vBInX) charges 0.25%.

In the world of investing, 0.9% is a high price—no way around it. If you put your money directly into, say, vanguard’s total stock Market etF (vtI), one of Betterment’s underlying stock market investments, you’d pay 0.07%.

Betterment’s underlying bond fund, ishares Barclays tIPs (tIP), charges 0.2%. Investors who are disciplined enough to buy and hold these or other low-cost funds could save a lot of money compared to investing with Betterment.

investing on autopilotthe problem is, many investors simply lack that discipline. a 2010 study by DaLBaR found that in the last 20 years, the stock market has returned 8.2%, but investors in stock market mutual funds only made 3.17%. Bond investors did even worse. Why? as the report put it, “Investors are impatient and irrational.” they move their money in and out of the market at the wrong time, they fail to rebalance, and they invest in actively managed funds that hardly ever beat the market.

Betterment’s investors might well turn out to be just as dumb. the product is only two months old, and stein declined to say how much money customers have invested so far (they’ll report this figure publicly to the sec at year’s end).

But stein offers a hint that his customers may be smarter than the average bear (or bull). “there are 5% of the customers or so who will come in and change the allocation once a week or something like that. But that’s


Putting your investing on autopilot may be one of Betterment’s better features


really a footnote when you consider 95% of people are setting an allocation and are just sticking with it even though the market’s been pretty volatile.”

(For frequent traders, meanwhile, a Betterment account may be cheaper than using a regular brokerage account, which charges commissions for each trade or monthly fees for unlimited ones.)

Putting your investing on autopilot may be one of Betterment’s better features – but it’s one that’s hardly ground-breaking.

target-date funds, which are funds of mutual funds with an asset allocation that becomes more conservative as the target date approaches, have been around

for years and are now the default investing option at most employers’ 401(k) plans. average expenses are in the 0.53% to 0.63% range depending on the target date, according to Morningstar. (Buying and selling no-load mutual funds does not involve paying a commission, either.)

Most mutual funds, of course, have minimum initial investment requirements of several thousand dollars, which Betterment does not. If you have very little cash to set aside, Betterment might be a better solution for you – as long as you understand you are investing, not saving that money, and that involves the risk of a potential loss. §


http://money.cnn.com/galleries/2010/smallbusiness/1005/gallery.techcruch_disrupt_winners/3.html

Founder: Jon stein Launched: august 2008 headquarters: new York city

Winner of “Biggest new York Disruptor” award; Final Five finalist

Betterment’s name sounds like a sly play on Mint.com, the personal-finance site that won techcrunch’s very first startup competition back in 2007 and went on to be acquired last year by Inuit for $170 million. Like its namesake, Betterment is built around user-friendly personal finance tools, but while Mint helps members manage the money they already have, Betterment targets investors.

For those that would be overwhelmed by an etrade account, Betterment offers visually intuitive tools. after transferring money in from a linked checking account, a user funnels it into one of Betterment’s two portfolios, one a stock mix and the other a very conservative basket of bonds. Using a slider that looks like a speedometer, the investor can easily calibrate their risk level. Betterment founder Jon stein calls his site “the replacement for your savings account.”

one cool feature allows users to see what others in their age and or income bracket are doing. the judges were favorably impressed: “I was a judge at tc50 when Mint was on stage and told them, ‘It’s a huge market; you only need a tiny piece.’ I think that’s true for you,” Don Dodge, a developer advocate at google, told stein. He’d like to see Betterment target 401(k) investors: “Many of them are totally clueless,” he said.

Betterment polarized the audience. some loved how simple the site makes it to allocate investment funds (the slider lets you set your risk tolerance from low to high risk), but others objected to an investment site billing itself as a safe replacement for savings accounts.

the Final Five judges came down hard on Betterment’s interface. John Borthwick, ceo of betaworks, called it “toyish” and felt that it was over-simplified, “reducing things to a simple graphic with one bar.”

of course, simplicity can pay off – techcrunch editor Michael arrington pointed out that Mint also drew criticism for being “too cute.” §

Betterment founder Jon Stein calls his site “the replacement for your savings account.”

simple Tools For savvy investing


Betterment is designed so that anyone can use it, regardless of their knowledge about the market and financial products.

Source: http://techcrunch.com/2010/05/24/betterment-wants-to-be-your-new-savings-account/

Betterment, a new startup that is launching today at techcrunch Disrupt, is looking to become the “replacement for your savings account” – it earns you more money than a standard savings account while offering more flexibility than you’d get from higher yield accounts. and, unlike most financial services, Betterment is designed so that anyone can use it, regardless of their knowledge about the market and financial products.

the site has established two portfolios, one of which consists of numerous stocks and another of ‘ultra-safe’ bonds. after linking your bank account with the service you use a slider to adjust how much risk you want to take, which determines how much money is allocated into each portfolio. the site cuts out as many steps as possible – as soon as you’ve put in your money and determined how you want to split your money between the stock market and bonds, you’re basically done (at least if you want to be).

there are plenty of other options for users who want to do a deeper dive. If you want advice on how to determine this allocation, you can look at what your peers have done. there’s an interface to adjust age ranges, income range, etc – and it shows you how risky other people in a similar situation are. an analysis

section allows you to watch percent returns over time, or the dollar changes in your accounts, and your account balance.

the site may be dealing with financial information, but like tc50 winner Mint, Betterment has clearly put a lot of time into making its graphs look slick and attractive,

Betterment charges a 0.9% fee. the company is registered with FInRa and the sec – they’ve built their own financial infrastructure for the service (it isn’t just a nice frontend on a different investment platform).

the site goes live tonight (May 24).

Q&a:chi-hua chien: the question is, are consumers going to feel they have enough control. at the end of the day customers think they can outsmart the market. How do you ride against that wave?

a: We do see those as the problem, we’re not the only ones with that Jim cramer style investment advice. We’ve seen a trend of people moving toward investment advisors and self-managed accounts.

a2: also, most people aren’t doing any of that. they know they should be doing more. they open etrade and don’t know what to do. We’re trying to replace the savings account. this is where you place

By JASon kincAid

Betterment wants To Be Your new, higher-Yield savings account


Continued: Betterment Wants To Be Your New, Higher-Yield Savings Account

excess money, “here’s where I’m willing to take risk”. It feels more like a savings account than an investment account.

chien: I do think you have to be more transparent..

a: It is completely transparent. We put every etF on your statement. We break out every individual security. It’s completely transparent. We’re not hiding anything. It’s just a simpler investment product.

don dodge: I like it a lot. I was a judge at tc50 when Mint was on stage, told them it’s a huge market, you only need a tiny piece. I think that’s true for you. I would focus on 401k market. Millions of people forced to be investors through 401k. Many of them are totally clueless.

a: We totally agree..

Bijan Sabet: Don’s right. I have noticed a lot of people who manage 401ks offer these age adjusted program that are black boxes. start with savings, add additional services.

chris Sacca: I worry that it’s too simple. People don’t always trust it. People expect a little bewilderment that gives it credibility. this starts to feel a little like a toy.

a: It’s not a toy, it feels more like a savings account. only difference is that you have to choose this allocation.

vardi: People like to invest in institutions they feel confident in like Lehman Brothers and Bear stearns

round 2 Business presentationBetterment was one of the companies chosen to proceed to round two of the techcrunch Disrupt startup Battlefield, where they talked about their business model. Here are my notes from that presentation:

there are $300 billion in online only accounts. overall market is $4.4 trillion. We’re content to focus on the $300 billion market. First we’ll go with traditional marketing – Facebook ads, adWords, display. a lot of that. second, intermediated financial channels. People who have existing relationships with customers we want to reach. Referrals. Ing Direct gets 40% of customers this way. We’ll also do Media outreach.

Sabet: I think you need to focus on a market. Word of mouth is something you can focus on later.

a: When I talk about referrals, I mean rewarded referrals which has worked very well for Ing Direct.

Sacca: I think they’re going after a real problem. But I think people expect some complexity in these kinds of services. Distribution problems become the complex frontend. §


“We want to take this really big. We want to make investing accessible for people as soon as possible.”

the web may already have a wide array of personal investment sites, but startup Betterment believes it has something new to offer.

the company launched today at techcrunch Disrupt. “When you go to a broker you have to pick among a menu of funds and stocks that are available,” said ceo and founder Jonathan stein. “It’s an overwhelming experience for many people, even columbia MBas.”

the result is that many people simply leave their money in savings accounts, said stein. Betterment gives users one decision to make, an allocation between treasuries and stocks. the company, which is an sec and FInRa licensed investment advisor, chooses which stocks to buy and puts the individual securities into each user’s account.

Betterment does not charge its customers a per transaction fee like most online brokerage accounts. Instead, it charges a management fee of 0.9 percent of the average annual balance. Betterment accounts are as liquid as a savings account, with the money transferring directly to and from users’ checking accounts.

the company has already provided returns for its beta users. While the s&P 500 is up 23 percent on the year, Betterment’s stock portfolio is up 29 percent across the same period, which is a significantly higher return than a savings account.

“Banks are in the business of paying as little as possible for deposits,” said stein. “this would cannibalize their most profitable business.”

according to stein, Betterment is looking to target the 20 million americans who have online savings accounts and, more specifically, the nearly 10 million who are between 20 and 40 years old.

“We want to take this really big. We want to make investing accessible for people as soon as possible.”

Betterment’s founders have already invested $640,000 to pay staff, create technical infrastructure, and build capital reserves required by the sec. the company is looking to raise a $1 million round of institutional funding in the near future. §

Source: http://venturebeat.com/2010/05/24/betterment-wants-to-make-investing-easy-and-the-savings-account-extinct/

By JAcoB BRody

investment startup Betterment says it Can make savings accounts extinct


http://articles.nydailynews.com/2011-12-27/news/30563144_1_investment-strategy-retirement-maximum-contribution

Q. I want to become financially fit in 2012. What should be my New Year’s resolutions?

a. a key part of financial fitness is having your retirement savings in place. How you think about this – and the definition of fitness – varies based on your age.

early 20s: get startedRetirement is likely more than 40 years away. It’s the last thing on your mind - but the best thing you can do for retirement in your early 20s is simple: get started.

If you start early, the effects of compounding can be astounding. a 25-year-old who invests $1,000 a year for ten years (with an average return of 8% per year), will have account worth $169,000 by the time he turns 65.

If he waits until he’s 35, it’s harder to catch up: even if he contributes $1,000 per year for 30 years (three times the amount) his total balance at age 65 will be $125,000 ($44,000 less!).

Young people have an edge on the most seasoned Wall street investors: time. there are many options for smaller investors (Betterment.com, an online brokerage, requires no minimum balance), and you should be taking advantage of your employer’s 401(k) plan.

35 to early 40s: max outWhile the goal in your 20s is simple (just do it), by mid career you should be making the most of your earning potential and tax benefits by maxing out your 401(k).

In 2012, the maximum contribution to a traditional 401(k) will be $17,000, or $11,500 for a sIMPLe 401(k). If you can’t afford to max out your 401(k), contribute at least enough to get the matching contribution from your employer. It’s free money – you’d be crazy not to take it!

50s and 60s: stay the CourseHopefully, by the time you reach your 50s and 60s, you will be in pretty good shape. It’s most important at this age to stay the course with the investment strategy you set all those years ago. Don’t make rash decisions or be influenced by volatile markets.

now that retirement is not too far away, however, it’s time to check in to ensure that your level of risk is appropriate for your needed return. People with a long timeframe ahead of them can afford to be more aggressive with their investments than those who need the money sooner.

one final tip. once you reach 50 you can contribute up to $5,500 more to your 401(k), so take full advantage.

Investing in your retirement is the smartest new Year’s resolution you can make in becoming financially fit in 2012.

start now and you’ll be on track for an enjoyable retirement, free of financial worry. §

By Jon Stein

get Financially Fit for 2012 By starting to save early and By maxing out Your 401(k)


By ASSociAted PReSS

Whether online or mobile, here are some personal finance technologies to watch in 2012:

http://www.cbsnews.com/8301-501366_162-57347931/4-personal-finance-technology-trends-for-2012/

If you’re one of the holdouts still paying bills with checks, tracking your accounts with pen and paper or clipping coupons from the newspaper, 2012 could be the year you take the digital plunge.

a host of budding personal finance services and applications are poised to go mainstream in the new year, and together, they will likely have a big impact on the way americans bank, shop, and track their finances. some of the services are web-based, but many take advantage of the proliferation of smartphones, which are now carried by one-third of U.s. adults — with more likely to join that crowd in the next few days after receiving the gadgets as holiday gifts.

Whether online or mobile, here are some personal finance technologies to watch in 2012:

mobile moneythe september launch of google Wallet was just one high-profile move toward the use of smartphones for payments, replacing credit or debit cards. the technology allows users to wave their phones in front of payment terminals and have transactions deducted from linked bank accounts or credit cards. expect more options for electronic payments from mobile service providers and card networks next year, and wider adoption of the

terminals by retailers, mass transit systems and more.

another innovation that is already being heavily promoted is person-to-person payments. american express co., Mastercard Inc., visa Inc. and PayPal all offer ways for their customers to send and receive money using links to various accounts and cards. as the tv commercials depict, if this technology takes off there will be no more fumbling for cash when it’s time to split the check at a restaurant, and sending money across town or across borders will be easier, faster and less expensive.

non-bank money managementMint.com, the popular personal finance site, was only the beginning. a raft of new money management tools are now available that can help users keep track of bills, investments and other aspects of their financial lives.

among the standouts is Manilla.com, which not only pulls together household bills and financial accounts, but also helps users keep track of details like travel rewards points and magazine subscriptions. the service provides reminders for when bills are due and has features that make it easy to pay bills or set up auto payments. since the company’s goal is to help its customers eliminate paper

4 personal Finance Technology Trends for 2012


Continued: 4 Personal Finance Technology Trends for 2012

clutter, there’s even a way to store electronic account statements. and it has a smartphone app for accessing all these functions on the go.

other non-bank options include Pageonce, an app that automatically tracks bills and enables users to make payments on their phone; savvymoney.com, a site that offers debt-management help; and Betterment.com, a site designed to simplify investing.

Targeted dealsthe combination of geo-location technology that can track your movements when you’re carrying your smartphone, and QR codes, those weird squares appearing more and more often in advertising, is enabling companies to offer personalized discounts and on-the-spot deals to customers willing to opt into their programs.

Mall shoppers have already started getting texts and emails designed to lure them into certain stores, and the technology can also be used to encourage customers to enter contests, demonstrate new apps or products and even contact customer service.

social commerceJavelin strategy & Research, a financial services research firm, is using this term to identify the trend toward the combination of commerce and social networking

on sites like Facebook, LinkedIn and twitter.

While these sites are moving toward making it easier to shop without navigating toward a link, that’s just one step toward social commerce.

the concept of financial social networking is also being expanded by companies like Weemba.com, whose site allows individuals to search for a loan by posting nontraditional details like a description of the need for the money — debt consolidation, a mortgage refinance, or a kitchen makeover complete with the designer’s plans, for instance. the details posted add depth to the usual credit score and financial information that banks and other funders may review, and the site opens the lending request to a wider audience.

other examples of the use or concept of social networking include Kickstarter.com, where creative types can seek funding for their artistic endeavors and those willing to provide seed money can choose to provide all or part of the needed funds to get the project off the ground.

saveup.com is a game aimed at helping individuals pay down debt and build savings, and Bundle.com uses data tracking and spending


Continued: 4 Personal Finance Technology Trends for 2012

information to produce lists of popular restaurants and stores in selected cities, helping users find the right spot at the right price.

Banks are also experimenting with ways to make use of social networking to interact with customers, with some success. even Bank of america corp., a recurring target for gripes large and small about the financial system this year, has nearly 365,000 “likes” on its

official Facebook page, which it uses for efforts like supporting community causes and advertising opportunities like its student Leader program, which offers paid internships to high schoolers who work at charitable organizations.

customers can expect more on these fronts from startups and big financial institutions in the next 12 months. §


Source: http://www.huffingtonpost.com/jon-stein/ows-where-the-rubber-meet_b_1051364.html

Creating smarter, more innovative products is not enough. The big banks on Wall Street are not going away. So, what changes are needed?

confession: I used to work for a big-not-so-popular-bank. these days, I need to be careful who I admit that to. But, I’m not ashamed of it. In fact, it was my experience at big banks that motivated me to create meaningful financial services products.

as the founder of a technology-based financial services company, I’ve been thinking a lot about the occupy Wall street movement. all financial services startups have. the movement is a bit of vindication – seeing others realize that the current system is not working – and there is a real need for the innovative financial products these startups are building.

creating smarter, more innovative products is not enough. the big banks on Wall street are not going away. so, what changes are needed?

With three simple changes by all financial services institutions – produce, protect, and play fair – the financial services industry can get on track to working for the 100%.

Produce. Financial services companies must make meaningful products that fill a consumer need.

as a consultant, I witnessed the predatory banking practices of an ohio bank that made 80% of

its profits off of fees on checking accounts – mostly overdraft fees. the average consumer-facing bank makes about 50% of its profits on fees, 50% on interest. so this might seem like bad business – who would go to such a bank, with such fees? But they were growing fast, putting up branches faster than their rivals.

the trick? they targeted the poorest neighborhoods and customers. their average customer over-drafted 3-5 times a month, paying $120-$200 in fees. they marketed to the customers who could least afford it, those who should not have had overdraft “privileges,” and then “strip-mined” their wallets. Building a checking account with high overdraft fees is not filling a customer need – it’s exploiting loopholes in regulation and preying on customer weakness.

Protect. Financial services companies should be held to a fiduciary standard – the same way doctors take the Hippocratic oath and lawyers must pass the bar.

I also worked for a broker, and found that 90% of customers lost all of the money they invested. the broker would take the opposite side of their trades, and would profit when they were wiped out. that was their business model. this kind of business is unproductive and predatory, and would be

By Jon Stein

ows: where rubber meets the road


Continued: OWS: Where Rubber Meets the Road

best controlled by introducing a fiduciary standard for brokers (which the sec has proposed, and the industry is resisting). We have to trust the companies that provide us these products – like we trust doctors, lawyers, or the pilot of our airplane when we need to rely on them – and yet financial services vendors often have no requirement (or incentive) to act in our best interests, like those others. as an Investment advisor, Betterment.com does have to act in its customers’ best interest. this is a good thing, and should be extended to all financial services companies

Play Fair. there needs to be a level playing field for all market participants.

a lot of people feel like the deck is stacked against them when it comes to investing. they think the big banks make all the profits, and the little guy doesn’t have the same chance. they’re not far off. the big banks will do things like co-locate with the exchanges, so they get to see your orders before they get to the exchange. and they can then buy the stock, and sell it back to you at a higher price – all without your knowing about it or being able to do anything about it. that’s the deck being stacked against you.

so how do we ensure that these principles are put into practice? It’s time for like-minded financial services companies to rally around them, and, to come up with their own principles for what they stand for and how they treat their customers. and, it’s time for consumers to demand this level of accountability.

a number of young, innovative financial services companies are already embracing this change, and creating a much needed level of transparency in the industry. For example, at www.slashdeclare.org, you can see financial services organizations that have made a declaration to their customers of what they deserve. each of these companies has launched a page on their site – i.e. www.betterment.com/declare – with these promises.

as consumers of financial services products, start to demand that your bank, investment advisor and brokerage join this movement. If they aren’t willing to publicly declare what you deserve, you deserve a better company. §


When I started investing, I used Sharebuilder. But if I were starting again today, I’d probably use Betterment instead.

the financial blogging conference last week was great. My colleagues and I had a lot of thought-provoking discussions, not only in the planned sessions but also late at night in the hotel lobby. one of these impromptu chats focused on the financial products we actually use.

Financial bloggers do a lot of product reviews. (I do them too, but I think they’re tedious. Besides, I think there are some ethical grey areas with product reviews, so I don’t venture there very often.) sometimes it’s difficult to tell which tools they’re pitching and which tools they actually endorse.

For my part, I don’t endorse anything. one of my mantras is “do what works for you”. that’s because I don’t believe there’s any one-size-fits-all answer, especially with banks and credit cards. as a perfect example, many financial bloggers (including me) love Ing Direct. that’s where we do our banking. But Mike Piper from oblivious Investor is a quiet Bank of america fan. “I think they’re great,” he told me. Mike’s a smart guy, so I can’t help wondering if maybe he knows something that we don’t!

“You know,” I told the group. “I think it’d be fun to actually tell my readers which financial products I actually use. and then ask them to do the same.” so that’s what we’re going to do today.

With that preamble out of the way, here are the financial products I actually use:

Bank accounts.as I’ve shared in the past, I have several bank accounts.

My business banking is all done with Wells Fargo, which is a legacy from when I co-founded my computer consulting business with two friends. one of my buddies had an account at Wells Fargo, so he opened our business account there. they’ve given me great service, so I’ve never moved the account. It’s been there for over a decade.

My personal checking account lives at the local credit union. again, I like their service, and I like supporting a local bank. I have a couple of old savings accounts there too, but they have no money in them.

since I discovered the wonders of high-yield savings accounts, most of my cash lives at Ing Direct. I chose Ing because get Rich slowly readers raved about it. Plus at the time, it offered a very high interest rate. (I think it was about 5% when I signed up, a rate we’re not likely to see again for many years.) Because I practice targeted saving, I have several savings accounts at Ing – one for each of my current pet projects.

Source: http://m.foxbusiness.com/quickPage.html?page=21322&content=58890331&pageNum=-1

ask the readers: which Financial products Do You actually use?


Continued: Ask the Readers: Which Financial Products Do You Actually Use?

“Why don’t you have your personal accounts and business accounts at the same bank?” adam Baker asked me in chicago. “It’s a legacy of my poor financial habits,” I said. “I intentionally kept them separate so I couldn’t mingle funds. now it’s a psychological thing.

Credit cardsFor almost a decade, I didn’t carry a personal credit card. credit card abuse had led me to become deep in debt, so I wanted to prevent temptation. But it was you folks who suggested I was ready to use credit wisely and recommended I get a card.

gRs readers suggested I try a capital one no-Hassle cash Back card (now called a capital one cash card. It’s a cash rebate card that earns me 1% on everything I spend. I use it for nearly everything I can (and then I pay it off at the end of the month. Readers recommended it back in 2007 was that it has no foreign transaction fees, so it’s perfect for travel. I’ve had it for four years without any signs of returning to my former habits.

My second card is also perfect for travel. It’s a chase British airways card, which I wrote about in april. I did indeed sign up, and I met the spending requirements to obtain the 100,000 airmile bonus (though barely). I think I have 106,000 miles on it now or something like

that, but I have no idea how to use them. something to look at in 2012.

Finally, I carry a business credit card. actually, I have two. the first is my Wells Fargo vIsa, which I obtained for obvious reasons. (and which I had even when I carried no personal credit cards.) My second business card is the american express costco card, which I use to get 1% cash back on business purchases. this one is actually kind of silly. I don’t spend a lot on my business, so it doesn’t make much sense to go after cash back, especially since there’s an annual fee on the card. When I get home from Peru, I should cancel this.

BrokerageWhen I started investing, I used sharebuilder. though their fees are relatively high, they were perfect for helping me develop the habit of saving every month. I still recommend them to people who are just starting out. But if I were starting again today, I’d probably use Betterment instead. (although it’s important to note that Betterment doesn’t allow you to save in a Roth IRa.)

When I set up the 401(k) for my business, I needed to find a broker that allowed me to open a specific type of account. I wanted to go through vanguard, but they didn’t offer what I needed. I went to Fidelity instead. I’ve been very


Continued: Ask the Readers: Which Financial Products Do You Actually Use?

pleased with Fidelity, and have built a good relationship with the fellow who manages my account at the local office. now that vanguard offers solo 401(k)s, I’m not willing to switch.

note: and what do I invest in at Fidelity? I shared this info earlier this year when I wrote about rebalancing.

miscellaneousMy family has always had insurance through the same state Farm office in the town where I grew up. My father was friend with the agency’s founder. When Dad died, the rest of the family kept our policies there. now, though, the agent himself has died and when I went in recently to ask about umbrella insurance, all of the women who used to sit at the desks out front were gone. nobody’s there that I know. In other words: I’m no longer loyal to state Farm. one of my projects for this winter is to research insurance of all types. not only is it likely to save me money, but it’ll also probably give me several blog posts!

the only other major thing would be the software I use to track my saving and spending. I know many people prefer to do this on-line, but I’ve tried a variety of these tools and none of them work for me. I always come back to the desktop version of Quicken, as quirky and cranky as it is. there’s just nothing else that fits the way I work.

Disclaimer: again, I’m not endorsing any of these products. I don’t do endorsements. Instead, I’m trying to share what I do in real life.

now it’s your turn. What financial products do you actually use? Where do you put your money? Who’s your broker? What credit cards do you carry? Who provides your insurance? Do you like these companies? are you looking to try something else? Help gRs readers learn ... §


Source: http://www.crainsnewyork.com/article/20111016/SMALLBIZ/310169986

the biggest hit at last month’s Finovate conference here was Manhattan-based Billguard, which uses crowdsourcing to solve a big consumer headache: unauthorized credit card charges.

It’s one of several companies in new York that are using technology to transform the way financial services are delivered and solve problems that traditional institutions have yet to successfully address. Pervading it all is mobile access: the ability to pay a bill, make a purchase, check balances or transactions, even cash a check via a smartphone.

“Mobile will be the way you bank,” predicted Jim Bruene, the author of the netBanker blog and an organizer of Finovate, a twice-yearly conference on innovative financial technologies. “online will be secondary.”

some upstarts are vying with big banks for ownership of the customer relationship. Banksimple, a mobile middleman launched in Brooklyn, combines checking, savings and debit card services under a single bank card accessible via smartphone. transactions take place behind the scenes at partner banks, but Banksimple is the brand facing the consumer. on the money management side, Betterment offers savings and investing

services, both online and through an iPhone app.

others are addressing areas neglected by bigger players.

secondMarket operates an online platform for trading illiquid securities, displacing bigger intermediaries that had been the main, though inefficient, market-makers for such assets. the 5-year-old company expects to broker $600 million in private company stock alone this year. onDeck capital lends to the credit-starved small business sector, using technology to track a company’s cash flow, while Plastyc is going after teenagers, students and the “unbanked” with a prepaid debit card linked to a savings account and accessible via a smartphone.

In innovative uses of crowdsourcing, cB Insights’ Mosaic service scans social media, blogs and other sites to evaluate the health of private companies, while Billguard combs the Web for complaints about credit card transactions, analyzes its subscribers’ accounts for similar transactions and alerts customers to potential problems.

“It’s brilliant – the kind of thing that makes you say, ‘Why didn’t you do that 10 years ago?’” Mr. Bruene said. §

Going mobile transforms the money business.

By Judith meSSinA

reinvented by Technology: Financial services


Betterment, which is a sort of hybrid planning tool and online investment account.

Last week, Finovate came to new York. not familiar with it? that’s not surprising – many consumers aren’t.

Finovate is a conference, held every spring and fall (and once a year in London) that serves as a launching pad for innovations in banking technology.

sounds like a snoozefest, but it’s actually not. It presents new and updated tools that can help you manage your money better.

You’ve heard of Mint.com? they’ve been there (several times). Prosper, the peer-to-peer lending site? Yup. even I have spent some time up on that stage. I launched my score Builder app, created in conjunction with smartcredit.com, in san Francisco at Finovate last year.

Here’s a look at the developments I think will be most helpful to you in the months and years to come.

online planning adviceYou know I’m all for financial advisers. Research has shown that people who use them save more and invest more for their futures. But I also acknowledge that having another person on your payroll isn’t appealing to everyone.

so if you don’t want an adviser, can’t afford an adviser, or you want to cross-check your adviser’s advice, some of the new online

tools featured at Finovate may fill the gap.

First, there’s Personal capital, which keeps track of your spending, saving and investing. the developers say they’re bringing together “high tech and high touch.” Like other online budgeting tools, this one pulls all of your accounts under one roof. But it also gives you free investment advice and will manage your portfolio for a fee of less than 1%.

next up: Betterment, which is a sort of hybrid planning tool and online investment account. If you’re saving for college, you can sign up with Betterment – a new York-based tech startup – tell the site how much you want to save and when you need the money and they’ll recommend an asset allocation.

You can accept their recommendation or adjust it and start transferring money from your checking account to Betterment securities, which is a broker-dealer (and member of FInRa) that buys exchange-traded funds based on your savings goal and time frame. the service costs between 0.3% and 0.9% each year, depending on how much you invest (there is no minimum balance). §

Source: http://articles.nydailynews.com/2011-09-28/news/30236519_1_budgeting-tools-rewards

By JeAn chAtzky

Financial planning Tools pay off


Investing is not always as simple as focusing on costs alone, much as we might like it to be.

Source: http://www.huffingtonpost.com/jon-stein/the-investment-cost-of-be_b_945579.html

While the stock market swings like a trapeze artist – “for my next death defying trick, I’ll plunge from even greater heights...” – many investors are busy locking in losses, selling low after having bought high. this kind of self-defeating behavior is what behavioral economist Dan ariely would call “predictable irrationality.” It’s not what people would do if they were thinking rationally, but it’s what people do when their emotions get in the way of rational thought. We’ve seen it happen time and again.

David swensen, of Yale’s endowment, wrote last month a commendable piece in the new York timescriticizing this behavior and the “mutual fund merry-go-round,” which does little to protect investors’ long-term interests.

swensen makes a compelling argument for revolutionary change in the mutual fund industry, with aggressive regulation and fiduciary standards for brokers. these are great ideas that would help investors. He also advises individual investors to abandon over-priced, under-performing mutual funds and “take control of their financial destines, educate themselves, and invest in a well-diversified portfolio of low-cost index funds.”

this second part, about individual responsibility, sounds charmingly

idealistic. It’s a little like saying the solution to healthcare costs is for people to eat better and exercise more. no doubt true, but unlikely to happen.

the reality? even with the best of intentions, many of us are still going to panic and chase returns at the wrong time.

to highlight this, consider a simple comparison of two investors:

(1) a typical buy and hold strategy put into place by a “typically irrational” investor

(2) an ideal buy and hold strategy put into place by an “idealistically rational” investor

Let’s say that the typical investor and the ideal investor both start off with the same portfolio: a diversified portfolio of 8 low-cost funds (6 equity, 2 bonds). Both portfolios start with a mix of 75% equities and 25% bonds, the kind of allocation that might be appropriate for a young professional with a long horizon and conservative risk tolerance. equities are 35% international and 65% domestic.

What does the typical investor do?

He buys stocks when they seem to be going up, sells them when they’re going down, and reacts twice as strongly to declines. Let’s

By Jon Stein

The investment Cost of Being human


Continued: The Investment Cost of Being Human

assume that the typical investor moves 10% of his portfolio into stocks for every 20% market increase and 20% into bonds for every 20% market decline.

How much does the typical investor pay?

aside from the fund fees, the typical investor must pay trade fees. Let’s assume an average commission of $10 per trade, four deposits or withdrawals and two trades per year, each time trading three funds. this activity would cost $180 -- or, about 1.80% of a $10K portfolio.

What does the ideal investor do?

He rebalances on a quarterly schedule, or whenever the markets move allocations more than 5% from their target. He contributes money regularly over time, enjoying the benefits of dollar cost averaging and a lower overall cost

for shares over time. He diversifies every penny, re-investing dividends at his set allocation. and, perhaps most important, he remains focused on the long term. He does not buy or sell because of daily market activity. He is a passive investor.

What does the ideal investor pay?

time, discipline, and money for all of the transactions to re-balance, deposit regularly, and automatically re-invest dividends. Let’s assume there was a service that empowered the ideal investor to do all of these rational things without paying transaction or trade fees. Let’s assume that this service charged an annual fee – say 0.90% of assets.

What are the returns?

assuming the rational and irrational behaviors and the costs for a $10K portfolio for the period of December 2003 to July 2011, we’d see the following performance:

meTriC iDeal invesTor TYpiCal invesTor

average 1-year return 5.81% 3.72%

cost 0.90% 1.80%

net performance 4.91% 1.92%

standard deviation 13.2% 11.5%

Maximum 3-month loss (26.7%) (27.8%)


Investing is not always as simple as focusing on costs alone, much as we might like it to be.

Continued: The Investment Cost of Being Human

the analysis shows a striking 3% annual performance gap between the ideal investor and typical investor. In case that seems insignificant, this could mean a performance difference of more than 250% over 40 years, or more specifically, $2.5mm vs. $1mm.

and the underperformance of our “typical investor” may be conservative – studies by DaLBaR, Morningstar, and others shown that the average investor may underperform the funds he invests in by as much as 5% per year.

so what can we learn from this? swensen advocates for low-cost above all. But, cost-obsessed self-directed investors in most cases do worse than those in managed accounts. that’s why we think it’s time for a renewed focus on real human behavior in investing.

Investing is not always as simple as focusing on costs alone, much as we might like it to be. sure, it’s easy to hate on investment advisers and their fat fees. We feel the same way! We hate fat fees too! especially 2-and-20! But the advice and discipline that good investment managers provide – to rebalance, to stay the course in wild times – has real value. §


talk to an Internet entrepreneur or attend a tech conference, and sooner or later (probably sooner), someone talks about being a “disrupter.”

“We’re viewed as a disruptive company, bringing trust and transparency back to public markets,” Barry silbert, founder and chief executive of secondMarket, told the audience at a showcase for startups a few months ago.

“We’re really being disruptive here,” said Josh Rochlin of his company, Xtify, which produces opt-in, location-based advertising and last year won an award for having the best mobile platform.

the techcrunch Disrupt conference, held annually in san Francisco near the heartland of disruption – and lately, in new York city and Beijing – awards prizes to would-be disrupters that have yet to even launch.

It all begs the question: Is all this disruption really possible?

For starters, the definition of disruption is vague, seeming to apply in the minds of entrepreneurs to companies that change the way people relate to each other (Facebook), as well as to companies that change the way

business is done in their segment of the world (secondMarket).

“When you’re at a point when people can’t imagine what it was like before you, you have disrupted things,” says Josh green, president and co-founder of Panjiva, a young Manhattan-based company that, with its technology platform, hopes to transform the way companies buy and sell goods and supplies globally.

of course, it’s often hard to discern which companies are real disrupters until after the fact.

Remember Webvan, a company founded in 1999 that aimed to revolutionize grocery shopping? after spending $1.2 billion, going public and hiring 4,500 people, it fizzled into bankruptcy two short years later.

In new York’s technology community, there are a handful of companies that are frequently referred to as disrupters-in-the-making. among them are Mr. silbert’s secondMarket, which provides a platform for trading illiquid assets; online education purveyor Knewton Inc.; and social media platform Foursquare. they were three of 31 companies from around the world named technology pioneers for 2011 by the World economic Forum.

Source: http://www.crainsnewyork.com/article/20110216/SMALLBIZ/110219910

By Ron LieBeR

The new generation of tech companies is out to change the world. And a sense of mission really does matter – just not for the reasons you might think.

The endless “Disruption” eruption


“It’s very important to be building something that will help people, help them manage their money better”

Continued: The Endless “Disruption” Eruption

venture capitalists, who hear the word “disrupt” a lot, say there’s no shortage of ideas about ways to use technology to change the world. But they don’t matter nearly as much as the ability to follow a business plan.

“We will always take a world-class entrepreneur with great execution skills over a great plan with somebody who can’t execute,” says angel investor David Rose. “there are relatively few ideas that are so brilliant that nobody else has thought of them.”

In fact, said Michael Brown, a general partner at Battery ventures, an investor in Panjiva, “We pass on a lot of investments where the founders are passionate and think they are going to disrupt an industry.”

the fact that the word “disrupter” is used so frequently that it’s losing its meaning hasn’t stopped entrepreneurs from employing it. Disruption seems to be serving as a sort of tech shorthand for the desire to change the world – a common entrepreneurial motivation, and maybe more common in technology than in other industries.

that belief in their mission keeps entrepreneurs upbeat as they slog through months or years of midnight angst, maxed-out credit

cards and dismissive vcs, not to mention mothers who constantly push them to go back to law school.

Jonathan stein, for one, spent two years building a system and overcoming steep regulatory hurdles before he was able to launch Betterment, an online bank and investment company that last year won the techcrunch Disrupt best new York city startup award and a best-of-show award at Finovate, a conference that showcases financial technology innovations.

“It’s very important to be building something that will help people, help them manage their money better,” said Mr. stein.

Disruption potential also helps attract talent. ari Jacoby was able to bring to solve Media many of the people he worked with in his previous venture, a direct-response company that he’d sold to a seattle marketing company.

“When creating a disruptive technology, you become a magnet for talented people who fantasize about doing the same thing,” said Mr. Jacoby, whose solve Media has turned Web captchas—the squiqqly letters and numbers websites use for verification—into a marketing tool for major brands.


For all their enthusiasm about their capacity for disruption, entrepreneurs are also surprisingly down to earth about what it really takes to change the world or even just their small slice of it.

“Being disruptive is moving a pile of money from one place to another,” said Mr. Jacoby. “turning the knob from 1% to 2% is hardly disruptive. You want to crank the knob up to 5 or 6. that’s how we’re going to make money.”

Indeed, disruption can also be code for another age-old motivation of entrepreneurs: making money. one thing that true disrupters have in common is that. §

Continued: The Endless “Disruption” Eruption

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Recent Press Coverage - BettermentRecent PRess coveRage | Page 6 Stein sees platforms like his moving into other areas, such as tax advice and estate planning. Continued: Searching