Is Betterment Safe? A Closer Look at This Investment App

Bob HaegeleBy: Bob Haegele

October 19, 2021October 19, 2021

Betterment is one of the oldest robo-advisors still in operation, having started life in 2009. As a pioneer of the industry, Betterment continues to serve investors who want a low-cost, simplified approach to investing.

Robo-advisors as a whole have experienced incredible growth. The average assets under management growth for 2021 have already reached 34%, for example.

But is Betterment a safe place to invest your money, when compared to traditional brokers? Let’s talk about how Betterment protects its investors.

What is Betterment?

Currently, Betterment boasts more than $10 billion in assets under management. This is all investor funds and means millions of investors have put their trust in the platform.

Investing with Betterment charges no trading fees or commissions. All you pay is 0.25% per year in management fees, which is more than many robo-advisors but lower than traditional brokerages.

Overall, Betterment fees make it a worthwhile platform to invest with. Plus, you also gain access to tax-loss harvesting, which is usually only a feature of traditional brokerages.

To find out more about Betterment, you can read our full Betterment review. But what safety features does Betterment have to protect your money?

Direct Ownership

What makes the platform safe is the fact that all assets you hold in your portfolio are under your direct ownership.

Some platforms hold the assets themselves, which means you don’t really hold the assets at all. When you create an account with Betterment, they’re merely the broker, not the asset holder.

It’s a good rule of thumb for first-time investors. Unless your stocks, bonds, and ETFs are in your name, you own nothing.

Keeping Investor Funds Separate

Like with any business in the world, there’s always a risk of your broker collapsing into the void. Betterment has already prepared for this by structuring its business in a way that protects investors should the platform experience financial difficulties.

All investor funds are ring-fenced. They’re maintained in separate accounts from Betterment’s own funds to enable investors to maintain complete control of their money.

In theory, if Betterment investing failed tomorrow, investors would instantly receive all funds related to their accounts. If you ever decide to leave the platform, Betterment will refund your money to your linked bank account within a matter of hours.

Securities Investor Protection Corporation (SIPC)

Betterment is also a full member of the SIPC. Even though your funds are held separately, the SIPC offers an additional layer of protection should Betterment fail to fulfill its obligations.

SIPC protection guarantees your money up to a limit of $500,000 per account. If you have less than this in your account, you can guarantee that you’ll eventually get your money back whatever the circumstances.

Betterment 2FA

Two-factor authentication, or 2FA, is a security feature designed to protect individual user accounts from attack.

All investors have access to this feature. Whenever you enter your password, you’ll receive a unique code via SMS. To enter your account, you’ll need to enter this code, which changes every time you log in.

According to Microsoft, 2FA stops 99% of all common attacks on your account. It’s the simplest way to keep your money safe. 2FA is the gold standard of investor account protection, and Betterment encourages its users to keep it switched on.

Are All Robo-advisors Safe Ways to Invest?

Now you know about the protections Betterment has in place, this leads us to the question, “Does every robo-advisor have the same level of security?”

The vast majority of robo-advisors are registered with the appropriate bodies, such as the SIPC. Most robo-advisors also have heavily encrypted websites to deter hackers.

Security is important for investors to protect their financial futures. Here are some tips to keep your investment portfolio safe:

  • Two-factor: Always enable 2FA when creating your account.
  • Passwords: Change them regularly.
  • Investor protections: Be aware that foreign robo-advisors may not have the same investor protections in place as U.S. roboadvisors.
  • Security: Review the platform’s security policy. Do they even have one?
  • Community: Speak to other users about how safe they feel when using the platform. You’re not the only one who’s concerned about whether their money is safe.

For the most part, your account’s security relies on the actions you take to keep your credentials safe.

The Bottom Line: Is Your Money Safe with Betterment?

As mentioned in our full review on Betterment, we believe that Betterment is one of the best robo-advisors available for new investors to get into the market.

When it comes to security, Betterment does all the right things. At Modest Money, we see no reason why any investor should ever have to worry about their money when they create a Betterment account.

Start investing safely with a Betterment account. Follow our unique Modest Money link and get one year of no management fees now.

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Bob Haegele
Bob Haegele

About the Author:

Bob Haegele is a personal finance writer, entrepreneur, and dog walker. He's a money management expert and investing connoisseur. Bob has been writing about personal finance for three years and now manages several personal finance sites, including The Frugal Fellow and Modest Money. You can also find him contributing to popular websites such as GOBankingRates, Bankrate, and You can see more of his work on Muck Rack and Contently, or connect with him on LinkedIn.