If you’re unfamiliar, Betterment is an automated investment service that takes users’ funds and puts them into uber-diversified ETFs and mutual funds, representing equities all over the globe. The user decides what percentage of the portfolio will be allocated to stocks and to bonds, and also identifies a risk-tolerance level – the highest risk tolerance chosen for the chance at largest growth in the shortest amount of time. Everything else is up to Betterment’s algorithms – buying, selling, tax-loss harvesting, allocation rebalancing, etc. It has been called the “set it and forget it” model of investing.
Betterment is the fastest-growing “robo-advisor” in the world, but this Betterment review will show that it’s methods and business model are not unique in the investment world. There are a number of competitor robo-advisors who offer similar automated portfolio building and management, with similar pricing and occasionally even some features that Betterment lacks.
Betterment tends to have slightly better portfolio returns than the competition, but this is likely not the sole reason for their success. As many have noted, Betterment brings much to the table when it comes to design and usability, user-focused considerations that the competition often lacks.
Betterment’s Design Focused Branding
In the early days of Betterment, many described the service as just as easy to use as Facebook. Though they’ve added many new features since then, the service still retains that “idiot proof” quality that makes so many users feel secure. Unlike competitor platforms like Vanguard (which, admittedly, isn’t truly aiming at the same customer base) which have a steep initial learning curve, Betterment feels like an Apple product in the way you just know how to use it as soon as you begin. The platform isn’t cluttered, the images and colors are precise, and the navigation is as simple as can be.
One of Betterment’s key design traits is how they make it easy to visualize what is going on within a portfolio, and how the financial situation is likely to change over the coming months and years. Betterment uses backtested performance analysis to show the user how their money is likely to grow in a variety of possible market futures. As Betterment is often marketed to beginning investors, these big, clear, interactive charts communicate a message that’s easy to understand, even without a great deal of market knowledge or experience. This is essential to the Betterment experience.
Betterment also has a way of adding features while taking away difficulties for the user. A case in point is tax-loss harvesting (a way to save a user money on their tax bill). Any investor can do their own tax-loss harvesting with strategic selling of underperforming positions, but it’s hardly a job for beginners, and one that simply wasn’t offered in an automated service like Betterment. Today, this feature is also automated, and it has become industry standard among the competition as well.
We could go on about what makes Betterment attractive and easy to use, but the proof is in the pudding. With many billions in assets managed and thousands of users added every day, Betterment is a success story built on design and easy functionality.
Like many other companies that succeed in these ways, Betterment has actually brought nothing new to the table. They weren’t the first robo-advisor. They weren’t the first place to make it easy to buy funds and ETFs. They weren’t the first service to target beginning and/or hands-off investors. They simply took all these things and made them easier and more convenient. As a result, they’re bringing thousands of new investors in the marketplace who would likely never invest at all were it not for this company. We’re not here to write a love letter to Betterment, but simply to use them as an example about how good design and user-focused functionality can make a good service stand out from the crowd.