Betterment Laying Off 28 Employees

Robo-advisor Betterment is laying off 28 staff members and closing its Philadelphia office, a company spokesperson confirmed Thursday.

In a filing with the Securities and Exchange Commission last week, Betterment reported having 397 employees, excluding clerical workers.

“Our business is not immune to the effects of market volatility, or to the record levels of inflation that have pushed operating costs up in all areas,” the representative said.

“Throughout 2022 we took steps to adjust to the new economic reality: We tightened spending and slowed hiring. As we examined our 2023 outlook, we determined it made business sense to further cut expenses through headcount reductions.

“We can also confirm that we are closing our Philadelphia office. The reduction in force did not eliminate all the roles in Philadelphia; we just decided to close our office space there. We still have multiple individuals who reside in the Philadelphia area.”

Business Insider reported Wednesday that CEO Sarah Levy informed the staff about the layoffs in an email that day.

The firm spokesperson didn’t immediately address reports that Betterment is subleasing a floor in its New York City offices.

David Goldstone, investment research manager for Condor Capital Wealth Management, which publishes the Robo Report and Robo Ranking, suggested via email Thursday that Betterment has thin margins if it’s profitable.

“Betterment has clearly refocused on profitability and efficiency. They recently just announced they are charging $4 per month for clients with platform assets less than $20,000 unless they meet a recurring deposit requirement. This change in fee structure likely aims to generate sufficient revenues from small clients to service them at cost or at a profit,” Goldstone said.

“The nature of the asset management business is when asset prices fall, so does revenue. With equity and bond markets both down significantly last year, this had a direct impact on revenues at Betterment. It is also a much more challenging environment to raise money as a growth company today than a year ago.

“I believe if Betterment is currently profitable, this only occurred in the last few years. Given the very low fees at Betterment, they must operate on razor thin margins. At the same time, taking a hard look at expenses and making moves to be more efficient can be healthy for a company in the long run,” he said.

“Robo advice is more than a decade old at this point, but the business model has been driven by venture capital fundraising for many of those years,” Goldstone added. “It may be time for robo advisors to prove they can operate profitably as stand-alone businesses.”

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