Betterment just released an updated Management Fee schedule going forward in 2017. Here is the text from the notice that was released:
“After listening to our customers, we realized our pricing could be even more straightforward. So, we’re moving to a flat fee of 0.25% per year of your average balance. In addition, we’re eliminating our $3-per-month minimum fee, and eliminating our fees on all balances above $2 million”
This is great news for those just starting in robo-investing. The highest fee rate of 0.35% is being reduced by 0.10% and the $3 per month minimum that used to apply to accounts that did not have a recurring monthly deposit is now history. This should make Betterment much more accessible to those may not be able to reliably invest $100 each month and removes the penalty if you wanted to take a break from investing. All good moves on Betterment’s part.
The catch is if you had over $100,000 invested previously your rate was 0.15% so that has increased by 0.10%. How many investors have balances over $100,000 and how this will effect future high-value accounts is something that Betterment will have to pay attention to. They have tried to balance this with the elimination of all fees above $2 million dollars (No fees for money invested above $2 million). I don’t believe that the fee changes of this size are enough to push away high net worth investors but time will tell.
Overall I think this is a great change for Betterment to make. They have gone to an easily understood flat structure that reduces non-investing penalties and gives incentives to extremely large accounts. For myself it is a net positive as my fee rate will be reduced from 0.35% to 0.25%. I appreciate the removal of hurdles to new investors and the move towards simplicity. This reinforces my choice of Betterment as my robo-advisor platform.