Betterment is a firm that entered the financial services sector in 2010 with a disruptive service.
The offering is a technical one in which technology and automation are used in investing to reduce costs and maxime efficiency.
The company has been a resounding success and is currently the largest independent robo-advisor.
Betterment has harnessed algorithms and developed software that creates a portfolio based on the investor’s answer to questions. The software then automates the ongoing investment process, record keeping, administration and continuous portfolio management.
Since the process is automated and does not require human interaction with a certified professional, costs are kept to a minimum, leaving investors with more money in their pockets.
Compared to the traditional method of using a financial advisor, your money is managed at a fraction of the cost.
Modest Money is an excellent source for a detailed Betterment review.
Does this all sound too good to be true? Before you rush off and subscribe, you would best ask yourself: Is Betterment safe?
Are Robo-Advisors Safe in General?
Since robo-advisors are relatively new in the marketplace, it is best to proceed with caution before committing.
Most robo-advisors operate under a federal fiduciary standard, which means they have a federal duty to serve your best interests. Betterment is no exception.
There is a distinct difference between new tech startups and relatively well-established robo-advisors with massive capital under their management.
Some robo-advisors have partnered with banks which adds a layer of safety.
There have been some failures of robo-advisors, and some of the fallout has not been pretty. However, if you favour the established robo-advisors such as Betterment, the risks are somewhat mitigated.
Jeremy Biberdorf covers whether Betterment is safe in an article in Techbullion, which is well worth a read.
Is Betterment Legit?
Betterment is one of the most extensive investment services with a good reputation in the market and offers services to a vast group of investors.
It has been trading since 2010 and has proven that it is legitimate and cannot be suspected of being a scam. Furthermore, it has more than $33 billion of assets under management and is no longer a tech startup!
What if Betterment Goes Bust?
Some crypto-advisors have gone bust, and the fallout has been a matter of inconvenience more than financial loss so far.
When you manage your investments through Betterment, all the assets and securities in your portfolio are strictly under your ownership.
At no point is your money mixed with any of the company’s money.
You retain complete control over your money, allowing you to add, withdraw, or transfer.
Lastly, Betterment cannot use your money to pay for any of its company costs, and it also has a fiduciary duty to invest for you and act in your best interest.
If you choose to close your account with Betterment, it will simply transfer your funds back to your linked checking account.
If Betterment were to go out of business, your funds would be transferred to another brokerage
of your choice.
Is Betterment Regulated, And Does It Have Insurance?
Betterment Securities is a Member of SIPC. This provides you with coverage of up to $500,000 if your broker loses your financial assets. Since Betterment is a member, you have coverage for your assets. Note that the SPIC does not protect against market changes in your investing account.
Individual Cash Reserve accounts have FDIC insurance of up to $1M, and joint Cash Reserve accounts offer up to $2M in FDIC insurance.
Funds deposited into Checking are FDIC-insured for up to $250K for individual accounts and up to $250K per depositor for joint accounts.
Are There Any Risks My Account Could Get Hacked?
There are always risks that your account could get hacked. Never say never, they say. However, the chances are incredibly slim and significant measures are taken by Betterment to ensure that this does not happen.
Betterment uses the following security measures to keep your data safe:
- Industry-standard Encryption. The platform uses 256-bit SSL encryption for connections between users and the servers.
- Secure Servers. All account information is encrypted and stored behind secure, monitored firewalls in a 24/7 safeguarded facility.
- Systematic Procedures. Betterment maintains continuous encryption, auditing, logging, backups, and data safeguarding.
- Hacker Checks. Betterment frequently runs internal and external security audits.
- Two-factor Authentication. This is the most secure authentication available and provides a second layer of security to access your account.
- Account Ownership Verification. When you link to external accounts, Betterment will verify that you have proper access. This prevents people from opening a Betterment account in your name and moving money out of your bank account.
Are There Any Hidden Fees?
Betterment is totally transparent with its fee structure.
There are no hidden fees.
You can learn about five things to beware of with Betterment.
There is no question that Betterment is a safe bet.
Betterment was the originating pioneer in the robo-advisor space and has become one of the primary choice offerings.
The likelihood of Betterment going bust is very slim and much lower than most of its competition.
Betterment continues to be at the forefront in the robo-advisor space. Its new crypto offering will no doubt add to its pretty extensive portfolio.