Betterment Expands Socially Responsible Investment Offerings

"We are listening to our customers," says Boris Khentov, senior vice president, operations and legal counsel at Betterment, noting that users are demanding investments that are aligned with their values. "We asked customers which values are most important to them, and climate change and social justice were at the top of their list."

Related: Social Issues, Outperformance Are Increasing Interest in ESG Investing

Betterment also saw the growing interest in SRI from customer asset flows. Its SRI assets under management, which grew at twice the rate of its traditional core portfolio in 2018 and 2019, have been growing at six times that rate year to date, according to Khentov. In addition, the number of customers electing the firm's SRI strategy is also growing — twice as fast as those choosing other portfolios, says Khentov.

In designing its new Social Impact portfolio, Betterment did something that is usually the purview of institutional and investors advocating for social change within corporations: engagement. It engaged with ImpactShares, the sponsor of socially conscious ETFs including the NAACP Minority Empowerment ETF (NACP) and the Rockefeller Foundation, which helped fund the ETF at its inception, to lower the ETF's expense ratio so that it could be included in its Social Impact offering. The expense ratio of the ETF — the only ETF Betterment found directly addressed systemic racism — was cut from 0.7% to 0.49%.

The overall blended expense ratios of Betterment's Broad Impact, Climate Impact and Social Impact portfolios for taxable accounts range from 0.15% to 0.20%.

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