In a funding round that more than tripled the amount raised in its previous round, wealth management innovator Betterment raised $32 million from a sizable group of both new and existing investors.
Betterment’s total capital now stands at $45 million. Participating in this latest round were:
- Anthemis Group
- Bessemer Venture Partners
- Citi Ventures
- Globespan Capital Partners
- Menlo Ventures
- Northwestern Mutual Capital
Among the goals for the new capital cited by Betterment CEO Jon Stein is expanding the company’s range of products. This likely includes a new product for RIAs, Betterment Institutional, that the company plans to release soon.
In an interview with Forbes.com, Betterment CEO Jon Stein said
he expects his company to have more than $1 billion under management by the end of 2014. Betterment currently has about half that amount under management right now, and Stein says that AUM is growing at a rate of 10% a month.
Betterment works by investing its customers in low-cost, index exchange-traded funds. With investments ranging from short-term U.S. Treasury bonds to stocks from emerging market countries, investors can achieve broad diversification without single-stock or liquidity risks. Asset allocation is personalized based on the short or long-term goals of the individual investor.
The company stresses that its goal is not to beat the market on a risk-adjusted basis. Instead Betterment practices “passive investing,” looking to deliver market returns at a reasonable price that is lower than that offered by traditional investment managers.
Betterment has no minimum investment or minimum account balance, though account balance is a factor in determining pricing. The company charges a management fee ranging between 0.15% and 0.35% that covers everything from trades to advisory service. The company has 30,000 customers, with an average age of 36. However, 20% of Betterment’s customers are over the age of 50.
Founded in 2008 and based in New York City, Betterment was a Best of Show winner at FinovateFall 2010. See a demo of their presentation here