Betterment Aims to Save Consumers $1 Billion Per Year in Fees

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Feb 22, 2012, 11:00 ET

NEW YORK, Feb. 22, 2012 /PRNewswire/ -- Betterment, the smart way to invest online, now offers Traditional and Roth Individual Retirement Accounts (IRAs), as well as a lower fee structure for all accounts. With the new offering, Betterment aims to save consumers $1 billion annually with lower fees than high priced IRAs, 401(k)s, and personal investment accounts*. With Betterment's lower fees, customers will pay just 0.15% to 0.35% per year, depending on their balance. The average money manager charges upwards of 1.50% annually.

Betterment is noteworthy for its unmatched simplicity – in less than 5 minutes, a customer can invest in a diversified portfolio. Just like a Betterment Investing account, the Betterment IRA is easy to set up and effortless to manage. Rolling over an IRA or 401k from a previous employer is just as simple.

"Americans who change jobs and don't rollover their 401(k) are really losing out over the long term," said Jon Stein, Founder and CEO Betterment. "30% of Americans who change jobs don't move their 401(k) because of how complicated the process is. As a result, these investors end up paying outrageous fees that significantly impact retirement savings. We designed the Betterment IRA so that a rollover would be simple – a real no-brainer."

The only decision an investor makes for a Betterment IRA is the asset allocation between a diversified portfolio of stocks and bonds. Betterment's custom advice tool recommends an allocation to the user, based on his goals. All of the complexities and time-consuming tasks of a well-managed investment account – like selecting a diversified portfolio, re-balancing, auto-deposit, and dollar cost averaging – are automated with Betterment's sophisticated platform. This suite of online services is unavailable anywhere else, and would cost 10x more at traditional investment firms.

Betterment's lower fees are effective immediately and apply to both IRAs and regular investing accounts. Customers will fall into one of three fee buckets: 0.15% for balances above $100,000; 0.25% for accounts with more than $10,000; and 0.35% thereafter.

Betterment integrates the simplicity of an online bank account with the higher long-term returns associated with investing in a diverse portfolio of stocks and bonds. Users fund their Betterment account by electronically linking to their checking account, allowing for quick and easy transfers between accounts.

Media contact: Johanna Scott: [email protected].

*Betterment aims to save consumers $1 billion in fees on 401(k) rollovers alone:

30% of Americans changing jobs leave a retirement account behind rather than rolling it over. This accounts for nearly 3 million 401(k) accounts per year. [Harris Interactive survey commissioned by ING DIRECT]
For 2011, the average fee on a 401(k) plan was 0.78%. [Deloitte Consulting survey commissioned by Investment Company Institute ] The average Betterment fee is 0.25%.
The average 401(k) account balance was $60,329 at the end of 2010. [Deloitte Consulting survey commissioned by Investment Company Institute ]
3,000,000 401(k)s left behind X $60,329 average balance X (0.78%-0.25%) Fee Savings with Betterment = $959,231,100.

Available Topic Expert: For information on the listed expert, click appropriate link.
Jon Stein | https://profnet.prnewswire.com/Subscriber/ExpertProfile.aspx?ei=107131

SOURCE Betterment