Recent Press Coverage Contents

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

Recent Press Coverage | Page 2 New Firms Taking Financial Advice Online

By Ruthie Ackerman Jonathan Stein, Even as many financial advisers try The company has about 10,000 to shift upward from the mass- customers, says Stein, and over founder and CEO affluent segment to a wealthier $20 million in assets under of Betterment, sees clientele, some new Internet-based management. start-ups are aiming their services When a client signs up with online advisory at the not-so-rich. Betterment, they fill out a platforms as the While online investment platforms questionnaire about their age, answer for the aren’t new, such fledgling services savings goals, income and timeline, as Wealthfront and Betterment are with scenarios to determine their “99% of everyone trying to distinguish themselves risk tolerance. Based on their with new programs to provide responses, Betterment makes in this country” with advice electronically. The recommendations using two less than $500,000 investment minimums are as low as ETF baskets: a basket of stock- $5,000 – or even nothing at all. focused ETFs carrying higher return to invest. expectations but also higher risk, Generally speaking, they seek and a lower-risk basket of bond clients who are satisfied with an ETFs. The client is then free to adjust online, largely automated process their allocation between the baskets. and who don’t feel the need for Accounts are rebalanced quarterly, face-to-face contact with an or sooner if holdings shift more than adviser. As the public gets more 5% from the target allocation. That, comfortable carrying out all Stein says, “almost makes up for our kinds of activities online and as fee in and of itself.” traditional advisers pursue the wealthy, this new market should “By automating our whole process, grow. Jonathan Stein, founder and we’re able to serve even $2,000 CEO of Betterment, sees online customers,” Stein said. advisory platforms as the answer Betterment currently focuses on for the “99% of everyone in this investment services, but Stein country” with less than $500,000 see platforms like his moving into to invest. other areas, such as tax advice and Online brokerage firm Betterment, estate planning. based in New York City, has no Andrew Rachleff, co-founder investment minimum and charges of Wealthfront, believes online a 0.9% fee for those with up to financial platforms could reshape $25,000. At the top of its sliding the advisory industry the way scale, the fee drops to 0.3% for travel sites like Expedia and Orbitz those with $500,000 and above.

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

Recent Press Coverage | Page 3 Continued: New Firms Taking Financial Advice Online

transformed the travel industry platforms in that clients interact when they eliminated the need to online with a financial adviser, who use travel agents. Clients are able is assigned to them and offers to get a tailored portfolio through individualized investment portfolio software that is “accessible and management. These advisers can simple enough for the consumer to be reached via email, phone, video use directly, eliminating the need and through the chat function on for a human being,” he says. the site.

“When you get rid of the human Launched in September, Personal being, you get rid of much of the Capital said the firm has close cost without getting rid of any of to 5,000 clients with an average the rigor,” he says. managed account size of about $300,000, a spokesman says. Wealthfront, based in Palo Alto, Calif., has a minimum investment One challenge for the firms is of $5,000 and charges no getting investors, shaken by advisory fees on a customer’s the 2008 crisis, to be willing to first $25,000 under management. experiment with new approaches It charges 0.25% on assets over to investing. Even in the best of $25,000, including the cost times, “financial services is not of monitoring and periodically a place where people take a lot rebalancing the portfolio. of chances on a firm that they’ve never heard of,” says Katharine Another online advisory platform Wolf, senior analyst at Cerulli, a is Personal Capital, which charges research firm specializing in the a 0.95% fee to manage the first financial services industry. “The $250,000 in investable assets biggest hurdle we see for these and scales down the more money platforms is getting people to the client has to invest. But the trust them.” § 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

Recent Press Coverage | Page 4 Searching for Financial Advice Online

By Ruthie Ackerman The company has Even as many financial advisers try When a client signs up with to shift upward from the mass- Betterment, they fill out a about 10,000 affluent segment to a wealthier questionnaire about their age, customers, says clientele, some new Internet-based savings goals, income and startups are aiming their services risk tolerance. Based on their Stein, and over $20 at the not-so-rich. responses, Betterment makes recommendations using two million in assets While online investment platforms exchange-traded-fund baskets: under management. aren’t new, such fledgling services a basket of stock-focused ETFs as Wealthfront and Betterment are carrying higher return expectations trying to distinguish themselves but also higher risk, and a lower- with new programs to provide risk basket of bond ETFs. The advice electronically. The client is then free to adjust their investment minimums are as low as allocation between the two baskets. $5,000 – or even nothing at all. Accounts are rebalanced quarterly, Generally speaking, they seek or sooner if holdings shift more clients who are satisfied with an than 5% from the target allocation. online, largely automated process That, Stein says, “almost makes up and who don’t need for face-to- for our fee in and of itself.” face contact with an adviser. As “By automating our whole process, the public gets more comfortable we’re able to serve even $2,000 carrying out all kinds of activities customers,” he says. online and as traditional advisers pursue the wealthy, this new Betterment currently focuses on market should grow. Jonathan investment services, but Stein Stein, founder and CEO of sees platforms like his moving into Betterment, sees online advisory other areas, such as tax advice and platforms as the answer for the estate planning. “99% of everyone in this country” Andrew Rachleff, co-founder with less than $500,000 to invest. of Wealthfront, believes online Betterment, based in New York, financial platforms could reshape has no investment minimum and the advisory industry the way charges a 0.9% fee for those with travel sites like Expedia and Orbitz up to $25,000. At the top of its transformed the travel industry sliding scale, the fee drops to 0.3% when they eliminated the need to for those with $500,000 and above. use travel agents. Clients are able The company has about 10,000 to get a tailored portfolio through customers, says Stein, and over $20 software that is “accessible and million in assets under management. simple enough for the consumer to

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

Recent Press Coverage | Page 5 Continued: Searching for Financial Advice Online

Stein sees platforms use directly, eliminating the need financial adviser, who is assigned for a human being,” Rachleff says. to them and offers individualized like his moving into investment portfolio management. “When you get rid of the human other areas, such These advisers can be reached via being, you get rid of much of the email, phone, video and through as tax advice and cost without getting rid of any of the chat function on the site. the rigor,” he says. estate planning. Launched in September, Personal Wealthfront, based in Palo Alto, Capital, based in Redwood City, Calif., has a minimum investment Calif., has close to 5,000 clients of $5,000 and charges no advisory with an average managed account fees on a customer’s first $25,000 size of about $300,000, a under management. It charges spokesman says. 0.25% on assets over $25,000, including the cost of monitoring One challenge for the firms is and periodically rebalancing the getting investors, shaken by portfolio. the 2008 crisis, to be willing to experiment with new approaches Another online advisory platform to investing. Even in the best of is Personal Capital, which charges times, “financial services is not a 0.95% fee to manage the first a place where people take a lot $250,000 in investable assets of chances on a firm that they’ve and scales down the more money never heard of,” says Katharine the client has to invest. But the Wolf, a senior analyst at Cerulli, a minimum to invest is $100,000. research firm specializing in the The company’s founders include financial-services industry. “The Bill Harris, the former chief biggest hurdle we see for these executive of PayPal and Intuit. platforms is getting people to trust It is different than some of the them.” § other online platforms in that clients interact online with a

Recent Press Coverage | Page 6 Tech Startups Give Wall St. Run For Its Money

BY PHYLLIS FURMAN Goodbye, Wall The economic meltdown has didn’t have to be that hard and been rough for the city’s financial inaccessible. Founding a startup Street. Hello, services employees and with a new created the best vehicle for round of layoffs in the making, the genuine change. Silicon Alley. road ahead is looking grim. Q Are more financial types making But for many young Wall Streeters, the leap? New York City’s bustling tech startup scene is providing jobs — A Five years ago, no one in New and a shot at creating their own York was thinking about startups. fiefdoms. Today, it’s a common conversation in every social circle, at every Jon Stein, 32, is one of those who dinner, and the Wall Street types I made the successful leap. know are curious about what it’s like to work for Betterment and The former senior consultant at other startups. First Manhattan Consulting Group launched Betterment.com, an Many are disillusioned with their online brokerage firm jobs, and want to build a better way. This is especially true for the Based in Soho, he now has 13 younger generation. employees, six of them from Wall Street. The site, which went live in Q Are the skills transferable? What May 2010 has 11,400 users and is does Wall Street bring to startups? growing at a rate of 20% to 30% a month. A Betterment needs smart people to continue to deliver on Here is what he had to say: our promise to customers — and bankers are smart. Their analytics Q Why are Wall Street bankers skills and ability to get things moving into the tech startup world? done can be applied to helping A Wall Street no longer holds the Betterment grow and deliver allure that it used to. Many Wall smarter investments. Streeters, corporate lawyers, and Q What about pay? What do people the like, are sacrificing salary in the give up? pursuit of more meaningful careers. A People sacrifice a lot. Typically half They want to be building their salary or more. Payout odds productive, next-generation are slim. Mostly, this is about doing products like Betterment. In my something satisfying and making a career as a consultant to banks, difference versus making a fat salary I saw an industry that needed but feeling like a cog in the wheel. § serious reforming. Investing

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

Recent Press Coverage | Page 7 The Financial Institutions Banking On Occupy Wall Street’s “Move Your Money Day”

By Anya Kamenetz Demonstrators plan This Saturday, Nov. 5, is being New Resource Bank, a small bank promoted by several Occupy-Wall- in San Francisco with extensive to withdraw money Street affiliated groups, including green initiatives that invests in from big banks on MoveOn.org, as Bank Transfer cleantech and other sustainable Day, aka Move Your Money Day, a companies, last year became the Saturday. A handful day for consumers to show their first publicly traded company to file dissatisfaction with bailouts and as a B-Corp, incorporating triple- of credit unions and billions in profits by cutting up their bottom-line ideals into its charter. other progressive Citibank or Bank of America debit They’re running a “Move Your cards in favor of a nonprofit credit Money” campaign, where those institutions see it union or community bank. who join by November 15 will be as an opportunity. rewarded with a $25 donation to In recent weeks, angry protesters one of several nonprofits. “From our But are they really have surrounded bank branches normal 25 accounts a week, we’ve any better than the on both coasts. Some account been seeing 15-20 new accounts holders were even arrested while a day,” says CEO Vince Siciliano. banks? trying to close their accounts – “People are coming in and saying, not a pleasant customer service I’ve been thinking about this for experience on either side of the a long time, and this Occupy Wall equation. Some even credit the Street and Move Your Money Day movement with Bank of America’s have pushed me off the wall of recent reversal on debit card fees. inertia.”

But one company’s PR nightmare And recently just blocks from is another’s business opportunity, Wall Street, three self-dubbed particularly for those in the “disruptive” financial services financial industry who are trying companies held a media event to break from the pack by offering titled “Beyond Occupy Wall Street: idealism, integrity, and lower costs Creating Industry Change for the as selling points. Credit unions Greater Good.” “Our offices are across the country are adding just a few blocks away from Liberty Saturday hours for the 5th and Plaza,” said Jon Stein, CEO of reaching out to potential switchers Betterment.com, who organized via social media. CUNA, the trade the event. “We took a couple association of the nation’s credit people from the office to go down unions, has created a T-shirt to and walk around. I was surprised promote Bank Transfer Day, and by the focus – many people were the Credit Union League of New talking about the same things we Jersey is running radio ads. were interested in when we started

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

Recent Press Coverage | Page 8 Continued: The Financial Institutions Banking On Occupy Wall Street’s “Move Your Money Day”

“I had to make the Betterment.” Stein used to consult Fast Company spends a lot of for large banks, and witnessed space covering new financial case internally that lots of bad behavior, like a bank in companies that claim to do things this was something Ohio that was purposely targeting differently. Often, like Betterment poor customers with low balances, and PerkStreet, these startups that resonated reaping 80% of its checking rely on technology to cut costs account profits from overdraft and and pass the savings along to with me and that I other fees; and a broker who took customers. But it remains to be believed we should the opposite side of every trade seen whether having principles that reached his desk, with the can be profitable under current do something.” result that 90% of his customers regulations. A cautionary tale is lost all the money in their accounts. that of Amalgamated Bank. The He started Betterment as an online only union-owned bank in the place for ultra-low-cost, ultra- United States, it’s been drawing simplified investment management: lots of press, since it’s where the Bundles of exchange-traded funds Occupy Wall Street movement itself come in just two flavors, stocks has deposited over $500,000 in and bonds, with low fees ranging donations. But it’s also under FDIC from 0.3 to 0.9%. At the press investigation for falsifying how it conference, Stein, along with books delinquent loans to spruce Jason Henrichs of online rewards up its balance sheet – exactly the bank PerkStreet Financial and kind of bad behavior that the folks Yaron Samid of antifraud service at Liberty Plaza are protesting. § 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.”

Recent Press Coverage | Page 9 Breaking up the Bank

By Jeremy Caplan It may take some Americans love to hate their U.S. companies, as noted by a recent banks. Alongside airlines, phone piece on The Atlantic’s website, but time, but the companies, and cable providers, Buffett’s betting on a turnaround. banks rank at the bottom when it American retail As the country’s biggest bank, comes to pleasing the customer, with $2.26 trillion in assets, BOA banking industry is according to the American won’t shrivel away anytime soon. Consumer Satisfaction Index. primed for a radical And given that BOA’s peer group shift. A growing pool Some banks generate nearly half includes 107 banks with $10 their operating revenue from fees billion plus in assets, the banking of financial upstarts – think overdraft fees, minimum establishment won’t be easy to balance requirement fees, ATM shake from its comfortable perch are poised to begin fees, transfer fees, even fees for atop the financial sector. Not yet, challenging the requesting paper statements. at least. Add confusing fine print and poor It may take some time, but the banking status quo. customer service, and the result is American retail banking industry that just 37 percent of Americans is primed for a radical shift. A are satisfied with their primary bank, growing pool of financial upstarts according to an Ath Power survey. are poised to begin challenging Banks aren’t alone in generating the banking status quo. Next frustration. Retail investing bewilders week, more than 60 consumer consumers. In a country where financial start-ups are demoing at financial literacy means knowing FinovateFall 2011. They’ll present LeBron James’ salary, concepts like new sites, services and products balanced asset allocation and risk that aim to improve upon – or diversification confuse consumers undercut – traditional financial who want fewer investing options, services. We’re not just talking not more. The investing public wants snazzier ATM receipts. The aim is clearer guidance on how to meet better service, better rates and their goals (saving for retirement, better digital tools. Like the postal paying for college), not more fees service, financial services are ripe and fine print. for disruption.

Despite broad dissatisfaction with BankSimple, one of the companies status quo institutions, Warren presenting next week, is set to Buffett recently deposited a $5 launch by the end of the year. billion vote of confidence into the Unlike traditional banks, which coffers of Bank of America, the tend to pile up fees, cut back on country’s biggest bank. BofA may service and throw up byzantine rank among the 20 most despised sites, BankSimple promises to be Source: http://www.thedaily.com/page/2011/09/15/091511-biz-banks-column-1-2/

Recent Press Coverage | Page 10 Continued: Breaking up the Bank

“Traditional financial service-focused, easy to navigate, with Betterment, reducing the odds and smart about technology. It of picking individual lemons that institutions offer a won’t charge overdraft or other sink your portfolio. fees, it’ll help you track your terrible customer Stein cites excessive trading fees savings and spending goals, and and bewildering complexity as experience. They’re give you one-to-one help from evidence that industry giants real people via Skype, iChat, email are out of touch with consumers. designed to take or the phone. The start-up has “Traditional financial institutions advantage of us already amassed more than $13 offer a terrible customer million in venture capital and a experience,” he said. “They’re rather than to help waiting list of more than 50,000 designed to take advantage of us customers eager to switch away us get more out of rather than to help us get more out from traditional banks. our money.” of our money.” Betterment, which launched a year Building a strong pool of financial ago at the TechCrunch Disrupt industry upstarts will take time conference, focuses on simplifying because of regulatory hurdles. investing and a streamlined Establishing a new firm is costly alternative to stagnant, zero-interest and it takes several years to apply savings accounts. Founder and CEO for licenses and meet requirements, Jon Stein said 8,000 customers Stein said. “The barriers are have already signed up, and that tremendous. That’s why you don’t number is growing by 20 percent see the number of start-ups in each month. The management fee this sector as you do building new ranges from just 0.3 to 0.9 percent. social networks or photo-sharing You can deposit your six-figure applications.” retirement savings if you’d like, but many people start with a $1,000 As newcomers like Betterment deposit and gradually quintuple and BankSimple gain traction that as they grow accustomed to by demonstrating demand for investing sans broker. customer-centric financial services companies, we’ll see more start- It’s a super-simple alternative for ups following suit. That’ll lead those confused by complex mutual either to a hastened response funds or retail investment pitches from the banking giants, or a with tiny print and jumbo charges. long-run reshaping of the industry Rather than paying for the pleasure landscape. Buffett’s $5 billion may of having someone take your money be safe in the near term. Beyond and invest it dart-style in a flavor- that, banking may be in for a of-the-month mutual fund, you bank blizzard of change. § on the broad success of the market

Recent Press Coverage | Page 11 Betterment Adds International Investments to Portfolio

By Ann Carrns As of last month, Betterment, a simplified investment All new clients have the service for investors who aren’t international funds, while existing Betterment’s multimillionaires, has expanded its clients are being transitioned into portfolio includes portfolio to include international the new holdings over a period of stock funds. months. international In a recent Your Money column Does Betterment’s addition of exposure through about efforts to serve smaller international investments make the the addition of two investors, Ron Lieber credited service more attractive to you? § Betterment, which invests in a new exchange- mix of exchange-traded funds, for its openness to serve anyone, traded funds: regardless of how much they Vanguard Europe have to invest. But he warned that a glaring drawback was that Pacific and Betterment’s portfolio lacked Vanguard Emerging international stock funds–a risky choice given the state of the Markets. 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.

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

Recent Press Coverage | Page 12 Investment Advice for Small Fry

By Ron Lieber Jon Stein is the chief executive of Betterment, a firm that is notable for almost radical simplicity and its Most of us have no business Someone will make a lot of money insistence that managing our own investments. by coming up with a streamlined someone with just way to serve these investors, and We buy when prices are high two services called Betterment and $1,000 is welcome. and sell just as the markets are Flat Fee Portfolios are among the bottoming out. Or we cannot bring latest to try. ourselves to sell investments that have done well to buy more of Betterment is notable for an what hasn’t. Or we buy on impulse, almost radical simplicity and its picking up individual stocks of insistence that even someone with companies we like and think we just $1,000 is welcome. The Flat understand without much regard Fee Portfolios model is built around for how they may fit into an overall a fixed price for advice no matter investing strategy. how big your portfolio is – a far cry from the usual method of having Some of this behavior springs customers pay, say, 1 percent of from a red-blooded insistence their assets each year in fees to that we are all above average and the adviser. can easily pick stocks and other investments that will outperform Neither one may have cracked the market. the code, but they are different enough from most of what’s come But our collective failure is also a before to be worth a look for result of the fact that we are literally those of us who recognize that we left to our own devices. Advice from are constitutionally incapable of a human being is sorely lacking managing our own money. when we sign up for work place retirement plans, and there is a First, a bit more about Betterment, severe shortage of moderately priced which began operations last year. financial advisers who will help Once you decide how much to non-millionaires and put customers’ invest, you have only one choice to interests ahead of their own. make: the amount of risk you want

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

Recent Press Coverage | Page 13 Continued: Investment Advice for Small Fry

to take on. Once you’ve figured portfolio for you. So Betterment that out, there is just one portfolio is betting that enough people are to invest in (a mix of exchange- willing to turn everything over to traded funds, which are index-fund its service and will pay for the like investments that Betterment privilege. makes in United States stocks and But Betterment has two glaring government bonds). weaknesses. First, there are no The company lets anyone use individual retirement accounts the service, which is admirable available, so you can’t set up a in an industry where many Roth I.R.A. there or roll over money financial advisers won’t work from a retirement plan you have with you unless you have more at a former employer. Second, than $500,000 or $1 million, and the portfolio has no international even “discount” brokers may not stock funds, a risky choice given manage your money for you unless all the questions about the you meet some kind of account American economy. Betterment’s balance minimum. chief executive, Jon Stein, says the company will fix both of these Betterment is pretty costly, on problems this year. a percentage basis, for people with less than $25,000, though. He remains insistent, however, Customers pay 0.9 percent in about sticking to just one blueprint annual fees, which the company for customers’ investments. “We takes out of their investment don’t want to break that glass box account. The fee declines in three and start having multiple portfolios,” incremental tiers from there. For he said. “People will start picking any money beyond $500,000, the things that have gone up the most fee is 0.3 percent. recently, and that is a terrible choice. We want to be simple.” Betterment’s portfolio consists of six United States stock funds Flat Fee Portfolios offers a few and two bond funds, which invest more investment choices and even in short-term Treasury bonds and simpler pricing than Betterment. inflation-protected bonds. The It’s also aimed at more affluent company makes its portfolio public customers, people who have six on its Web site, so there is nothing figures in money to invest but don’t stopping you from mimicking it on have the kind of broader financial your own. The company charges no planning needs that might merit an trading fees beyond its annual fees, adviser who charges more money. however, and it rebalances your

Recent Press Coverage | Page 14 Continued: Investment Advice for Small Fry

Betterment is The fee is $199 a month if you year, and you call me wanting to have more than $250,000, and take $100,000 to pay off your betting that enough it does not grow no matter how mortgage, the advice you are people are willing much money you have. If you have getting is conflicted,” he said. less than that, you can enroll in That is not how pricing usually to turn everything a different program with fewer works when advisers charge annual choices and less service for fees to customers. A financial over to its service $129 a month. and will pay for the services software company called At the $199 level, you can choose PriceMetrix recently surveyed its privilege. among three types of portfolios. clients who charge annual fees, There is one made up of actively from Morgan Stanley on down managed mutual funds, an indexed to smaller firms. It found that 37 portfolio of passively managed percent of individual advisers funds like the one that Betterment were charging management fees offers, or a portfolio that is more of more than 1.5 percent a year tactical and temporarily moves on portfolios of $250,000 to money to the sidelines when the $500,000 that have an even mix markets get crazy. A real human of stocks and bonds. Meanwhile, adviser reviews your investments just 23 percent levy fees of less with you twice a year, and Flat than 1 percent. Fee does the trades for you. At “There is no typical price,” said the $129 level, the portfolios are Doug Trott, the president and chief simpler and fewer in number and executive of PriceMetrix. “It’s a you have only one meeting a year. well-supplied industry, but it’s not Mark A. Cortazzo, Flat Fee’s very competitive.” founder, named the service after Whether Betterment and Flat Fee the price offering in an attempt to Portfolios can afford to stay in hint at its conflict-free nature. Like business in the lower pricing tiers a growing number of investment is an open question. Betterment advisers, Flat Fee earns money has about 4,000 accounts but the only from customers, not from average balance is roughly $5,000 commissions from mutual fund right now. It’s hard to imagine that companies. it will ever make money unless it But even that is no guarantee of a attracts many more people. lack of conflicts. “If you have half a million dollars and I’m charging you 1.5 percent of your assets each

Recent Press Coverage | Page 15 Continued: Investment Advice for Small Fry

Mr. Cortazzo, of Flat Fee Portfolios, Meanwhile, Vanguard, Fidelity, said he had already made Charles Schwab, TD Ameritrade investments in the six figures in and E*Trade all have their own staff and his Web site, and he offerings. If you’re considering any figured he would be spending of them, check the fees and ask more than he made for at least 18 whether there’s an investment months more. His financial planning minimum, whether they will trade firm, Macro Consulting Group, has and rebalance for you and whether $500 million under management; they’re using the very best funds profits from that line of business or ones that the firm has created. allow him to invest in the Flat Fee (As usual, links to every service I’ve part of the operation. mentioned are in the online version of this column.) But he says he believes that his challenge is more about Again, it’s not at all clear which streamlining his service and of these services, if any, is built efficiently finding his target to last. But their proliferation is a customer than it is about welcome development at a time competition. “Most small advisory when the number of advisers and firms don’t have the staying power institutions interested in helping to get to critical mass to make this people with smaller balances profitable,” he said. A“ nd the big continues to shrink. financial services firms who could “A whole segment of customers do this would cannibalize their is being dislocated,” Mr. Trott existing business by coming up said. “And there will be new with model-based solutions with opportunities for companies to lower costs.” satisfy their demands.” § That said, there are some similar services. I’ve written about MarketRiders and AssetBuilder in the past. Folio Investing is another one worth considering.

Recent Press Coverage | Page 16 Mint Teams Up with Betterment to Boost Revenue

By Jeremy Quittner Intuit Inc.‘s financial The Intuit site has long received “Once I have accumulated assets or much of its revenue from referrals have $20,000 or something in my management for basic financial products such savings account, I will start to think website, Mint.com, as credit cards through its Ways to if I should do different things with Save service. Intuit has generated it,” said Bill Doyle, vice president is partnering with more revenue by integrating Ways and principal analyst at Forrester to Save with its other products Research. the investment site since buying Mint in 2009, but the Betterment, a New York company, Betterment in the basic business model for Mint itself launched its online investment has remained largely the same. service in May. Its model for hopes of making a Analysts said the Betterment deal investing mirrors Mint’s model for might change that. better Mint financial management in that it Specifically, Betterment might strips away the complexity in a way address a pain point for Mint: that that appeals to consumers age 25 most of the referral revenue it to 35, analysts said. generates has been through cards Jon Stein, Betterment’s chief and other accounts pitched when executive, said his company’s users sign up. goal is to make investing simple “Betterment gets the visibility and smart, and that the website, they need, and the traffic,” said which vets exchange-traded index Stessa Cohen, a research director funds for its investors, helps new at Gartner Inc. “Mint is looking investors perform better than they for transactions that will generate would by choosing index funds on revenue.” their own.

Mint’s founder, Aaron Patzer, told In late December, Betterment American Banker in 2009 that “we began offering its service free tend to make most of our revenue for the first six months to anyone in the first month … you’re only who was referred by Mint. Further, going to switch your credit card “we are launching a new tiered so often.” Patzer and other Mint fee structure that we have been executives were not available to piloting with Mint.com,” Stein said, comment for this story. replacing his site’s flat fee of 1%.

The relationship with Betterment Doyle said a 1% fee is high, might help Mint nudge its seasoned particularly for large investments. users into investing, analysts said.

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

Recent Press Coverage | Page 17 Continued: Mint Teams Up with Betterment to Boost Revenue

Jon Stein, Betterment’s new structure Stein said Betterment has charges 0.9% for portfolios of thousands of clients and assets Betterment’s chief under $25,000; 0.7% for portions under management of “several executive, said his of balances up to $100,000; million” dollars. 0.5% for portions of balances up “PFM providers are moving company’s goal is to $500,000; and 0.3% after beyond presenting static account that. Betterment requires no information, and they are getting to make investing minimum balance. simple and smart. more transactional and more Betterment asks new investors operational by linking” to sites such questions about their risk as Betterment, said Ron Shevlin, a tolerance, and according to the senior analyst at Aite Group LLC in level of risk, assigns assets into Boston. either its stock or bond fund He said that the fee structure portfolios, both of which are based made sense for young investors, on exchange-traded index funds. particularly as the tacit message Stein said Intuit would get revenue from the mainstream brokerages for the successful leads it generates. is that they would rather deal with For its part, “it’s a great way for us people with more assets. § to promote” Betterment, he said.

Recent Press Coverage | Page 18 Betterment Raises $3M to Give Casual Investors a More Accessible Portfolio

By Matthew Lynley The newest round Online investing service The New York, N.Y.-based Betterment announced today that company’s founders invested of funding will be it has raised $3 million in a first $640,000 to pay staff, create used to expand the round of funding led by Bessemer technical infrastructure, and build Venture Partners. capital reserves required by the size of the team SEC. It launched at TechCrunch Betterment lets users transfer Disrupt earlier this year and is and prepare for new money to their accounts and already managing millions of product launches decide how much of it they want dollars in investments. The newest invested in the stock market and round of funding will be used to later this year. government-backed treasury expand the size of the team and bonds. Stocks are typically a prepare for new product launches little more volatile in the short later this year. term, whereas treasuries have a guaranteed yield but generate a Betterment also launched a new much smaller return. The idea is to government-backed treasury let users pick just how much risk bond portfolio that is supposed to they want to take on their savings. be less sensitive to interest rate changes. When the economy turns The company, which is an SEC and south, many investors typically FINRA licensed investment advisor, flock to treasuries in order to chooses which stocks to buy and keep their money safe. That drives puts the individual securities into interest rates down. The newest each user’s account. Betterment addition to its investment portfolio does not charge its customers is likely a response to the current a per transaction fee like most investment environment, which is online brokerage accounts. Instead, at best a complete snafu. § 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.

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

Recent Press Coverage | Page 19 Congratulations! You’ve Closed Your First Round. Now What?

By Schuyler Brown Closing a first round For an entrepreneur, closing a team will spend way too much time first round of financing is a major in the office, and the space itself of funding is a major milestone. But what are you will become a key component of supposed to do next? After all, you company culture. That means more achievement. But won’t actually see any money for than buying a ping-pong table. you won’t see any two, or maybe three months, while Instead, ask yourself if the space is you wait for the legal diligence to accessible by public transportation. cash for months. be completed. Is there a comfy couch to crash on for the inevitable all-nighter? What do you do Still, there’s plenty you can do to until then? move forward while your check is In New York, “the biggest lie going stuck in limbo, say Jon Stein and Eli is square footage for commercial Broverman, co-founders of online space,” says Stein. “Every listing investment platform Betterment. inflates square footage, sometimes by as much as 100%. You have to Recruit. “It takes three months to take out the tape measure and hire a strong candidate, so get out start negotiating a reduction [in there the day you close your term rent].” In the end, Betterment found sheet, if not sooner,” says Stein. He a building they liked and worked became a self-professed LinkedIn directly with a previous tenant to junkie, trying to identify potential secure the space before it went on hires. While he didn’t hire any the market. When the space came of his LinkedIn finds, those early up for lease, Jon didn’t wait for his interviews helped clarify the ideal investors’ checks to clear. He used background and skill set for each his own credit to get that first lease. role. Once the team identified the appropriate skills, they screened Choose your benefits. These take the list for the best cultural fit. A“ a while to come online too, and culture is built organically from the now that you’ve got funding, your people around you,” says Stein. employees are going to expect “Early hires have to want to build benefits like health insurance. a company, not just work at one. Betterment has a younger work In particular, they have to believe force, so the company chose a in what you’re doing. We ask each high deductible health insurance candidate ‘Why Betterment? Why plan. That can be a good option for not another startup?’” those who don’t expect to need much medical care. Your employees Find office space. “You need might fit a different profile, but it’s space that employees actually still important that to have a good want to spend time in, where “fit” between your employees and they’re comfortable,” says Stein. “It your benefits. § will pay long term dividends.” Your http://www.inc.com/schuyler-brown/congratulations-youve-closed-your-first-round-now-what.html

Recent Press Coverage | Page 20 Bessemer Backs Better-Savings Startup Betterment with $3 Million

By Eric Schonfeld Since opening up Betterment, a financial savings Since opening up earlier this startup which launched last May year, the service has attracted earlier this year, at TechCrunch Disrupt, raised $3 thousands of customers and the service has million in a series A financing led millions of dollars in savings. by Bessemer Venture Partners. The Annualized returns are tracking the attracted thousands Anthemis Group, Thomas Lehrman, S&P 500. Betterment will use the and other angel investors also new capital to hire more engineers of customers and participated. and roll out new products, such millions of dollars as an IRA. Expect more game Betterment aims to disrupt the mechanics to be introduced into in savings. financial savings industry by letting the service as well which will customers invest their savings reward people for making smart in a carefully-selected blend of financial moves. § 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).

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

Recent Press Coverage | Page 21 Former Banking Consultant Jon Stein Founds Betterment.com, Advises Investors on Smart Finances

BY PHYLLIS FURMAN “There wasn’t When John Stein was in his slider tool bar, you indicate your twenties and working as a banking risk tolerance. Based on that, anything out there consultant in the city, his friends Betterment allocates your dollars that made it easy would often hit him up for some between two investment baskets: free advice: How should they exchange traded funds invested in and accessible,” said manage their money? stocks and U.S. Treasury bonds.

Stein, 31. One option was to hire an And there’s no need to pick those investment advisor - but these ETFs, which are passively managed, He decided he could money pros often require a low-cost funds that track a variety do better. minimum investment, at least of indexes. Betterment has chosen $100,000 - and generally charge six stock funds that it believes an annual fee of 1% to 2% of reflects the broad U.S. market, as assets under management. well as two lower-risk bond funds.

Another was to research Want to know how other people investments and manage them on your age invest their money to their own, something his friends help you choose your allocation? didn’t have much time for. Betterment offers tools for that, too.

“There wasn’t anything out there Fees range from 0.3% to 0.9%, that made it easy and accessible,” depending on the size of the said Stein, 31. portfolio. The bigger your investment, the lower the fee. He decided he could do better. There are no minimum investment Last May, Stein launched requirements – you can start with as Betterment.com, a new spin on little as $10 – no trading or transfer online brokerages that won top fees and no holding periods. honors last year at Finovate, Rebalancing - buying and selling a conference that showcases funds so that you keep your target financial technology. allocation - is done automatically, Patterned after online banking at no charge. pioneer ING Direct, Betterment’s The online broker is registered goal is to take the hard work out with the Securities and Exchange of investing. Commission and is a member of You can set up a Betterment the Securities Investor Protection account that is linked to your Corp., meaning accounts are checking account in a matter insured up to $500,000 should of minutes. Using a simple Betterment go under.

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

Recent Press Coverage | Page 22 Continued: Former Banking Consultant Jon Stein Founds Betterment.com, Advises Investors on Smart Finances

But unlike a savings account, a “One huge plus: no investment Betterment account is invested, minimums,” Losey said. meaning you run the risk that it Others said there are ways to do could go down in value. what Betterment does and pay Betterment isn’t for sophisticated less. do-it-your-selfers who can scout Scott Brewster, a fee-only certified investments on their own and financial planner in Park Slope, would likely find less expensive Brooklyn, noted that a number ways to trade. Instead, its target of brokerage firms, including is people who prefer ease and Vanguard and Fidelity, sell a large guidance. group of ETFs without charging a “It’s for someone who is very dime in commission. smart, who is too busy to manage “The fact that (Betterment’s) their investments,” Stein said. “The trading costs are for free is majority of the population would not that big a deal since many rather do other things with their brokerages have free trading of time. It is more of a ‘set it and ETFs,” Brewster said. forget it’ account.” For people who want a diversified The median age of Betterment’s portfolio, but wouldn’t know how to customers is 33 and the average assemble one, there are cheaper account is worth $5,000. So far, alternatives, namely target date more than 2,000 investors have retirement funds, Brewster added. signed up with the newfangled online broker, which has yet to “Personally, I would rather small ramp up its marketing. retail investors go with a good target date fund or life cycle fund Even so, certified financial planner that is well diversified and has fees Bill Losey wondered why someone of around 0.2%,” Brewster said. would spend 0.9% a year on “That is a lot more cost efficient Betterment, when they could spend than paying a 0.9% Betterment. slightly more and have the benefit com management fee on top of the of a flesh and blood financial 0.2% ETF fee.” advisor. Stein noted that the selection of But he said the site might appeal ETFs handpicked by Betterment to young investors who are starting can not be assembled elsewhere out with small sums and who may for free. not be able to find a financial planner willing to take them on.

Recent Press Coverage | Page 23 Continued: Former Banking Consultant Jon Stein Founds Betterment.com, Advises Investors on Smart Finances

Stein acknowledged While he likes target date funds, Betterment’s goal is to match he said that many investors have the market, not produce outsized that there are goals beyond saving for retirement returns. “We are not a hedge many other choices that might make a better fit with fund,” Stein said. “What we are Betterment. trying to do is give people a solid for sophisticated investment.” “Betterment lets you pick the right investors, but said savings goals and horizon for you,” Stein acknowledged that there Betterment presents Stein said. “Betterment is also are many other choices for easier and more accessible than sophisticated investors, but said an option for busy any target date fund I’ve seen. Betterment presents an option for There’s no minimum, it takes about busy people. people. ten seconds to initiate a deposit or He compared choosing your own withdrawal and it takes less than investments, without the benefir of five minutes to get your account a financial advisor, to being asked set up.” to build your own car. The average Betterment customer “We’ll build cars centrally, return in the last year was 20.2%, standardized and ship them out Stein said. The returns are based pre-build,” Stein said. “So people on the average customer allocation get better cars, they’re safer and of 77% stocks and 23% bonds. people spend less time setting This compares to 18.9% that an them up.” § 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.

Recent Press Coverage | Page 24 9 Smart New Ways to Manage Your $$: Investing with the Twist of a Dial

By Blake Ellis Burning to invest Company: Betterment As you select your investment Location: New York City blend, the site lets you know how some money but Founded: August 2008 much risk you are taking, gives don’t know where advice, and show you how others of Burning to invest some money but your age, income and gender are to start? don’t know where to start? investing their money. § 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.

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

Recent Press Coverage | Page 25 A Better(ment) Mousetrap for the Mass Affluent?

By Davis D. Janowski Startup online Technology will be the key that pressure “America’s Got Talent” unlocks the mass-affluent market type of event for startups in New hybrid investment for financial advisers. York that took place in May. service could turn Only through technology will clients Some advisers will recall that small investors into with Main Street-level assets be I introduced them to another profitable to advisers. startup, Mint.com, during Finovate adviser clients Fall 2007. That website and service Along those lines, one site advisers has grown to 4 million users and might want to keep an eye on is was bought last year by Intuit Inc. Betterment.com. for $170 million.

The startup online service, meant GROWING FAST for novice investors and active Getting back to Betterment, the traders alike, could foster the site was launched in beta five growth of whatever liquid assets months ago and with very little in mass-affluent investors have. the way of marketing; it already In a nutshell, Betterment provides has 1,000 users. users with a hybrid investment It costs users a quarterly service that builds a conservative management fee of 0.9% of assets portfolio of stock and bond index under management, there is no exchange-traded funds that is minimum balance, transfers and easily managed from a simple trades are free, and there are no interface yet has the liquidity of an holding periods. Oh, and by the online banking account. way, the portfolio is automatically The company is a Securities and diversified and re-balanced. Exchange Commission-registered Betterment isn’t intended for investment advisory firm and a the sophisticated, hands-on, broker-dealer. do-it-yourself consumer who is It also happens to be a startup that comfortable buying and selling is already off to a good start. his or her own equity and fixed- income investments, and doing the Betterment garnered a great deal re‑balancing. of buzz last week at the Finovate Fall 2010 Conference in New York It is meant for consumers who have and was named best in show. That some amount of liquid assets to follows a finish among the top five invest and want to be more active at Techcrunch Disrupt, a high- with them but are either intimidated

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

Recent Press Coverage | Page 26 Continued: A Better(ment) Mousetrap for the Mass Affluent?

or lack the time or passion to Charles Schwab Corp., E*Trade educate themselves to the DIY level. Financial Corp. and TD Ameritrade (They also probably lack the assets Holding Corp. to interest an adviser). Now 31, he first heard about Jonathan Stein, chief executive Betterment through the friend of and co-founder of Betterment.com, a friend and decided to try it out noted that the current user has by investing $2,000. (Coincidence anywhere from $100 to $100,000 alert: 31 happens to be the average invested through the site’s age of Mint.com users.) platform, with the average being “What I liked most was the ability $15,000. to reallocate my position simply A committee of economics and quickly, and was impressed professors from Columbia with automatic diversification of University and fund managers the account through the spectrum helps determine changes to the of stocks and bonds they offer,” Mr. site’s portfolio mix on a quarterly Aviram said. basis, he said. He added that while it was possible That mix is grounded in – and for him to achieve this level of managed based on – modern diversification in his accounts at the portfolio theory. The stock portfolio major retail brokerages, the process is representative of the total U.S. was more time-consuming, less stock market, Mr. Stein said. automated and demanded more research on his part, and often left “The people we are after are the him with big cash positions that he traditional savers that are looking then had to manage. for an entry into active investing, but one that they can set it and “For someone like me who is actively forget it if they want to,” he said. managing my allocations, this is really simple to use; with it, if I am Betterment suggested that we taking money out of stocks, it goes contact David Aviram, a New York right into a bond portfolio, and I’m real estate developer whom it able to shift that based on market considers a typical user. fluctuations,” Mr. Aviram said.

He said that he has been investing To illustrate the simplicity, he with the site for five months, after described his home page at a decade of managing his own Betterment and how he could money on different trading change his allocation values with a platforms, including those of The click on the “Allocation” tab.

Recent Press Coverage | Page 27 Continued: A Better(ment) Mousetrap for the Mass Affluent?

“Right now, I have things split 70% THERE’S AN APP FOR IT in stocks and 30% in bonds, and Betterment last week also if I want to change that to 65/35, announced the availability of I just click it, then all the orders an iPhone application and an are automatically processed,” Mr. online automatic-savings plan. Aviram said. After users create a Betterment account through the website, they He asked me not to publish the simply download the free iPhone amount of his current account application from iTunes. It lets balance, but it dwarfs the initial them check, in real time, the status one and includes most of his liquid of deposits and withdrawals, their assets, he said. account balance and composition, and allows them to make changes to their stock and bond allocations. §

Recent Press Coverage | Page 28 A Better Savings Account?

By Matthew Amster-Burton Arguably, no service It’s one of the most common investors will pay for, and they’ve questions on Mint Answers and created a web-based product has made investing around water coolers everywhere: “I that makes investing as easy as simpler than have a little money to invest. Where opening a savings account. In doing should I put it?” so, they’ve earned plenty of fans Betterment, a New (the company hit its summer goals Let’s face it: the average person, in its first week), but also critics York-based startup no matter how educated, finds who say the site is misleading and which launched in the world of stocks, bonds, and overpriced. mutual funds to be about as easy May. to understand as the National Let’s take a look. Electrical Code. “For most people, Streamlined to the bone opening an online trading account Opening an account with and figuring out what to buy and Betterment takes about five who to listen to, there’s so much minutes. When you make a deposit, noise out there,” says Zack Miller, your money will be invested in an expert on web-based investing a mix of exchange-traded funds and author of Tradestream Your (ETFs), seven in all, with an Way to Profits. emphasis on value stocks. The Confused investors plus new complete list of funds can be found technology equals opportunity, in the Betterment client agreement. and startups have swarmed Once you’ve signed up and into the investing market. Trade transferred money from your mirroring sites, like Covestor, let checking account to your you mimic the trades of investment Betterment account, you allocate professionals. Online brokerages your money between stocks and like E*Trade feature investing treasury bonds on a percentage advisories that walk you through basis (60% stocks, 40% bonds, an online survey and then select for example), and that’s the only a package of funds tailored to investing decision Betterment asks your needs. And social lending you to make. The dashboard looks sites like Lending Club put your like this: 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

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

Recent Press Coverage | Page 29 Continued: A Better Savings Account?

There’s no deciding Customers fill out a very short to confuse the two concepts, survey about their risk tolerance, appearing to use saving language which stocks or and the site suggests an allocation to describe an investment that which funds to buy: between stocks and bonds. Most carries the risk of principal loss,” customers accept the suggestion. he said in an email. every Betterment “They’re coming in, they’re using Betterment has responded to our advice tools, and they’re that criticism, up to a point. “We customer owns setting their allocation according to announced this as the replacement exactly the same that,” says Betterment founder and for your savings account, because CEO Jon Stein. investments. that’s how we saw it,” says Stein. There’s no deciding which stocks “That said, we took that criticism or which funds to buy: every very seriously, and obviously we Betterment customer owns exactly don’t want to mislead and we want the same investments. Betterment to appropriately market this. So we automatically rebalances your went through all of the text on the account so that if you select, say, site to make sure that it was clear a 50/50 split between stocks and that this was an investment, and bonds, it will remain at 50/50 even we’ve changed that positioning if the stock market goes up and just slightly.” bonds go down. Betterment’s site still invites you A “savings” account? to “start saving now,” and says it’s The simplicity of Betterment’s tools “better than a bank.” But they’ve isn’t what has the company’s critics changed some of their text and exercised, of course: it’s that they’ve graphics to make it more clear been marketing it as an alternative that your Betterment account can to a bank savings account. actually lose money. Yet, on one page of their site they promise “They took a process that’s that “your money is safe and inherently scary and overwhelming secure with Betterment,” and for people and used technology trumpet their SIPC insurance. SIPC to simplify it,” says Miller. “I think is completely different from FDIC that’s an honorable thing. But to insurance: it protects your money market it again and again, to talk if an investment company commits about a savings account, is just fraud or goes bankrupt. It’s no help disreputable. It’s scary, actually.” at all if the stock market tanks.

Dallas Salisbury, President of the Stein says his customers get it. Alliance for Investor Education, “The market is up and it’s down agrees. “This website appears since we launched, and those

Recent Press Coverage | Page 30 Continued: A Better Savings Account?

customers who have lost money, Betterment’s underlying bond fund, not one of them has come back iShares Barclays TIPS (TIP), charges to say, ‘Hey, there’s risk in this 0.2%. Investors who are disciplined product; I had no idea what I was enough to buy and hold these or getting into.’ Not one.” other low-cost funds could save a lot of money compared to investing “Most of our customers aren’t first- with Betterment. time investors,” Stein adds. “This is an investment for the medium to Investing on autopilot long-term.” The problem is, many investors simply lack that discipline. A 2010 Simplicity, at a cost study by DALBAR found that in the Betterment makes money by last 20 years, the stock market charging a management fee: 0.9% has returned 8.2%, but investors of your average balance per year. in stock market mutual funds only (On a balance of $10,000, for made 3.17%. Bond investors did example, that’s $90.) There are no even worse. Why? As the report per-trade fees or any other fees; put it, “Investors are impatient and you can add or withdraw money at irrational.” They move their money any time. in and out of the market at the When you factor in the expenses wrong time, they fail to rebalance, inherent in the underlying funds, and they invest in actively though, things quickly add up – managed funds that hardly ever to a total expense ratio of about beat the market. 1.09%. In comparison, the average Betterment’s investors might well moderately aggressive balanced turn out to be just as dumb. The fund, which maintains a constant product is only two months old, and stock-to-bond ratio (typically Stein declined to say how much 60/40), charges 1.01%, according money customers have invested to Morningstar. Vanguard’s so far (they’ll report this figure Balanced Index Fund (VBINX) publicly to the SEC at year’s end). charges 0.25%. But Stein offers a hint that his In the world of investing, 0.9% is customers may be smarter than a high price—no way around it. If the average bear (or bull). “There you put your money directly into, are 5% of the customers or so say, Vanguard’s Total Stock Market who will come in and change ETF (VTI), one of Betterment’s the allocation once a week or underlying stock market something like that. But that’s investments, you’d pay 0.07%.

Recent Press Coverage | Page 31 Continued: A Better Savings Account?

Putting your really a footnote when you for years and are now the default consider 95% of people are setting investing option at most employers’ investing on an allocation and are just sticking 401(k) plans. Average expenses autopilot may be with it even though the market’s are in the 0.53% to 0.63% been pretty volatile.” range depending on the target one of Betterment’s date, according to Morningstar. (For frequent traders, meanwhile, (Buying and selling no-load mutual better features a Betterment account may be funds does not involve paying a cheaper than using a regular commission, either.) brokerage account, which charges commissions for each trade or Most mutual funds, of course, monthly fees for unlimited ones.) have minimum initial investment requirements of several thousand Putting your investing on autopilot dollars, which Betterment does not. may be one of Betterment’s better If you have very little cash to set features – but it’s one that’s hardly aside, Betterment might be a better ground-breaking. solution for you – as long as you Target-date funds, which are funds understand you are investing, not of mutual funds with an asset saving that money, and that involves allocation that becomes more the risk of a potential loss. § conservative as the target date approaches, have been around

Recent Press Coverage | Page 32 Simple Tools For Savvy Investing

Betterment Founder: Jon Stein One cool feature allows users to Launched: August 2008 see what others in their age and founder Jon Stein Headquarters: New York City or income bracket are doing. The calls his site “the judges were favorably impressed: Winner of “Biggest New York “I was a judge at TC50 when Mint replacement for your Disruptor” award; Final Five finalist was on stage and told them, ‘It’s a savings account.” Betterment’s name sounds like a huge market; you only need a tiny sly play on Mint.com, the personal- piece.’ I think that’s true for you,” finance site that won TechCrunch’s Don Dodge, a developer advocate very first startup competition at Google, told Stein. He’d like back in 2007 and went on to be to see Betterment target 401(k) acquired last year by Inuit for investors: “Many of them are totally $170 million. Like its namesake, clueless,” he said. Betterment is built around user- Betterment polarized the audience. friendly personal finance tools, but Some loved how simple the site while Mint helps members manage makes it to allocate investment the money they already have, funds (the slider lets you set your Betterment targets investors. risk tolerance from low to high For those that would be risk), but others objected to an overwhelmed by an ETrade investment site billing itself as account, Betterment offers visually a safe replacement for savings intuitive tools. After transferring accounts. money in from a linked checking The Final Five judges came down account, a user funnels it into one hard on Betterment’s interface. of Betterment’s two portfolios, John Borthwick, CEO of betaworks, one a stock mix and the other called it “toyish” and felt that it was a very conservative basket of over-simplified, “reducing things to bonds. Using a slider that looks a simple graphic with one bar.” like a speedometer, the investor can easily calibrate their risk level. Of course, simplicity can pay Betterment founder Jon Stein calls off – TechCrunch editor Michael his site “the replacement for your Arrington pointed out that Mint savings account.” also drew criticism for being “too cute.” §

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

Recent Press Coverage | Page 33 Betterment Wants To Be Your New, Higher-Yield Savings Account

By Jason Kincaid Betterment is Betterment, a new startup that section allows you to watch percent is launching today at TechCrunch returns over time, or the dollar designed so that Disrupt, is looking to become the changes in your accounts, and your anyone can use it, “replacement for your savings account balance. account” – it earns you more money The site may be dealing with regardless of their than a standard savings account financial information, but like TC50 while offering more flexibility winner Mint, Betterment has clearly knowledge about than you’d get from higher yield put a lot of time into making its the market and accounts. And, unlike most financial graphs look slick and attractive, financial products. services, Betterment is designed so that anyone can use it, regardless of Betterment charges a 0.9% fee. their knowledge about the market The company is registered with and financial products. FINRA and the SEC – they’ve built their own financial infrastructure The site has established two for the service (it isn’t just a nice portfolios, one of which consists frontend on a different investment of numerous stocks and another platform). of ‘ultra-safe’ bonds. After linking your bank account with the service The site goes live tonight (May 24). you use a slider to adjust how much risk you want to take, which Q&A: determines how much money is Chi-hua Chien: The question is, allocated into each portfolio. The are consumers going to feel they site cuts out as many steps as have enough control. At the end of possible – as soon as you’ve put the day customers think they can in your money and determined outsmart the market. How do you how you want to split your money ride against that wave? between the stock market and A: We do see those as the problem, bonds, you’re basically done (at we’re not the only ones with that least if you want to be). Jim Cramer style investment advice. There are plenty of other options We’ve seen a trend of people for users who want to do a deeper moving toward investment advisors dive. If you want advice on how to and self-managed accounts. determine this allocation, you can A2: Also, most people aren’t doing look at what your peers have done. any of that. They know they should There’s an interface to adjust age be doing more. They open Etrade ranges, income range, etc – and it and don’t know what to do. We’re shows you how risky other people in trying to replace the savings a similar situation are. An analysis account. This is where you place

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

Recent Press Coverage | Page 34 Continued: Betterment Wants To Be Your New, Higher-Yield Savings Account

excess money, “here’s where I’m Vardi: People like to invest in willing to take risk”. It feels more institutions they feel confident in like like a savings account than an Lehman Brothers and Bear Stearns investment account. Round 2 Business Presentation Chien: I do think you have to be Betterment was one of the more transparent.. companies chosen to proceed to round two of the TechCrunch A: It is completely transparent. We Disrupt Startup Battlefield, where put every ETF on your statement. they talked about their business We break out every individual model. Here are my notes from that security. It’s completely transparent. presentation: We’re not hiding anything. It’s just a simpler investment product. There are $300 billion in online only accounts. Overall market is Don Dodge: I like it a lot. I was a $4.4 trillion. We’re content to focus judge at TC50 when Mint was on on the $300 billion market. First stage, told them it’s a huge market, we’ll go with traditional marketing you only need a tiny piece. I think – Facebook ads, AdWords, display. that’s true for you. I would focus A lot of that. Second, intermediated on 401k market. Millions of people financial channels. People who forced to be investors through 401k. have existing relationships with Many of them are totally clueless. customers we want to reach. A: We totally agree.. Referrals. ING Direct gets 40% of customers this way. We’ll also do Bijan Sabet: Don’s right. I have Media outreach. noticed a lot of people who manage 401ks offer these age Sabet: I Think you need to focus adjusted program that are black on a market. Word of mouth is boxes. Start with savings, add something you can focus on later. additional services. A: When I talk about referrals, I Chris Sacca: I worry that it’s too mean rewarded referrals which has simple. People don’t always trust it. worked very well for ING Direct. People expect a little bewilderment Sacca: I think they’re going after that gives it credibility. This starts a real problem. But I think people to feel a little like a toy. expect some complexity in these A: It’s not a toy, it feels more kinds of services. Distribution like a savings account. Only problems become the complex difference is that you have to frontend. § choose this allocation.

Recent Press Coverage | Page 35 Investment Startup Betterment Says It Can Make Savings Accounts Extinct

By Jacob Brody “We want to take The web may already have a wide The company has already provided array of personal investment sites, returns for its beta users. While the this really big. We but startup Betterment believes it S&P 500 is up 23 percent on the want to make has something new to offer. year, Betterment’s stock portfolio is up 29 percent across the same investing accessible The company launched today at period, which is a significantly higher TechCrunch Disrupt. “When you return than a savings account. for people go to a broker you have to pick as soon as possible.” among a menu of funds and stocks “Banks are in the business of that are available,” said CEO and paying as little as possible for founder Jonathan Stein. “It’s an deposits,” said Stein. “This would overwhelming experience for many cannibalize their most profitable people, even Columbia MBAs.” business.”

The result is that many people According to Stein, Betterment is simply leave their money in savings looking to target the 20 million accounts, said Stein. Betterment Americans who have online savings gives users one decision to make, accounts and, more specifically, the an allocation between Treasuries nearly 10 million who are between and stocks. The company, which 20 and 40 years old. is an SEC and FINRA licensed “We want to take this really big. We investment advisor, chooses want to make investing accessible which stocks to buy and puts the for people as soon as possible.” individual securities into each user’s account. Betterment’s founders have already invested $640,000 to pay staff, Betterment does not charge create technical infrastructure, and its customers a per transaction build capital reserves required by fee like most online brokerage the SEC. The company is looking accounts. Instead, it charges a to raise a $1 million round of management fee of 0.9 percent institutional funding in the near of the average annual balance. future. § Betterment accounts are as liquid as a savings account, with the money transferring directly to and from users’ checking accounts.

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

Recent Press Coverage | Page 36 Get Financially Fit for 2012 By Starting to Save Early and By Maxing Out Your 401(k)

By Jon Stein Q. I want to become A. A key part of financial fitness In 2012, the maximum contribution to is having your retirement savings a traditional 401(k) will be $17,000, financially fit in in place. How you think about this or $11,500 for a SIMPLE 401(k). If – and the definition of fitness – you can’t afford to max out your 2012. What should varies based on your age. 401(k), contribute at least enough be my New Year’s to get the matching contribution Early 20s: Get Started from your employer. It’s free money resolutions? Retirement is likely more than 40 – you’d be crazy not to take it! years away. It’s the last thing on your mind - but the best thing you 50s and 60s: Stay the Course can do for retirement in your early Hopefully, by the time you reach 20s is simple: get started. your 50s and 60s, you will be in pretty good shape. It’s most If you start early, the effects of important at this age to stay compounding can be astounding. A the course with the investment 25-year-old who invests $1,000 a strategy you set all those years year for ten years (with an average ago. Don’t make rash decisions or return of 8% per year), will have be influenced by volatile markets. account worth $169,000 by the time he turns 65. Now that retirement is not too far away, however, it’s time to check in If he waits until he’s 35, it’s harder to ensure that your level of risk is to catch up: even if he contributes appropriate for your needed return. $1,000 per year for 30 years People with a long timeframe (three times the amount) his total ahead of them can afford to balance at age 65 will be $125,000 be more aggressive with their ($44,000 less!). investments than those who need Young people have an edge on the the money sooner. most seasoned Wall Street investors: One final tip. Once you reach 50 time. There are many options for you can contribute up to $5,500 smaller investors (Betterment. more to your 401(k), so take full com, an online brokerage, requires advantage. no minimum balance), and you should be taking advantage of your Investing in your retirement is the employer’s 401(k) plan. smartest New Year’s resolution you can make in becoming financially 35 to Early 40s: Max Out fit in 2012. While the goal in your 20s is simple (just do it), by mid career you Start now and you’ll be on track should be making the most of your for an enjoyable retirement, free of earning potential and tax benefits financial worry. § by maxing out your 401(k). http://articles.nydailynews.com/2011-12-27/news/30563144_1_investment-strategy-retirement-maximum-contribution

Recent Press Coverage | Page 37 4 Personal Finance Technology Trends for 2012

By Associated Press Whether online or If you’re one of the holdouts still terminals by retailers, mass transit paying bills with checks, tracking systems and more. mobile, here are your accounts with pen and paper Another innovation that is already or clipping coupons from the some personal being heavily promoted is person- newspaper, 2012 could be the year to-person payments. American finance technologies you take the digital plunge. Express Co., MasterCard Inc., Visa to watch in 2012: A host of budding personal finance Inc. and PayPal all offer ways services and applications are for their customers to send and poised to go mainstream in the receive money using links to new year, and together, they will various accounts and cards. As likely have a big impact on the the TV commercials depict, if this way Americans bank, shop, and technology takes off there will be track their finances. Some of the no more fumbling for cash when services are web-based, but many it’s time to split the check at a take advantage of the proliferation restaurant, and sending money of smartphones, which are now across town or across borders will carried by one-third of U.S. adults — be easier, faster and less expensive. with more likely to join that crowd Non-bank money management in the next few days after receiving Mint.com, the popular personal the gadgets as holiday gifts. finance site, was only the Whether online or mobile, here beginning. A raft of new money are some personal finance management tools are now technologies to watch in 2012: available that can help users keep track of bills, investments and Mobile money other aspects of their financial The September launch of lives. Google Wallet was just one high- profile move toward the use Among the standouts is Manilla. of smartphones for payments, com, which not only pulls together replacing credit or debit cards. household bills and financial The technology allows users to accounts, but also helps users keep wave their phones in front of track of details like travel rewards payment terminals and have points and magazine subscriptions. transactions deducted from linked The service provides reminders bank accounts or credit cards. for when bills are due and has Expect more options for electronic features that make it easy to pay payments from mobile service bills or set up auto payments. providers and card networks next Since the company’s goal is to year, and wider adoption of the help its customers eliminate paper

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

Recent Press Coverage | Page 38 Continued: 4 Personal Finance Technology Trends for 2012

clutter, there’s even a way to store on sites like Facebook, LinkedIn electronic account statements. And it and Twitter. has a smartphone app for accessing While these sites are moving all these functions on the go. toward making it easier to shop Other non-bank options without navigating toward a link, include Pageonce, an app that that’s just one step toward social automatically tracks bills and commerce. enables users to make payments The concept of financial social on their phone; savvymoney.com, a networking is also being expanded site that offers debt-management by companies like Weemba.com, help; and Betterment.com, a site whose site allows individuals designed to simplify investing. to search for a loan by posting Targeted deals nontraditional details like a The combination of geo-location description of the need for the technology that can track your money — debt consolidation, a movements when you’re carrying mortgage refinance, or a kitchen your smartphone, and QR codes, makeover complete with the those weird squares appearing designer’s plans, for instance. The more and more often in advertising, details posted add depth to the is enabling companies to offer usual credit score and financial personalized discounts and on-the- information that banks and other spot deals to customers willing to funders may review, and the site opt into their programs. opens the lending request to a wider audience. Mall shoppers have already started getting texts and emails designed Other examples of the use or to lure them into certain stores, concept of social networking and the technology can also be include Kickstarter.com, where used to encourage customers to creative types can seek funding for enter contests, demonstrate new their artistic endeavors and those apps or products and even contact willing to provide seed money can customer service. choose to provide all or part of the needed funds to get the project off Social commerce the ground. Javelin Strategy & Research, a financial services research firm, Saveup.com is a game aimed at is using this term to identify the helping individuals pay down debt trend toward the combination of and build savings, and Bundle.com commerce and social networking uses data tracking and spending

Recent Press Coverage | Page 39 Continued: 4 Personal Finance Technology Trends for 2012

information to produce lists of official Facebook page, which it popular restaurants and stores in uses for efforts like supporting selected cities, helping users find community causes and advertising the right spot at the right price. opportunities like its Student Leader program, which offers paid Banks are also experimenting internships to high schoolers who with ways to make use of social work at charitable organizations. networking to interact with customers, with some success. Customers can expect more on Even Bank of America Corp., these fronts from startups and big a recurring target for gripes financial institutions in the next 12 large and small about the months. § financial system this year, has nearly 365,000 “likes” on its

Recent Press Coverage | Page 40 OWS: Where Rubber Meets the Road

By Jon Stein Creating smarter, Confession: I used to work for a its profits off of fees on checking big-not-so-popular-bank. These accounts – mostly overdraft fees. more innovative days, I need to be careful who I The average consumer-facing bank products is not admit that to. But, I’m not ashamed makes about 50% of its profits of it. In fact, it was my experience on fees, 50% on interest. So this enough. The big at big banks that motivated me might seem like bad business – to create meaningful financial who would go to such a bank, with banks on Wall Street services products. such fees? But they were growing are not going away. fast, putting up branches faster As the founder of a technology- than their rivals. So, what changes based financial services company, I’ve been thinking a lot about the The trick? They targeted the are needed? Occupy Wall Street movement. poorest neighborhoods and All financial services startups customers. Their average customer have. The movement is a bit of over-drafted 3-5 times a month, vindication – seeing others realize paying $120-$200 in fees. They that the current system is not marketed to the customers who working – and there is a real could least afford it, those who need for the innovative financial should not have had overdraft products these startups are “privileges,” and then “strip-mined” building. their wallets. Building a checking account with high overdraft fees is Creating smarter, more innovative not filling a customer need – it’s products is not enough. The big exploiting loopholes in regulation banks on Wall Street are not and preying on customer weakness. going away. So, what changes are needed? Protect. Financial services companies should be held to a With three simple changes by all fiduciary standard – the same way financial services institutions – doctors take the Hippocratic Oath produce, protect, and play fair – the and lawyers must pass the bar. financial services industry can get on track to working for the 100%. I also worked for a broker, and found that 90% of customers lost Produce. Financial services all of the money they invested. The companies must make meaningful broker would take the opposite products that fill a consumer need. side of their trades, and would As a consultant, I witnessed the profit when they were wiped out. predatory banking practices of That was their business model. This an Ohio bank that made 80% of kind of business is unproductive and predatory, and would be

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

Recent Press Coverage | Page 41 Continued: OWS: Where Rubber Meets the Road

best controlled by introducing So how do we ensure that these a fiduciary standard for brokers principles are put into practice? (which the SEC has proposed, It’s time for like-minded financial and the industry is resisting). We services companies to rally around have to trust the companies that them, and, to come up with their provide us these products – like we own principles for what they trust doctors, lawyers, or the pilot stand for and how they treat of our airplane when we need to their customers. And, it’s time for rely on them – and yet financial consumers to demand this level of services vendors often have no accountability. requirement (or incentive) to act A number of young, innovative in our best interests, like those financial services companies are others. As an Investment Advisor, already embracing this change, Betterment.com does have to act and creating a much needed level in its customers’ best interest. This of transparency in the industry. is a good thing, and should be For example, at www.slashdeclare. extended to all financial services org, you can see financial services companies organizations that have made a Play Fair. There needs to be a declaration to their customers of level playing field for all market what they deserve. Each of these participants. companies has launched a page on their site – i.e. www.betterment. A lot of people feel like the deck com/declare – with these promises. is stacked against them when it comes to investing. They think As consumers of financial services the big banks make all the profits, products, start to demand that and the little guy doesn’t have the your bank, investment advisor and same chance. They’re not far off. brokerage join this movement. The big banks will do things like If they aren’t willing to publicly co-locate with the exchanges, so declare what you deserve, you they get to see your orders before deserve a better company. § 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.

Recent Press Coverage | Page 42 Ask the Readers: Which Financial Products Do You Actually Use?

When I started The financial blogging conference With that preamble out of the way, last week was great. My colleagues here are the financial products I investing, I used and I had a lot of thought-provoking actually use: discussions, not only in the planned Sharebuilder. But if Bank accounts. sessions but also late at night in the As I’ve shared in the past, I have I were starting again hotel lobby. One of these impromptu several bank accounts. today, I’d probably chats focused on the financial products we actually use. My business banking is all done use Betterment with Wells Fargo, which is a legacy Financial bloggers do a lot of from when I co-founded my instead. product reviews. (I do them too, but computer consulting business with I think they’re tedious. Besides, I two friends. One of my buddies had think there are some ethical grey an account at Wells Fargo, so he areas with product reviews, so I opened our business account there. don’t venture there very often.) They’ve given me great service, so Sometimes it’s difficult to tell I’ve never moved the account. It’s which tools they’re pitching and been there for over a decade. which tools they actually endorse. My personal checking account For my part, I don’t endorse lives at the local credit union. anything. One of my mantras is “do Again, I like their service, and I what works for you”. That’s because like supporting a local bank. I have I don’t believe there’s any one- a couple of old savings accounts size-fits-all answer, especially with there too, but they have no money banks and credit cards. As a perfect in them. example, many financial bloggers (including me) love ING Direct. Since I discovered the wonders of That’s where we do our banking. high-yield savings accounts, most But Mike Piper from Oblivious of my cash lives at ING Direct. I Investor is a quiet Bank of America chose ING because Get Rich Slowly fan. “I think they’re great,” he told readers raved about it. Plus at the me. Mike’s a smart guy, so I can’t time, it offered a very high interest help wondering if maybe he knows rate. (I think it was about 5% when something that we don’t! I signed up, a rate we’re not likely to see again for many years.) “You know,” I told the group. “I Because I practice targeted saving, think it’d be fun to actually tell my I have several savings accounts at readers which financial products I ING – one for each of my current actually use. And then ask them to pet projects. do the same.” So that’s what we’re going to do today.

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

Recent Press Coverage | Page 43 Continued: Ask the Readers: Which Financial Products Do You Actually Use?

“Why don’t you have your personal that, but I have no idea how to use accounts and business accounts them. Something to look at in 2012. at the same bank?” Adam Baker Finally, I carry a business credit asked me in Chicago. “It’s a legacy card. Actually, I have two. The first of my poor financial habits,” I said. is my Wells Fargo VISA, which I “I intentionally kept them separate obtained for obvious reasons. (And so I couldn’t mingle funds. Now it’s which I had even when I carried no a psychological thing. personal credit cards.) My second Credit cards business card is the American For almost a decade, I didn’t carry Express Costco card, which I use a personal credit card. Credit card to get 1% cash back on business abuse had led me to become deep purchases. This one is actually in debt, so I wanted to prevent kind of silly. I don’t spend a lot on temptation. But it was you folks my business, so it doesn’t make who suggested I was ready to use much sense to go after cash back, credit wisely and recommended I especially since there’s an annual get a card. fee on the card. When I get home from Peru, I should cancel this. GRS readers suggested I try a Capital One No-Hassle Cash Back Brokerage card (now called a Capital One Cash When I started investing, I used card. It’s a cash rebate card that Sharebuilder. Though their fees earns me 1% on everything I spend. are relatively high, they were I use it for nearly everything I can perfect for helping me develop (and then I pay it off at the end of the habit of saving every month. the month. Readers recommended I still recommend them to people it back in 2007 was that it has no who are just starting out. But if foreign transaction fees, so it’s I were starting again today, I’d perfect for travel. I’ve had it for four probably use Betterment instead. years without any signs of returning (Although it’s important to note to my former habits. that Betterment doesn’t allow you to save in a Roth IRA.) My second card is also perfect for travel. It’s a Chase British Airways When I set up the 401(k) for card, which I wrote about in April. my business, I needed to find a I did indeed sign up, and I met the broker that allowed me to open a spending requirements to obtain specific type of account. I wanted the 100,000 airmile bonus (though to go through Vanguard, but they barely). I think I have 106,000 didn’t offer what I needed. I went miles on it now or something like to Fidelity instead. I’ve been very

Recent Press Coverage | Page 44 Continued: Ask the Readers: Which Financial Products Do You Actually Use?

pleased with Fidelity, and have built The only other major thing would a good relationship with the fellow be the software I use to track my who manages my account at the saving and spending. I know many local office. Now that Vanguard people prefer to do this on-line, but offers solo 401(k)s, I’m not willing I’ve tried a variety of these tools to switch. and none of them work for me. I always come back to the desktop Note: And what do I invest in at version of Quicken, as quirky and Fidelity? I shared this info earlier cranky as it is. There’s just nothing this year when I wrote about else that fits the way I work. rebalancing. Disclaimer: Again, I’m not Miscellaneous endorsing any of these products. I My family has always had insurance don’t do endorsements. Instead, I’m through the same State Farm office trying to share what I do in real life. in the town where I grew up. My father was friend with the agency’s Now it’s your turn. What financial founder. When Dad died, the rest of products do you actually use? the family kept our policies there. Where do you put your money? Now, though, the agent himself has Who’s your broker? What credit died and when I went in recently cards do you carry? Who provides to ask about umbrella insurance, your insurance? Do you like these all of the women who used to sit companies? Are you looking to try at the desks out front were gone. something else? Help GRS readers Nobody’s there that I know. In other learn ... § 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!

Recent Press Coverage | Page 45 Reinvented by Technology: Financial Services

By Judith Messina Going mobile The biggest hit at last month’s services, both online and through Finovate conference here was an iPhone app. transforms the Manhattan-based BillGuard, which Others are addressing areas uses crowdsourcing to solve a big money business. neglected by bigger players. consumer headache: unauthorized credit card charges. SecondMarket operates an online platform for trading illiquid It’s one of several companies securities, displacing bigger in New York that are using intermediaries that had been technology to transform the way the main, though inefficient, financial services are delivered market-makers for such assets. and solve problems that traditional The 5-year-old company expects institutions have yet to successfully to broker $600 million in private address. Pervading it all is mobile company stock alone this year. access: the ability to pay a bill, OnDeck Capital lends to the credit- make a purchase, check balances starved small business sector, using or transactions, even cash a check technology to track a company’s via a smartphone. cash flow, while Plastyc is going “Mobile will be the way you bank,” after teenagers, students and the predicted Jim Bruene, the author “unbanked” with a prepaid debit of the NetBanker blog and an card linked to a savings account organizer of Finovate, a twice- and accessible via a smartphone. yearly conference on innovative In innovative uses of financial technologies. “Online will crowdsourcing, CB Insights’ Mosaic be secondary.” service scans social media, blogs Some upstarts are vying with and other sites to evaluate the big banks for ownership of the health of private companies, customer relationship. BankSimple, while BillGuard combs the Web a mobile middleman launched for complaints about credit in Brooklyn, combines checking, card transactions, analyzes its savings and debit card services subscribers’ accounts for similar under a single bank card accessible transactions and alerts customers via smartphone. Transactions take to potential problems. place behind the scenes at partner “It’s brilliant – the kind of thing banks, but BankSimple is the brand that makes you say, ‘Why didn’t facing the consumer. On the money you do that 10 years ago?’” Mr. management side, Betterment Bruene said. § offers savings and investing

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

Recent Press Coverage | Page 46 Financial Planning Tools Pay Off

By Jean Chatzky Betterment, which Last week, Finovate came to New tools featured at Finovate may fill York. Not familiar with it? That’s not the gap. is a sort of hybrid surprising – many consumers aren’t. First, there’s Personal Capital, planning tool and Finovate is a conference, held every which keeps track of your online investment spring and fall (and once a year in spending, saving and investing. The London) that serves as a launching developers say they’re bringing account. pad for innovations in banking together “high tech and high technology. touch.” Like other online budgeting tools, this one pulls all of your Sounds like a snoozefest, but it’s accounts under one roof. But it also actually not. It presents new and gives you free investment advice updated tools that can help you and will manage your portfolio for manage your money better. a fee of less than 1%.

You’ve heard of Mint.com? They’ve Next up: Betterment, which is a been there (several times). Prosper, sort of hybrid planning tool and the peer-to-peer lending site? Yup. online investment account. If Even I have spent some time up you’re saving for college, you can on that stage. I launched my Score sign up with Betterment – a New Builder app, created in conjunction York-based tech startup – tell the with SmartCredit.com, in San site how much you want to save Francisco at Finovate last year. and when you need the money Here’s a look at the developments I and they’ll recommend an asset think will be most helpful to you in allocation. the months and years to come. You can accept their Online planning advice recommendation or adjust it and You know I’m all for financial start transferring money from your advisers. Research has shown that checking account to Betterment people who use them save more Securities, which is a broker-dealer and invest more for their futures. (and member of FINRA) that buys But I also acknowledge that having exchange-traded funds based on another person on your payroll isn’t your savings goal and time frame. appealing to everyone. The service costs between 0.3% and 0.9% each year, depending on So if you don’t want an adviser, how much you invest (there is no can’t afford an adviser, or you minimum balance). § want to cross-check your adviser’s advice, some of the new online

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

Recent Press Coverage | Page 47 The Investment Cost of Being Human

By Jon Stein Investing is not While the stock market swings idealistic. It’s a little like saying the like a trapeze artist – “for my next solution to healthcare costs is for always as simple as death defying trick, I’ll plunge from people to eat better and exercise focusing on costs even greater heights...” – many more. No doubt true, but unlikely investors are busy locking in losses, to happen. alone, much as we selling low after having bought high. The reality? Even with the best This kind of self-defeating behavior of intentions, many of us are still might like it to be. is what behavioral economist going to panic and chase returns at Dan Ariely would call “predictable the wrong time. irrationality.” It’s not what people would do if they were thinking To highlight this, consider a simple rationally, but it’s what people do comparison of two investors: when their emotions get in the way of rational thought. We’ve seen it (1) A typical buy and hold strategy happen time and again. put into place by a “typically irrational” investor David Swensen, of Yale’s endowment, wrote last month a (2) An ideal buy and hold strategy commendable piece in The New put into place by an “idealistically York Timescriticizing this behavior rational” investor and the “mutual fund merry-go- Let’s say that the typical investor round,” which does little to protect and the ideal investor both start investors’ long-term interests. off with the same portfolio: a Swensen makes a compelling diversified portfolio of 8 low-cost argument for revolutionary change funds (6 equity, 2 bonds). Both in the mutual fund industry, portfolios start with a mix of with aggressive regulation and 75% equities and 25% bonds, fiduciary standards for brokers. the kind of allocation that might These are great ideas that would be appropriate for a young help investors. He also advises professional with a long horizon individual investors to abandon and conservative risk tolerance. over-priced, under-performing Equities are 35% international and mutual funds and “take control of 65% domestic. their financial destines, educate What does the typical investor do? themselves, and invest in a well- diversified portfolio of low-cost He buys stocks when they seem index funds.” to be going up, sells them when they’re going down, and reacts This second part, about individual twice as strongly to declines. Let’s responsibility, sounds charmingly

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

Recent Press Coverage | Page 48 Continued: The Investment Cost of Being Human

assume that the typical investor for shares over time. He diversifies moves 10% of his portfolio into every penny, re-investing dividends stocks for every 20% market at his set allocation. And, perhaps increase and 20% into bonds for most important, he remains every 20% market decline. focused on the long term. He does not buy or sell because of daily How much does the typical market activity. He is a passive investor pay? investor.

Aside from the fund fees, the What does the ideal investor pay? typical investor must pay trade fees. Let’s assume an average Time, discipline, and money for commission of $10 per trade, four all of the transactions to re- deposits or withdrawals and two balance, deposit regularly, and trades per year, each time trading automatically re-invest dividends. three funds. This activity would Let’s assume there was a service cost $180 -- or, about 1.80% of a that empowered the ideal investor $10K portfolio. to do all of these rational things without paying transaction or trade What does the ideal investor do? fees. Let’s assume that this service He rebalances on a quarterly charged an annual fee – say schedule, or whenever the markets 0.90% of assets. move allocations more than 5% What are the returns? from their target. He contributes money regularly over time, Assuming the rational and irrational enjoying the benefits of dollar cost behaviors and the costs for a averaging and a lower overall cost $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%)

Recent Press Coverage | Page 49 Continued: The Investment Cost of Being Human

Investing is not The analysis shows a striking Investing is not always as simple 3% annual performance gap as focusing on costs alone, much always as simple as between the ideal investor and as we might like it to be. Sure, focusing on costs typical investor. In case that seems it’s easy to hate on investment insignificant, this could mean a advisers and their fat fees. We feel alone, much as we performance difference of more the same way! We hate fat fees than 250% over 40 years, or more too! Especially 2-and-20! But the might like it to be. specifically, $2.5mm vs. $1mm. advice and discipline that good investment managers provide – to And the underperformance of rebalance, to stay the course in our “typical investor” may be wild times – has real value. § 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.

Recent Press Coverage | Page 50 The Endless “Disruption” Eruption

By Ron Lieber The new generation Talk to an Internet entrepreneur business is done in their segment or attend a tech conference, and of the world (SecondMarket). of tech companies sooner or later (probably sooner), “When you’re at a point when someone talks about being a is out to change the people can’t imagine what it was “disrupter.” world. And a sense like before you, you have disrupted “We’re viewed as a disruptive things,” says Josh Green, president of mission really company, bringing trust and and co-founder of Panjiva, a young does matter – just transparency back to public Manhattan-based company that, markets,” Barry Silbert, with its technology platform, hopes not for the reasons founder and chief executive of to transform the way companies SecondMarket, told the audience buy and sell goods and supplies you might think. at a showcase for startups a few globally. months ago. Of course, it’s often hard to “We’re really being disruptive here,” discern which companies are real said Josh Rochlin of his company, disrupters until after the fact. Xtify, which produces opt-in, Remember WebVan, a company location-based advertising and last founded in 1999 that aimed to year won an award for having the revolutionize grocery shopping? best mobile platform. After spending $1.2 billion, going The TechCrunch Disrupt public and hiring 4,500 people, it conference, held annually in San fizzled into bankruptcy two short Francisco near the heartland of years later. disruption – and lately, in New York In New York’s technology City and Beijing – awards prizes to community, there are a handful would-be disrupters that have yet of companies that are frequently to even launch. referred to as disrupters-in-the- It all begs the question: Is all this making. Among them are Mr. disruption really possible? Silbert’s SecondMarket, which provides a platform for trading For starters, the definition of illiquid assets; online education disruption is vague, seeming to purveyor Knewton Inc.; and social apply in the minds of entrepreneurs media platform Foursquare. They to companies that change were three of 31 companies the way people relate to each from around the world named other (Facebook), as well as to technology pioneers for 2011 by companies that change the way the World Economic Forum.

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

Recent Press Coverage | Page 51 Continued: The Endless “Disruption” Eruption

“It’s very important Venture capitalists, who hear the cards and dismissive VCs, not to word “disrupt” a lot, say there’s mention mothers who constantly to be building no shortage of ideas about ways push them to go back to law school. to use technology to change the something that will Jonathan Stein, for one, spent world. But they don’t matter nearly two years building a system and help people, help as much as the ability to follow a overcoming steep regulatory business plan. them manage their hurdles before he was able to money better” “We will always take a world-class launch Betterment, an online bank entrepreneur with great execution and investment company that skills over a great plan with last year won the TechCrunch somebody who can’t execute,” says Disrupt best New York City startup angel investor David Rose. “There award and a best-of-show award are relatively few ideas that are at Finovate, a conference that so brilliant that nobody else has showcases financial technology thought of them.” innovations.

In fact, said Michael Brown, “It’s very important to be building a general partner at Battery something that will help people, Ventures, an investor in Panjiva, help them manage their money “We pass on a lot of investments better,” said Mr. Stein. where the founders are passionate Disruption potential also helps and think they are going to disrupt attract talent. Ari Jacoby was able an industry.” to bring to Solve Media many of The fact that the word “disrupter” the people he worked with in his is used so frequently that it’s previous venture, a direct-response losing its meaning hasn’t stopped company that he’d sold to a entrepreneurs from employing it. Seattle marketing company. Disruption seems to be serving “When creating a disruptive as a sort of tech shorthand for technology, you become a magnet the desire to change the world for talented people who fantasize – a common entrepreneurial about doing the same thing,” said motivation, and maybe more Mr. Jacoby, whose Solve Media has common in technology than in turned Web captchas—the squiqqly other industries. letters and numbers websites use That belief in their mission keeps for verification—into a marketing entrepreneurs upbeat as they tool for major brands. slog through months or years of midnight angst, maxed-out credit

Recent Press Coverage | Page 52 Continued: The Endless “Disruption” Eruption

For all their enthusiasm about Indeed, disruption can also be code their capacity for disruption, for another age-old motivation of entrepreneurs are also surprisingly entrepreneurs: making money. One down to earth about what it really thing that true disrupters have in takes to change the world or even common is that. § 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.”

Recent Press Coverage | Page 53