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You’ve probably heard of Betterment — one of the biggest robo-advisors in the financial industry. They have all the tools you need to put your money to work for you without the conflict of interest present in a traditional financial advising setup.
Conflicts of interest
In a conventional investing setup, you have to pay your financial advisor a percentage of your investment’s returns. Typically, the broker extracts a percentage fee after the first 4 to 6 percent. Because of the way this is set up, it’s usually in their best interest to get you to invest in something that will get them as much as possible in the short-term, and to sell you company products and packages that will net them the highest commission.
Even when they’re not thinking about consciously manipulating their client to turn a profit, the conflict of interest presents a problem. How can you be sure that you are being advised to choose the best available options for your personal needs when some of the options are tied to your advisor making money?
Real, unbiased advice
Nick Holeman, a financial planning professional at Betterment, says, “The way that you get paid has an enormous impact on the types of advice that you give.”
Betterment is different in that its financial advisors are all salaried; they don’t make any money off of your returns and don’t make any commission on selling Betterment products or packages of any kind. That way, you can be sure that you are getting real, unbiased advice. Holeman went on to say, “Being an advisor for a company like Betterment, where there’s really no conflict of interest, is freeing and enlightening.”
Takeaway
It can be hard to find real, unbiased financial advice that’s well-informed and professionally knowledgeable. Betterment uses modern technology to help people seek that level of expertise without having to worry about the traditional shell game that comes with hiring individuals who work on commission.
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