Betterment, the largest independent digital advisory firm, with $30 billion in assets, is considering how it can offer cryptocurrencies on its platform.
“What we’re doing is really trying to figure out: Is there a way that we can offer crypto with a guided wrapper so that we can help educate along the way?” said Betterment CEO Sarah Levy in a recent video interview with Andy Serwer, editor-in-chief of Yahoo Finance.
Wealthfront, Betterment’s closest competitor in the independent digital advisory space, announced in April it was “exploring options to enable clients to add crypto” to their portfolios.
“I’m a big fan of crypto. I think it’s a really interesting asset class to add into the mix,” said Levy, saying cryptocurrency is countercyclical and can help investors diversify their portfolios.
But crypto is volatile, and that volatility may be an issue for Betterment.
“A lot of what we do, you know, depends on, for example, tax-loss harvesting and things that can take advantage of that volatility,” said Levy. Such sales may not align with investors who want to hold onto their crypto assets.
The “crypto with a guided wrapper” idea that Levy suggested “may manifest itself more through a lens of a long-term buy-and-hold [approach … an] asset as a smaller portion of a portfolio rather than as sort of a trading opportunity short term,” said Levy.
She also spoke about the gamification of the stock market as OK for investors who have disposable income they can afford to lose, but even those day traders are spending only about 30% of their dollars in those activities and 70% on long-term solutions, largely in ETFs and some in mutual funds, Levy said, citing Betterment research. “That’s really where we play, which is, you know, explaining to investors and helping them along the journey of a diversified kind of long-term outlook.”
The approach is working for Betterment. It reported a record-breaking first quarter, with assets totaling $29 billion, almost 50% higher than a year ago, reflecting gains in all three business units — retail, retirement and advisors — over the past 12 months. It added 56,000 clients on a net basis in the first quarter and is adding another 17,000 through its acquisition of Wealthsimple’s U.S. book of business.