Insights: Betterment Launches Savings Account with 2.69% APY
It’s part of their new Betterment Everyday suite of products, which also includes a no-fee checking account. (July 2019)
JEN WIECZNER: Betterment now advises $17.9 billion in assets. It's what some might call a robo-advisor, so this is kind of like said it, forget it investing-- you invest, go into ETFs and it's kind of automatically rebalanced. You are also launching into some new products, so tell us a little bit about that. JON STEIN: Right, so what we've been known for is bringing the very best technology to money management. Starting with your investments, everyone knows that we help our customers make the most of their long term money. But as we've gone down this journey, we've heard from so many customers that to get them further down there, it would help if we could better manage their everyday cash, their everyday money. And if we can help them save a little bit more, that's super impactful. So we're launching both a savings account and a debit card with a checking account attached, that I believe will be the best in market of both of these products. The savings account is going to have what is the highest rate in the market. Today, it's yielding 2.69%, which makes it by far the highest yielding savings account. The debit card is going to have no fees at all whatsoever, no minimum balance, no fees on any ATMs, no network restrictions, nothing like that, and internationally free ATMs as well. So really, market-leading products for all of our customers who are looking to make the most of their everyday cash. One of the things that we've done is really intelligently structure this product. So we've negotiated with multiple banks. We're working with a range of banks on the back-end, just like we do on the ETF side. We're able to choose the best ETFs from multiple providers to give the very best value to our customers. And as an independent advisor, we're always working for our customers. We're always working to make the most of your money. A bank only makes money if they pay you less. We're able to get the very best rates in market and we pass all of that onto our customers. And that, I believe, is extraordinary value that we can provide as the market leading smart money manager. JEN WIECZNER: You're not making any money off this because you're just passing along everything that you're making from the banks and interest. How do you plan to make money from this? JON STEIN: So one of the ways that we make money, in fact, the only way we make money today is through our advisory fee that we charge for the advice we provide on your investments. That's 25 basis points. It's, I believe, the lowest in the market. We continue to provide that service at the same cost for all of our customers. We would hope that some customers come to us, and because we have this market leading rate, you're going to say, well, I'm interested in checking out Betterment. By the way, we also earn you more than anybody else on your retirement money. We earn you 40% more on average over the long term than you could if you even invest in the same ETFs that you could buy through us on your own-- JEN WIECZNER: Investment returns or savings? JON STEIN: Investment returns. JEN WIECZNER: So you can promise that? JON STEIN: Well, nothing is promise-able over the long term, but yes. Because of our tax optimization on average and over time, the average customer will have 40% more cash. It might be more, it might be less. But that's the average expectation based on the algorithms that are running today. And we're just getting better and better every year. We're getting smarter and smarter. Our technology is getting better. ROBERT HACKETT: A lot of big companies, a lot of big banks, they've been really releasing their own robo-advisors. We've seen Fidelity, Schwab. JP Morgan just recently came out with one, and they've been slashing fees left and right. JP Morgan doesn't charge you. I believe it's on the ETF fees that waives those fees. So with all of these fees coming down to maybe zero across the board, how will that affect the fees that you take out in your product? JON STEIN: So we haven't seen zero yet. So I think there's a difference between zero and something. JP Morgan product is at 35 basis points, which is more expensive than ours, even after you factor in ETF costs. And remember, we're able to choose the best ETFs from all of the providers out there. We don't have any backdoor deals to make money off of ETFs. Every other competitor in the market is either double dipping by offering you their own funds which they make more money on and which aren't in your best interest, or they have some kind of payment system that's not in your best interest. We only make money on that advisory fee and that independence means that we're always acting in your best interest in giving you the very best funds.