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Is Betterment Safe and Should You Invest?

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SmartAsset: Is Betterment Safe

Betterment is a robo-advisor that allows investors to create and manage their investment portfolios online. Whether you’re building wealth for retirement or other financial reasons, Betterment functions as your digital investing solution. With billions in assets under management, the company offers a range of online services, including two investing accounts, tax-loss harvesting features and competitive management fees. But should you use it and is Betterment safe? If you have questions about investing at any level, consider speaking with a financial advisor.

Why Safety Shouldn’t Be a Concern With Betterment

Betterment has a strong reputation and is recognized as one of the largest online investing services. This is good but it also means that the company has hundreds of thousands of clients to please. Before we determine whether this robo-advisor is safe, let’s look at the products and services it offers. You can also check out our full Betterment review to see how it stacks up against other robo-advisors.

The investment management account options Betterment offers are Betterment Digital and Betterment Premium. The first option provides portfolio management to users with balances under $100,000. These users receive an annual management fee of 0.25% and also rebalancing, tax-loss harvesting and SRI investing. Betterment Premium, however, charges users with account balances of at least $100,000 a 0.40% fee. You also get phone access to certified financial planners (CFPs). In addition, the company also offers a user interface and a mobile app feature.

But can you trust Betterment with your money? The answer is an unequivocal yes. When you manage your investments through Betterment, all the assets and securities in your portfolio are strictly under your ownership.

Additionally, your personal investment money and Betterment’s company’s funds remain separate for the entirety of your membership. This means you retain full control over your money, allowing you to add, withdraw or transfer as you please. Furthermore, Betterment cannot use your money to pay for any of its company costs, and it also has a fiduciary duty to invest for you and act in your best interest. In addition, if you choose to close your account with Betterment, it will simply transfer your funds back to your linked checking account.

Third-Party Protection and Regulation

Further, the Securities Investor Protection Corporation (SIPC) protects all Betterment accounts, up to $500,000 per account. This protects you against any losses that may arise as a result of broker error. So if you’re thinking about investing with Betterment, you should have both a safe and successful experience.

Finally, Betterment is a member of the Financial Industry Regulatory Authority (FINRA). It oversees and regulates brokerage firms, stock brokers and exchange markets. As a private, non-profit agency, it mandates how investors and securities participants can behave and interact. Should any participants be non-compliant, the agency has the authority to discipline those involved. At its center, FINRA works to protect investors and maintain market integrity.

Are Robo-Advisors Safe in General?

SmartAsset: Is Betterment Safe

Robo-advisors have grown in popularity largely because they offer convenient, automated online investment advice and management for lower fees. Some of the top robo-advisors include Vanguard, Betterment and FutureAdvisor.

These digital services also provide automated investment tools to build your portfolio. While many robo-advisors primarily use non-human investing consultation, many companies are offering users both robo-advising and traditional advising options. In other words, some services also allow you to speak to a human financial advisor while building your portfolio digitally.

But are all robo-advisor services safe? Most robo-advisors, like Betterment, operate under a federal fiduciary standard. Betterment is registered with the U.S. Securities and Exchange Commission (SEC), so it has a federal duty to serve your best interests. Furthermore, most robo-advisor companies also maintain heavily encrypted websites, so you typically won’t have to worry about your data and money’s safety. However, there are certain measures you can take to enhance your own safety. This includes downloading malware preventive software and turning on your computer’s firewall.

You can also determine the best advising option through a few other ways. Thorough research can go a long way in your online investing search. One way to choose the right advisor is to see what others are saying. All robo-advisor services generally apply the same safety measures for their users’ investment portfolios. However, you could gain additional insight by assessing the experiences others, including coworkers and friends, have had with the company.

What to Do If You Feel Your Money Isn’t Safe

If you’re concerned about the security of your money, you should first try to get in touch with the company’s customer service representatives. Normally, they’ll be able to offer comprehensive solutions on how to proceed and possibly more information on anything that has led you to be worried about your investment dollars.

However, if you’re worried that your funds are at risk and don’t want to take any chances, you can close your account with the company. The company will then transfer your money back to your checking account. This should be considered a last option.

Betterment, for instance, transfers its users’ money back to their personal checking accounts after they close an account. While the step is necessary for the worst-case scenario, you should first communicate with a company representative to see if the company can provide a solution. You don’t want to lose out on time when your money could be working in the market if you can avoid that result.

Bottom Line

SmartAsset: Is Betterment Safe

Overall, Betterment can be a great, low-cost online investing service if you’re confident in the security measures it takes. While the robo-advisor maintains its status as one of the largest digital services in the county, it also maintains its fiduciary duty to its users. It’s a member of FINRA, is registered with the SEC and customers are protected by the SIPC. Your money is in good hands with Betterment in terms of fraud, but we believe it’s also a good investment option for the right situation.

Tips on Investing

  • If you’d like to invest but aren’t sure where to begin, you should consider seeking professional advice. A financial advisor can help you develop a plan for reaching your financial and investing goals. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • If you decide a robo-advisor is suitable for your financial situation, make sure to carefully weigh the products and services offered by each company you research. Here are our top 10 robo-advisors to help you choose.

Photo credit: ©iStock.com/Pinkypills, ©iStock.com/gradyreese, ©iStock.com/Asawin_Klabma

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