Betterment faces regulatory scrutiny after new accounts launch
Online wealth advisor, Betterment, faced questions from US regulators within hours of unveiling its new checking and savings accounts, writes Jane Connolly.
CNBC reports that shortly after the US robo-advisory platform launched its new accounts that offer annual yields as high as 2.69% last week, it was contacted by the Financial Industry Regulatory Authority (Finra) to clarify some details about the accounts.
The exact nature of the questions has not been disclosed and Betterment told CNBC it refuses to comment on regulatory matters. The Securities and Exchange Commission (SEC) and Finra also declined to comment.
Betterment is offering 2.69% annual percentage yield (APY) for savings accounts – compared to the average yield nationally of 0.10% – as long as customers also sign up for the checking account. This rate is only guaranteed until the end of the year; without the promotional offer, the APY is 2.43%.
The APY is described on the company’s website as a variable rate that could change at any time.
Like many fintechs that want to provide bank-like services, Betterment has partnered with banks that are insured by the Federal Deposit Insurance Corporation (FDIC) that hold customers’ deposits. Betterment’s customers deposits are held by Citi, Barclays and Valley National, with insurance of up to $250,000 for checking-like accounts and up to $1 million for savings accounts.
Last year, US senators sent a letter of concern to the SEC asking how fintechs will be regulated as they start to compete with banks. The letter was prompted by stock trading app, Robinhood’s, decision to abruptly step back from the launch of a new checking and savings account that offered 3% interest, due to regulatory “confusion”.