Betterment adds checking and savings products

Betterment, the New York-based automated advisory service for wealth management, is adding FDIC-insured checking and savings account services through partnerships with several banks.

It’s the culmination of something we’ve been working on for a long time.,” says Betterment chief executive and founder, Jon Stein. 

While the money management services company has long been one of the dominant forces in fintech — alongside its competitor Wealthfront — one key piece of its offering had been missing. That was its ability to operate as a bank and have an even better window into the finances of its customers.

With the addition of these services, Betterment in some ways completes its financial services puzzle. Historically, says Stein, there were two segments to financial services. Banking for labor and wealth management and financial services for the owners of production. Over time, in the 70s and 80s, deregulation opened aspects of financial services to working class investors, but the industry didn’t evolve to serve those customers.

“I believe that the average American is very poorly served by both institutions,” says Stein. “Banks make money off of net interest margins, putting you into debt, or annoyance fees. On the other hand, most of the trading firms also make money when you do bad things. I believe that people need a cash advisor. One who aligns with them in a fiduciary sense and helps them make the most of their savings.”

Like other investment management and financial services startups in the fintech space that focus on savings and investing, Betterment has seen tremendous growth through the financial downturn caused by the global response to the COVID-19 pandemic.

“We saw net new customers even in the worst weeks of March,” says Betterment founder and chief executive Jon Stein. “And more people were depositing. Twenty five percent more people were depositing than withdrawing. Just among millennials that number was thirty six percent.” 

To date, Betterment has amassed some $22 billion in assets under management and Stein says the financial services company has seen 40% growth year over year in the company’s topline.

Now, with the new FDIC-insured checking account, that number is likely to grow.

“We’re partnered with NBKC to provide checking accounts,” says Stein. “For the savings product it’s a broker-deposit product we’re working with over a dozen banks on to bring the best rates we can find to our customers.”

Right now that means no ATM fees at any location in the world. The accounts also come with no overdraft or other checking fees; no minimum balance requirements; no foreign transaction fees; and mobile checking deposits. The accounts are insured up to $250,000 for the checking accounts and $1 million for an individual savings account. Joint accounts are insured up to $2 million.

Debit cards can be unlocked from an account holders phone and money can be transferred between Betterment accounts.

The savings and checking accounts may be handled by different banking providers, but the company said that it will sweep money between them for customers. “We’ll try to push as much as we can into the savings vehicle,” says Stein.

“The bigger picture thing is that we’re a cash advisor. We’re going to be telling you how to invest that,” says Stein.  “We’ll suggest that, ‘Hey you might want to set up your retirement goals… or it’s time to start saving for college… It feels like everyone is adding a debit card these days… for us it’s always been part of the vision to be the central part of our financial relationship.”