Name: Insights: Robo-Advisor Betterment Lowers Cost of Investing
Uploaded: 2020-02-25
Duration: 4 min
Description: The company hopes to entice new customers with a high-yield savings product, too. (July 2019)

[MUSIC PLAYING] JEN WIECZNER: Betterment now advises 17.9 billion in assets. It's what some might call a robo-advisor. So this is kind of like set it, forget it investing. You invest, go into ETFs, and it's kind of automatically rebalanced. You are also launching into some new products. So tell us a little bit about that. JON STEIN: Right, so what we've been known for is bringing the very best technology to money management, starting with your investments. Everyone knows that we help our customers make the most of their long-term money. But as we've gone down this journey, we've heard from so many customers that to get them further down there, it would help if we could better manage their everyday cash, their everyday money. And if we can help them save a little bit more, that's super impactful. So we're launching both a savings account and a debit card with a checking account attached that I believe will be the best in market of both of these products. The savings account is going to have what is the highest rate in the market. Today, it's yielding 2.69% which makes it by far the highest yielding savings account. The debit card is going to have no fees at all whatsoever, no minimum balance, no fees on any ATMs, no network restrictions, nothing like that, internationally free ATMs as well. So really market-leading products for all of our customers who are looking to make the most of their everyday cash. One of the things that we've done is really intelligently structure this product. So we've negotiated with multiple banks. We're working with a range of banks on the back end just like we do on the ETF side. We're able to choose the best ETF from multiple providers to give the very best value to our customers. And as an independent advisor, we're always working for our customers. We're always working to make the most of your money. A bank only makes money if they pay you less. We're able to get the very best rates in market and we pass all of that onto our customers. And that I believe is extraordinary value that we can provide as the market-leading smart money manager. JEN WIECZNER: So you're not collecting a spread on this? JON STEIN: That's right. We're just passing all of it to you, the customer. JEN WIECZNER: OK, so whatever the bank is paying you, you're then paying the customer. JON STEIN: Correct. JEN WIECZNER: How are you able to commit to it being the highest? Because I think the highest rate on the market right now is offered by your competitor Wealthfront, but you can commit to it being higher than that no matter what even if the Fed lowers rates. JON STEIN: So interest rates are interesting, and they're set by the Fed-- short-term rates are anyway. And all the banks kind of key off of these. And long-term interest rates also key off where people think short-term rates will go over the long term, naturally. Most of the large banks haven't really raised their rates at all even as interest rates have been coming up. They've just been banking that as profits. We're going out with a market-leading rate above the current Fed rate. And even if the Fed moves their rates, our rate will continue to be above that Fed rate. That's how we've structured the contracts which is unique. It's a commitment that we've made to providing the best in market rate for our customers. ROBERT HACKETT: lot of big companies, a lot of big banks, they've been releasing their own robo-advisors. We've seen Fidelity, Schwab. JPMorgan just recently came out with one. And they've been slashing fees left and right. JPMorgan doesn't charge you, I believe, it's on the ETF fees. It waives those fees. So with all of these fees coming down to maybe zero across the board, how will that affect the fees that you take out in your product? JON STEIN: So we haven't seen zero yet. So I think there's a difference between zero and something. The JPMorgan product is at 35 basis points which is more expensive than ours even after you factor in ETF costs. And remember, we're able to choose the best ETFs from all of the providers out there. We don't have any backdoor deals to make money off of ETFs. Every other competitor in the market is either double dipping by offering you their own funds, which they make more money on and which aren't in your best interest, or they have some kind of payment system that's not in your best interest. We only make money on that advisory fee. And that independence means that we're always acting in your best interest in giving you the very best funds. [MUSIC PLAYING]

Insights: Robo-Advisor Betterment Lowers Cost of Investing

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The company has a high-yield savings product, too.

Robo-Advisor Betterment Lowers Cost of Investing

The company hopes to entice new customers with a high-yield savings product, too.  (July 2019)

Betterment now advises $17.9 billion in assets. It's what some might call a robo adviser. So this is like said it. Forget it, investing. You invest going T APS, and it's kind of automatically re balanced. You are also launching into some new products, so tell us a little bit about that, right? So what we've been known for is bringing the very best technology to money management, right? Starting with your investment, everyone knows that we help our customers make the most of their long term money. But as we've gone down this journey, we've heard from so many customers that get them further down there. It would help if we could better manage their everyday cash, their everyday money and if we could help them, save a little bit more that super impactful. So we're launching both a savings account and a debit card with a checking account attached that I believe will be the best in market of both of these products. The savings account is going to have what is the highest rate in the market today. It's yielding 2.69% which makes it by far the highest yielding savings account, the debit card is going to have no fees at all whatsoever. No minimum balance, no fees on any A T m, no network restrictions, nothing like that. And internationally create Hamza's well, really market leading products for all of our customers who are looking to make the most of their everyday cash. One of the things that we've done is really intelligently structure this product. So we've negotiated with multiple banks were working with a range of banks on the back end, just like we do on the side, right? We're able to choose the best DTs from multiple providers to give the very best value to our customers and as an independent advisor were always working for our customers always working to make the most of your money. A bank on Lee makes money if they pay, you left were able to get the very best rates in market, and we pass all of that on to our customers. And that, I believe, is extraordinary value that we can provide is the market meeting Smart money manager. You're not collecting a spread on this. That's right. We're just passing all of it to you. The customer. Okay, so whatever the bank is paying you, your than paying the customer correct. How are you able to commit to it being the highest cause? I think the highest bid on the market right now is offered by your competitor Well, front. But you can commit to it being higher than that, no matter what, even if the Fed lowers rates. So interest rates are interesting and they're set by the Fed. Uh, short term rates are anyway, and all the banks kind of key off of these in long term interest rates. Also key up where people think short term rates will go over the long term. Naturally, most of the large banks I haven't really raised their rates at all. Even if interest rates have been coming up, they've just been banking that its profits were going out with a market leading rate above the current Fed rate. And even if the Fed moves, their rates are right, will continue to be above that fed rate. That's how we've structured the contracts, which is unique. It's a commitment that we've made to providing the best and market rate for our customers. A lot of big companies, a lot of big banks. They've been re releasing their own robo advisers. We've seen Fidelity Schwab TV. Morgan just recently came out with one and even slashing fees left and right. J. P. Morgan doesn't charge you. I believe it's on tthe e e t f waves those keys. So with all of these fees coming down to maybe zero across the board, how will that affect the fees that you take out in your product? So we haven't seen zero? Yes. Um, uh, So I think there's a difference between zero and something. The GP Morgan product. Is it 35 basis points, which is more expensive than ours, even after you factor in e t f costs. And remember, we're able to choose the best E t f from all over the providers out there. We don't have any backdoor deal to make money off of E. T. F. Every other competitor in the market is either double dipping by offering you their own funds, which they make more money on and which aren't in your best interest. Or they have some kind of payment, you know, system that's not in your best interest. We only make money on that advisory fee, and that independent means that we're always acting in your best interest in giving you the very best fund.