Auto-Adjust Disclosure

Betterment offers an automatically adjusted allocation feature (“auto-adjust”) for investors that automatically modifies client allocations towards more conservative levels as clients approach their goal time horizon. An allocation is the asset mix of stocks and bonds for any investing goal and portfolio strategy composed of exchange-traded funds (ETFs), and in certain cases, mutual funds. The following Betterment investing goals are compatible with the auto-adjust feature: Major Purchase, Education, Retirement, Retirement Income, and General Investing goals, in each case, if the client has provided Betterment with a time horizon for such goal. Safety Net investing goals are not compatible with auto-adjust because Safety Nets are intended for unexpected emergency expenses, which, by definition, have an unknown time horizon. Additionally, Betterment offers cash goals and crypto goals that are not compatible with auto-adjust.

For all investing goals (except for Safety Nets), the anticipated time horizon and goal type inform Betterment’s recommended allocation and auto-adjust feature. In general, the longer an investing goal’s time horizon, the more aggressive Betterment’s initial recommended allocation. The shorter an investing goal’s time horizon, the more conservative Betterment’s recommended allocation. A more aggressive allocation is characterized by a greater proportion of stocks as compared to bonds, and a more conservative allocation is characterized by a greater proportion of bonds as compared to stocks. This results in a “glidepath” for each goal type, which is how Betterment’s recommended allocation varies by time. The following table sets forth the glidepath range for each eligible investing goal type:

Eligibility

Auto-adjust is available for the Betterment Core, Socially Responsible Investing, and Innovation Technology portfolio strategies, as well as the Goldman Sachs Smart Beta portfolio strategy, in each case if the client has provided Betterment a time horizon for their eligible investing goal. However, it is not available for the Betterment Flexible Portfolio, Blackrock Target Income Portfolio, or any other third-party portfolio strategy supported by the Betterment for Advisors platform (including Vanguard CRSP, DFA Portfolios, or any Advisor-built custom portfolio). As noted above, auto-adjust is not available for cash goals and crypto portfolios.

The auto-adjust feature is enabled automatically if a client in an eligible investing goal elects to implement Betterment’s recommended allocation. If the client selects an allocation other than Betterment’s recommended allocation, the auto-adjust feature is disabled. Additionally, if a client would prefer not to participate in the auto-adjust feature, they may also opt out of it by turning off auto-adjust in the online interface of their account. If a client opts out or deviates from Betterment’s recommendations, the client’s allocation for that goal will remain at the client’s selected allocation, and Betterment will not automatically adjust the applicable allocations based on the passage of time. 

For participants in Betterment’s 401(k) offering, Betterment at Work, if participants do not select an investment strategy, their contributions will be invested pursuant to the Core portfolio strategy, which serves as Bettement’s qualified default investment alternative (“QDIA”). The QDIA’s target allocation takes into account the participant’s current age and Social Security full retirement age (based on the participant’s birthday), and is auto-adjusted to become more conservative over time following the glidepath as a participant approaches retirement.

Warnings & Limitations

Although auto-adjust is designed to help clients reach their goals, there is no guarantee that a client utilizing auto-adjust will reach their financial goal. Betterment determines recommended allocations based on projections, which are hypothetical and not guaranteed. For more details on projections, please refer to Betterment’s Goal Projection and Advice Disclosure. For retirement planning projections, please refer to Betterment’s Retirement Planning Advice Disclosure. Additionally, although a more conservative allocation is designed to lower risk and volatility, it is also not a guarantee that a more conservative allocation will minimize losses and maximize performance towards an investment goal. Investing in securities involves risk. Past performance is not a guarantee of future results.

Clients should be aware that the use of the auto-adjust feature in taxable investing goals may result in taxable gains as holdings are sold to rebalance allocations. Auto-adjust is compatible with Betterment’s tax features, including Tax Loss Harvesting and Tax-Coordinated Portfolios. For more information on Betterment’s tax features and advice, please refer to Betterment’s Tax Loss Harvesting+ Disclosure and Tax-Coordinated Portfolio Disclosure.