Big bucks for Betterment

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29 March 2016
William Trout
how to invest in a business: elements to create added values and profits for the investors

The $100 million investment by Swedish VC firm Kinnevik in NYC based Betterment doubled in one swoop the amount the automated advisor has raised to date. This latest capital raise translates into a valuation of more than $700 million and follows a $60 million round that the firm completed last year.

Since that time, Betterment has increased assets under management from just over $1 billion to nearly $4 billion in assets. Betterment would not provide a breakout of AUM, but direct to consumer sales account for the bulk of holdings to date, spokesman Joe Ziemer told me. This makes intuitive sense: while Betterment Institutional has emerged as a strong driver of growth, the firm’s retirement platform has not been around long enough to make a difference. That said, the pending imposition of a uniform fiduciary standard for retirement advisors by the Department of Labor should provide a significant tailwind for that leg of Betterment’s business. Indeed, investment by Kinnevik, coming in the wake of the proposed standard, signals a validation for the robo advisory model in its pure play form. This model has come under stress in the face of competition from incumbents like Charles Schwab and Vanguard, and more recently, asset managers BlackRock and Invesco. A closer look at the Kinnevik portfolio reveals financial services to be a small part of the firm’s overall holdings. Clearly the firm sees a huge opportunity in this arena, with the automation of retail wealth management an inflection point. I have more thoughts on this deal that I’ll share in a follow up post. If you can’t wait, email me directly at wtrout@celent.com to discuss. I’d love to hear your thoughts as well.

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