Digital advice company Betterment became the latest fintech to make job cuts in response to difficult market conditions.
The New York City-based robo-advisor laid off 28 staffers, according to a spokesperson. Betterment, which manages $33.8 billion according to its most recently filed form ADV and was valued at $1.3 billion after raising $160 million in 2021, is also closing its Philadelphia office but continues to employ people living in the area.
Betterment is also subleasing a floor of its New York office, Business Insider reported on Wednesday.
"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 spokesperson said in an email. "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."
The company declined to specify if the layoffs were companywide or impacted a specific team. The spokesperson added that the company had strong revenue growth through 2022 and is well capitalized for the future.
Like other firms in the wealth management industry, Betterment’s revenue was likely impacted by falling asset prices, said David Goldstone, manager of investment research at Condor Capital Wealth Management, which publishes a quarterly report on the robo-advisor market.
“With equity and bond markets both down significantly last year, this had a direct impact on revenues at Betterment,” Goldstone said in an email. “It is also a much more challenging environment to raise money as a growth company today than a year ago.”
Betterment has signaled an increased focus on profitability and efficiency, he added. The company changed its pricing structure in November to charge investors with less than $20,000 held at Betterment a $4 monthly subscription fee rather than 0.25% of assets under management.
“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. “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.”
The Betterment spokesperson said the company doesn't disclose total employee numbers. According to a form ADV filed Feb. 10, the firm employed 397 people, meaning the cuts impact just 7% of the robo-advisor’s workforce. Other wealth management fintechs have been hit far harder.
DriveWealth laid off 20%, according to TechCrunch. The move followed CEO Terry Angelos' announcement in January that he would leave the company. DriveWealth didn't respond to a request for comment.
Addepar, which raised $150 million at a $2.17 billion valuation in 2021, laid off 20 employees, or 3%, of its workforce in December, according to a person familiar with the company.
Belts continue to tighten across the broader fintech landscape. PayPal recently laid off 2,000 employees to address a “challenging market environment," according to a statement from PayPal president and CEO Dan Schulman. SoFi Technologies, which provides digital banking, lending, investing and digital advice, made cuts to its technology team, representing less than 5% of its workforce, according to American Banker.
Layoffs are impacting the entire technology ecosystem. DocuSign, the popular e-signature company that works with many financial institutions, announced Thursday that it would cut 10% of its workforce. It’s DocuSign’s second round of layoffs in a year, following a 9% head count reduction in September.
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