In May of 2015, I gave at talk at the MIT Fintech Conference about our work at Betterment using unprecedented data on investor behavior to close the “Behavior Gap”.

My main points were

  • Betterment is a novel platform to measure, understand, and influence retail investor behavior
  • Maximizing investor returns has to include returns net of taxes, fees, and behavior
  • Investors try to time the market, but the more they change their portfolio allocation, the worse they perform, on average
  • Experimental evidence in production shows that Betterment’s Tax Impact Preview feature can reduce allocation changes, thus improving returns
    • Investors have a bias towards active management
    • Investors have a bias against taxes
    • Making the taxes incurred by actively managing more salient drives improved behavior