Comments on: Betterment: Overpriced simplicity http://blogs.reuters.com/felix-salmon/2010/12/13/betterment-overpriced-simplicity/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: martin66 http://blogs.reuters.com/felix-salmon/2010/12/13/betterment-overpriced-simplicity/comment-page-1/#comment-21894 Tue, 14 Dec 2010 03:32:23 +0000 http://blogs.reuters.com/felix-salmon/?p=6549#comment-21894 Many fee-only investment advisors I know who work exclusively in the index space charge between 50-75bps for their human service. Hell, I charge 75bps and include personalized financial planning. Many brokerages do something similar for next to nothing. While a great idea (and I say this as someone whose business model is threatened by the idea), Betterment is charging WAY too much for what they do.

Curious where and how the client funds are custodied…

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By: jonstein http://blogs.reuters.com/felix-salmon/2010/12/13/betterment-overpriced-simplicity/comment-page-1/#comment-21890 Mon, 13 Dec 2010 23:07:35 +0000 http://blogs.reuters.com/felix-salmon/?p=6549#comment-21890 Jon Stein here, Founder and CEO of Betterment.

We are working to make smart investing more accessible, giving sophisticated investors a set-and-forget alternative to hard-to-manage brokerage and fund accounts, and offering traditional savers a conservative path into investing.

We launched six months ago with a fee of 0.9%, which is less that the average mutual fund fee, less than the average investment advisor fee, and a lot less than the hidden spread banks charge on customer deposits. And we have no transaction fees and no minimums. So, from our perspective, we’re already offering a good deal. However, I agree with you that it could look expensive to some users, since many of them aren’t used to paying asset-based management fees for services like rebalancing, allocation advice, customer service, and ETF monitoring. That’s why soon we’ll be tiering our fee, offering lower fees for higher-balance accounts, since it doesn’t cost us 100 times as much to manage $100,000 as it does to manage $1,000, and seems only fair.

I agree with you that we should offer our customers exposure to international stocks. Our users are all US-based, and so are naturally overweight US. We plan to add international exposure soon, and perhaps a real-estate component or credit component, as well. All of these asset classes are components of the “market portfolio” – and would be represented in the “everything bagel” that you talked about in a previous post. It’s that everything bagel that we’re working toward – it takes time to make it just right.

Thanks for your interest in our new product and please keep in touch. I think you’ll really like where we’re headed.

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By: OnTheTimes http://blogs.reuters.com/felix-salmon/2010/12/13/betterment-overpriced-simplicity/comment-page-1/#comment-21886 Mon, 13 Dec 2010 21:09:14 +0000 http://blogs.reuters.com/felix-salmon/?p=6549#comment-21886 So I click on the Sean Park link to see who he is, and in the second sentence, he uses the words, “super exciting”, in that order. Right away, I would discount any advice this guy has to provide, and I would avoid doing business with any company he is connected to. I just can’t trust someone who says things like that.

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By: BKay http://blogs.reuters.com/felix-salmon/2010/12/13/betterment-overpriced-simplicity/comment-page-1/#comment-21885 Mon, 13 Dec 2010 20:41:29 +0000 http://blogs.reuters.com/felix-salmon/?p=6549#comment-21885 It’s good that Betterment has essentially merged the steps of transferring money and investing it (I do not know of a way to combine both steps with a low-cost account at the various brokerages or fund supermarkets), nut the ETF portfolio is quite appalling considering that their asset allocation is supposed to be part of the selling point.

The lack of other asset classes can be an issue, but more important is the terrible overlaps entailed by their US investment allocations. Russell Mid-Cap owns essentially the 201st-1000th largest equities in the US, which means it overlaps hugely with the S&P 500, rather than providing a complementary mid-cap holding. The DIAMONDS ETF follows the DJIA, which is nearly nonsensical as an index but also overlaps entirely with the S&P 500 (but it gives you that massive IBM overweight you always wanted!). It’s as if they didn’t even put an ounce of research into the methods of the various indexes they chose to fill out the portfolio.

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By: Eastvillagechic http://blogs.reuters.com/felix-salmon/2010/12/13/betterment-overpriced-simplicity/comment-page-1/#comment-21883 Mon, 13 Dec 2010 20:35:24 +0000 http://blogs.reuters.com/felix-salmon/?p=6549#comment-21883 I think Fidelity already does this with their Smartcash account. I use it because they reimburse ATM fees, enabling me not to bank at anything bailed out by US taxpayers, but I definitely remembering them offering it.

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