Betterment for Business is built to deliver better retirement outcomes for 401(k) participants. This includes empowering participants to align our retirement savings advice to their personal values.
We decided to develop an SRI portfolio because, currently, most 401(k) participants do not have access to any SRI solution. That fact may seem counterintuitive considering research showing there are important benefits to providing SRI options within a 401(k). A 2017 survey by NAPA reported that 67% of employees who do not participate in their 401(k) plans would choose to do so if they had access to an SRI-oriented portfolio. Furthermore, 60% of surveyed participants said that they would increase their contribution rate if they knew their investments were doing social good.
By offering SRI to 401(k) participants, we believe we can help plan sponsors increase plan participation and help SRI-focused investors save more for retirement. The SRI portfolio is designed to maintain our fundamental advice for a low-cost, diversified investment strategy with tax optimization, while helping socially conscious participants make sure their investments reflect their personal values.
What is Betterment for Business’ approach to SRI?
401(k) plans have only started to include SRI funds in the last few years. The first SRI-oriented target date fund didn’t enter the market until 2016, and most SRI products in employer-sponsored plans are actively-managed mutual funds with high fees. Only recently have lower cost options, like SRI-oriented ETFs, emerged in the market.
As we developed our SRI portfolio, we analyzed all low-cost SRI funds available, searching for products that could replace components of our core strategy without disrupting the diversification or cost of the overall portfolio.
Participants in Betterment for Business plans have the opportunity to invest using an approach that reduces exposure to companies that are deemed to have a negative social impact—e.g., companies that profit from poor labor standards or environmental devastation—while increasing exposure to companies that are deemed to have a positive social impact—e.g., companies that foster inclusive workplaces or commit to environmentally sustainable practices.
A solution that aligns to participant personal values
Currently, most SRI approaches in employer-sponsored retirement plans offer participants a few SRI fund options that may not be low-cost and certainly don’t constitute a fully-advised SRI portfolio. Diversification and controlled costs are investing fundamentals that all investors—SRI or not—deserve. They’re principles that live at the heart of our advice for retirement savings.
Offer your employees a 401(k) solution that they can align to their personal values. Our SRI portfolio option is built into every 401(k) plan provided by Betterment for Business.