Betterment and Wealthfront can’t fight the Fed. Both automated advice platforms, or so-call robo advisors, have either dropped or are expecting to drop the interest rates they offer investors using their cash products. Wealthfront announced a 25 basis point drop from 2.57% to 2.32% Friday. Betterment will make its decision on Monday, Aug. 5, said Arielle Sobel, a spokesperson for the firm. "We believe it will, but we are not sure," she noted. "When our program banks adjust their available rates, our customers' rates will follow suit."
Automating investing platforms have been aggressively going after cash assets lately, offering interest rates that are multiples of those being offered by some banks. Wealthfront said it accumulated $1 billion in cash just months after launching a cash account. Betterment was the most recent built-from-scratch robo to offer a cash solution.
With companies from Envestnet to Fidelity to Betterment focused on “financial wellness,” these cash wars among financial service providers are in line with trends, said Dennis Gallant, senior analyst for Aite Group’s wealth management division. “You’re seeing this integration of banking and wealth management services,” he said in an interview about Betterment’s new offering last month. “It’s picking up momentum, and it’s going to expand over the next several years.”