Betterment, which operates approximately $10 billion in assets under management, is the largest robo-adviser firm in the world. Now, the company which has previously shunned traditional Wall Street firms has announced its plans to partner with two of the biggest companies in the financial world: Goldman Sachs and BlackRock. Together, Betterment will work with these two agencies to present two new portfolio options for its customers. The development is part of Betterment's mission to provide its customers with a greater range of personalized services.
270,000 Customers, More Investment Options
The partnership between Betterment and the two investment firms is notable, particularly because of the acerbic tone Betterment CEO Jon Stein has maintained in prior comments on traditional Wall Street companies. Stein has claimed that big banks tend not to put the customer first. "The old way just sells the product," he explained in an interview with Business Insider. He continued, "the old way has the product they want to push."
Partnering with the two companies means that Betterment will offer a wider range of portfolio investment options for its 270,000 users, according to director of behavioral finance and investments for the company, Dan Egan. Betterment has vetted both portfolio options in order to be sure that they meet the roboadviser's standards of affordability and quality for its users. "We wanted to get these strategies out to our clients as quickly as possible, rather than build them out ourselves," he explained.
Smart-Beta and Income-Based Options
The new portfolio provided in conjunction with Goldman will be a smart-beta option. This will give users a more aggressive investment option compared with Betterment's core portfolio platform, which traditionally allocates money to stocks and bonds. The new option will have greater exposure to emerging markets and REITs, according to a release detailing the upcoming partnership. This marks the latest in a wave of smart-beta investment products which have grown in popularity as Wall Street firms have sought to provide investors with affordable options relative to managed portfolios.
The second new portfolio option will be managed by BlackRock. BlackRock is the largest fund manager across the globe, operating with $5.7 trillion in AUM. The portfolio through BlackRock will be income-based, seeking to provide a more conservative option which is designed to deliver target income. Egan explained that "it's a portfolio of bond ETFs across credit risk levels and delivers targeted income."
Betterment customers have had the option to engage in investments in either of the two new portfolios as of Wednesday of this week, according to company spokeswoman Arielle Sobel. Whether this is the full extent of Betterment's partnerships or just the beginning remains to be seen, and may be dependent upon the success of these two initial portfolios.