Ask HN: Bettermet Raises Fees – are you leaving? | Hacker News Reader

Ask HN: Bettermet Raises Fees – are you leaving?

9 points_uy6i10 comments

Just got this email from betterment telling me they are raising my fees 67% - will you leave? Any better options?

"Since we launched Betterment in 2010, we have worked every day to empower investors like you to do what's best for you and your money, so you can live better. I hope that you feel we've been living up to that aspiration.

Customers have told us that they want direct access to Betterment's financial experts. So today, we're introducing new plans that allow customers to choose how they prefer to receive financial advice from Betterment: Digital, Plus, and Premium.

You are currently on the Digital plan, which will offer the same great service you've enjoyed with Betterment to date. Plus and Premium plans include direct access to our team of CFP® professionals and licensed financial experts, who will actively monitor your accounts to help you confidently reach your financial goals. If you're interested in learning more about the new plans, you can read about them on our Resource Center.

Each plan will cost a simple, flat rate. Starting June 1, your Digital plan will be 0.25% per year of your average balance. In addition, we're eliminating our monthly minimum fee, and eliminating our fees on all balances above $2 million. Furthermore, all plans are backed by our new Satisfaction Guarantee..."

The price change itself isn't enough reason to leave them, but the way that they've handled the price change and their responses to customers is definitely pushing me that way.

It feels like a very tone-deaf response from Betterment that, while people are disappointed in the price hike, the loss of trust is coming entirely from the way Betterment is handling it and responding. It's hard to trust a company with your retirement when they literally seem like they don't care at all about the loss of trust.

I don't yet know if I'm leaving, but I am extraordinarily disappointed. I sat down and did the math a while ago and came to the conclusion that, with the benefit of the taxable/tax-deferred tax management and tax loss harvesting, 15% was a reasonable amount to pay. After I do it again, it may turn out that .25% still puts me ahead, but this leaves a bad taste in my mouth. How long before they eliminate the digital plan and put me in the .4% plan?

It looks like they have now decided to grandfather the 0.15% rate for a few months (this was posted last night).

> My fee was lower before the pricing update. Will I keep my lower rate?

> If you had a balance of $100k to $3.3MM as of Jan. 31 and were on the 0.15% pricing plan, the price change will not go into effect until June 1. On June 1, your fee will go up to 0.25%.

Just go buy VTI. Unless you value all the trappings of Betterment at 0.25% of your balance, I haven't seen any analysis online that suggest returns are any better outside of random chance. [0]

The only con would be you'd need to spend a few hours a year managing your money.

[0]: http://www.mrmoneymustache.com/betterment-vs-vanguard/

That's a pure equity index. but yes, could just buy a target date fund.

I think that is the trade off, at 15bps the math sort of made sense just from a time savings/hassle factor, at 25bps, not so much...

I don't think it's a coincidence that they moved to the same 0.25% fee tier as Wealthfront. Though I don't believe Betterment is matching the first $10k managed for free. It was always more appealing to get started with Wealthfront than Betterment because of this.

If someone is putting in a few hundred dollars per month or less, a $3 per month fee on Betterment was robbery percentage wise.

Edit: technically they lowered fees for <$10k and raised fees for >$100k

Also, they're charging no fees above $2M. Since the old fee on accounts over $100k was 0.15%, and the new fee (for the "digital" tier) is 0.25%, this means that they're lowering fees on accounts above (0.25%/0.15%)*$2M = $3.33M. Is Betterment trying to get into this high-net-worth space? They can't have too many customers right now, given that their average account size is $29K. (https://www.fastcompany.com/3067717/new-money/betterment-add...)

I thought the $2M was a weird magic number. I'm curious if there's a deeper significance to choosing that.

My guess is that they basically want to have a flat fee but don't want to discourage a big account, if you figure that if you retire in your mid 60s, you probably need 8x-13x your annual income in retirement savings, $2m would cover the bulk of the market... also, $2m is the area where you start competing with the lower end of the high net worth wealth management market...

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