Betterment CEO on Empowering More Women in Finance

Late last year, Bloomberg News reported how for gen Z, it's daunting to think about saving, investing and planning for a retirement and in markets that have been in turmoil with a possible recession looming, and as wages haven't kept pace with inflation and more so, let's get some thoughts on financial wellness with us is Sarah Levy. She's chief executive officer of the independent Digital Investment Advisor. We're talking about betterment. Sarah, by the way, spend over twenty years

at Viacom, was COO there. She is joining us via zoom in New York City. Hey Sarah, great to have you here with Katie and myself. What's the question, first of all, that you get most asked about in this investment environment. To say it's unusual probably an understatement. That is an understatement. Thank you so much to both of you for having me. I think probably right now, the most common question is a pretty basic one, which is what should I do with my money in these volatile times?

And I think that's a question being asked by investors really at all stages of their investment journey, and so all stages of their investment journey. Obviously, if you think over the past two years, the retail investor was a type of investor that we got very well acquainted with. Obviously, the market environment in twenty twenty two was much different from twenty twenty one. Twenty twenty What is the state of the retail investor now? What are you seeing at Betterment?

So our philosophy in general has been sort of tried and true in terms of starting with a long term plan, sticking to your plan, being diversified, and not getting distracted by the markets. What is interesting to see right now is that you know, there are other platforms and investment

solutions that don't necessarily preach that sort of consistency. And so, as you point out in twenty twenty one that there was a lot of excitement sort of chasing the latest trend, we a Betterment never really believed in that, and so I think by and large we attract that a consumer who agreed with that philosophy, which was, you know, don't get just don't get distracted, and don't make changes when the market moves, because this is really about a long

term play and it's about long term savings. So if you take that as context, what we're seeing now is that we're seeing a lot more money being put into savings because it's a high yield environment and there are a lot of great rate available while people are sort of waiting out you know, the Fed, and waiting to see kind of what the markets are going to do. Great,

that's what I wanted to ask you. Your platform, you know, avails you a lot of information, and I was curious what were some of the dominant broader investment trends right now. So people in cash shorter investment trends basically maybe assign a big sign of risk off at this point and just kind of waiting it out. Yes, I would say for sure risk off. Savings is absolutely a place people are putting their money. But retirement investing, I would say,

is remaining stable. So people putting money into iras, people putting money into their four oh one ks, those remain really good sort of long term thinking about compounding interest and thinking about kind of tax advantaged investing, I would say is much more resilient than taxable accounts. Right now, Sara, are they reducing the amount of money that they're putting in their four oh one K or retirement accounts as a result, as we talk about this kind of more

cautious stance, we're not seeing that. We're seeing a very consistent habits in retirement accounts. And what we're seeing is really a shift that money we maybe saw last year going into investing, those same dollar values are going into savings this year. And when you say going into savings, could you break down a little bit more of what that means because the conversation I have all the time

is that cash earns something. Right now, if you're talking about treasury bills, if you're talking about money market accounts, you know the yields there are higher than they have been in a long time. I mean, just specify what you mean by savings, that's right, Yes, So I think on our platform what we offer is a high yield cash account. So that's where we're really seeing the activity. We're currently offering a four percent apy and that's really

top of market. One of the things you see is that you know, the bigger banks have lower rates and that they are benefiting from this cash environment, but we see the opportunity to really pass that along to our consumers. And so it's been a really great way for our particularly for our tenured customer base, but also for new customers to kind of enter for the first time and say, I'm going to put my cash here, I'm going to get some yield. And there hasn't really been a tremendous

amount of incremental yield to be gained through duration. So the idea of sort of locking up your money isn't really necessary right now in this climate because short term rates are so high. So that's what we're seeing, Sarah. One thing I wanted to ask you aim you guys generally speaking, you know, platforms like Betterment or robo advisors, no stranger to investment algorithms. The focus now on chat,

GPT and generative AI. What are the conversations that you guys are having around that and whether some of the folks on your platform are like, hey, what are you doing? What does this mean for us? So it's interesting because I would say we are an automated platform. I think to say that AI is powering or investing would be disingenuous. So we really have real professionals behind the scenes, those human beings. So not the technology are actually putting together

the portfolios for us. What the technology is doing is rebalancing portfolios according to the rules set by the humans. So I think in that sense, things like chat GPT are not acting our portfolio construction. I think where we're seeing the potential of chat CHPT again sort of very early days, is thinking about messaging and marketing and taking

the temperature of things going on in the industry. UM where you know, where you can you can work with your creative teams um to really kind of meet the moment. So let's so for necessarily screening for holdings more like you say, it sounds like more language based applications is what you're looking for. So far, that's where that's where we are. Um, we don't. We don't yet see the

application necessarily. I think, you know, humans still have a real role to play an investment selection UM, and it's pretty complicated, so we're not We're not there yet. I will say the humans around the world, thank you, Sarah. We do want to ask you Goldman Sachs with Goldman Tomorrow, you guys are hosting a panel uh and an event International Women's Day, Financial Impowerment on the agenda. Tell us

a little bit about it and what your your focus is. Yes, so I'm really excited to be joined by Patti Rafael, who is a longtime Goldman Sachs Wealth Wealth executive. She's had a tremendous career and so the two of us, what we're hoping to do is really sheer tips on investing, on careers, maybe on life. And she's a fun and fabulous woman, So hopefully there'll be a little personality and people will come away with some practical and easy to implement tips on sort of how to do the best

with your money. Are we getting more empowered? Can I just ask you? I feel like we've been talking about financial empowerment for an awfully long time, probably easily a decade or two. Are we getting more financially empowered? In your view? Well, I don't know that this is really

just about women. To be honest, I agree. I think women sort of carry the stress sometimes more, and so what we can do is we can demystify some of that by really breaking it down by offering ways that technology can make things kind of simple and set it and forget it, you know. I think what I'd like to do is really show people that it's not that scary. I think the word investing can be scarier than the word saving. And really there are just two sides at

the same coin. Right, It's about starting early. So are we more empowered? I mean, you know, I like to think, so I like to I like to think about these you know, senior women who have had great careers and think that that sets an example for what the future can hold for the you know, the next generation. I really like that point that savings sounds safer than investing. But I mean, we don't have much time left. But I'm also curious. I mean, in thirty forty seconds, what

does financial empowerment look like? That's a word we toss around all the time, but what does being empowered financially actually mean? I think being empowered financially starts with a plan, right, and there's a rule of thumb you can follow or you can personalized, and that's you know, your choice in terms of how deep you want to go. I think being financially empowered is understanding what's available to you. The

government offers a tremendous amount of tax advantages. You want to take advantage of that, right, whether that's a four owin k or an IRA or all the other various accounts for educational savings. I think being empowered means means compound interest means taking advantage. Time is money, Start now, no matter how small, and think and then I think. Lastly, I would say, you know, make it simple and stress free. And that's where technology can help. All right, I gotta

leave it on that note. Good luck with your event tomorrow. Sarah Levy, she's chief executive officer at Betterment. Joining s via Zoom from New York City, Carol Master, Katie Greifeld. We are Bloomberg Radio. You're listening to the Bloomberg Business Week podcast. Catch us live weekdays from two to five pm Eastern on Bloomberg Radio. The Bloomberg Business a band you two. You can also listen live to our flagship New York station, Just Say Alexa, play Bloomberg E Love

and Dirty. Yeah. We are talking about a ceiling, the debt ceiling, to be exact, it's potentially the risk that Wall Street doesn't want to ponder this story in the upcoming issue of Bloomberg BusinessWeek magazine, add on newstands later this week, already online at Bloomberg dot com slash business Week. It's also on the Bloomberg Terminal. It is written by

Bloomberg's Liz McCormick, Eric Watson, and Josh Wingrove and Mike Dorning. Liz, by the way, Bloomberg News, chief correspondent for Global macro markets, are go to for everything on this topic, and I feel like the bond market man, you are so revered around here. She joins us along with the editor of Bloomberg Business Week, Joel Webbert Joel and Liz both in our Bloomberg Interactive Broker Student. I mean, she's kind of a goddess, like her reputation proceeds are. I don't know

if she knows that, but it does. Can you tell my kids that let's talk about let's talk about the bonds and really let's talk about the debt ceiling. And I just want to say, Lionel Richie's dancing on the ceiling. The tone of that music and that song not the same thing that's in the tone of this story. The story is all about the debt ceilings down, aren't you? We are? And look like it's in the forthcoming issue

of Business Speak also Today's Big Take. What really resonated with me here is that it's like we've been in this showdown for a while already. Technically we may have already crossed a line a little while ago that was kind of a significant when Treasury's kind of bailed us out. But it might get a lot worse between now and summer. I'm trying to suppress the laughter. We're going to talk about this like every day for eternity soon, Yeah, I not, But like, how bad could it get less? Well, that's

the thing. And like you said, we in January hit that debt ceiling in which they had set a bit ago, and thirty one point four trillion. Now the Treasury departments, using extraordinary measures kind of a special accounting moves to

stay under it because they can't go above it. But you're right, Joel, that this is only going to get worse because there is, of course a limit to how long Treasury Secretary Janet Yellen and her team can do these maneuvers and stay under the debt limit, So they really needs to raise it or resuspend it, which they do many times, and even Chairman Pal today was talking and saying this is crucial. We need this, you know, full stop. They need to raise the death ceiling. So

I think it's only going to heat up. So maybe we're kind of prodding the markets today and our story saying you know, listen, you should be worried more, but they'll get more worried for sure. I feel like part of the problem though, is that, you know, like you said, we reach the debt limit in January and then through extraordinary measures, the FED figure is something out and it seems like we come up against the seas ceiling and

then we always figure something out. What's different this time around? Potentially, well, I think this time around, and you know, the gentleman on the story with me are the you know, Washington politics experts, but that you know, Eric Wawson will tell you that we have a very contentious situation here where both sides, you know, are you know, jockeying. You know, the Republicans don't want a clean death sailing raise, which means that we just raise it. They want to kind

of jockey for some future spending cuts. And President Biden and his team is saying, no, we don't want to do that, and you know, they seem pretty entrenched, and it kind of hearkens to twenty eleven where we had a very contenent stat sailing episode that they eventually did come to something in the final hour, but it was such a messy process that the US for the first time ever by SMP got there rating downgraded from triple A, and you know that had a sting, even though we

didn't see rates jump up sharply. Then you know, the stock market went down and it was a tumultuous time. So I think that's what people think this time, it's

going to go down to the wire. And Joel and I were talking that, you know, Eric had a nice story of like the Democratic leader on this debt negotiation saying, hey, we're going to go to the mat here and that it really might make them What mean, the markets have to go crazy till Washington gets a fire under them, right, stock market sells off their constituent saying what's going on?

You know, and then then he's realized we got to come up with an agreement, right, So that that story that Eric wasn't did about Brendan Boyle of Pennsylvania representative top democrat on the budget community. When I read our story and then I read that story, I was like, oh boy, this is this got scarier all of a sudden, right because he's basically saying like, we're not going to back down, like this will have to come from Republicans. That is not the dynamic that we had back then.

So do that calculus exactly. That's why, like I printed out Eric's story, I'm like, oh, this is troublesome, you know, And you know, it's funny, Joel, because everyone thinks, which we came to in our story, that of course they'll come to something. We've seen this movie before. It's a headache, we hate it, but well they'll do it. But when you know, you look at some of this stuff like Eric's laying out, it's really troublesome, and you know, like

we hope, you know, cooler heads will prevail. No one would jeopardize the US treasuries as the world's safe haven security, which some people say. People may not realize if there's a default, be it short, you know, because they'll say, oh, well it'll be short, you know, but that doesn't matter. You know, the US doesn't default on their debt and if they do, it could have repercussions for years and years. Okay,

so X date, we don't know when that is. What's our best sense of not a new dating app is it's not well. Janet Yellen says they have at least until like June. It seems like most of Wall Street is saying it probably goes until August. But it's very unclear because you know, it's kind of coming at the worst time. We're in tax season right and the government doesn't know exactly how tax flows are going. I know,

I want a refund. They're trying to figure out of a Yeah, if we didn't get our refunds, I know, I know, I mean, that will happen. But they don't know how the flows are going to be, how much you know, the cash flows are going to go, how much refunds they're gonna have to pay out, how much inflows people paying their taxes. So it's very hard for the Treasury to kind of have a good timing of,

you know, when we'll run out of these maneuvers. Help if I was getting a refound and I said, why don't you guys just sit on it till August and like it's like social Security a little bit and maybe I get a little bonus. Wow, you're the man. I'm just thinking he's got of I don't think I'll give mine whatever. Now, what rate do you want? Exactly exactly?

So that's made it harder. That's why, you know, we know in past times, what a lot of the traders do is say, hey, listen, I'm not buying any Treasury bills or bonds that have coupon payments, which is this semi annual interest that's coming around that crazy X date time. But now this X date range is so wide that it's kind of murky in the market. Right, people are like, I don't know yet what debt to avoid, right, So maybe maybe that will become more clear as a troublesome

when we get a better date. You know, maybe we'll get an update from the Treasury of when that X date is going to be. And is there any sense if if the wheels start coming off this car ahead of that X date, do we have any sense what what's going to break? Or is it just gonna break? And then we're gonna find out. Well, you know, after twenty eleven, a lot of the called parties that be

that oversee the treasury market did a lot. They were like, we don't want to go through this again with having no idea, So they did a lot of backup plans, like what if, like maybe Treasury says, well, we'll delay the maturities a day. You know, they can deal with that because you have to remember there's the repurchase agreement market that uses treasuries as collateral. So there's a lot of things that you know, what if it couldn't even function.

So there's been some backup plans. But even those officials say, but we're not sure. You know, we haven't been through this before. You hope the treasury market will function. But Chairman Pale has also said, like, don't expect that the Fed can swoop in and make a cure all evils. That it would be repercussions on the economy for a

long time. It may sting borrowing costs for years and Years's playing that to me that if indeed we get that default, I mean, if somehow then there's a fix, quick fix after it, list would we still have that long term impact. Well, that's what a lot of people say. If course, we don't know till it happens. But you know, some very smart people have said in various stories we've

done that it could be cured very fast. But you have to think some big investors say, I might add that I need a little cushion because you know the US has defaulted, right, you know, so you would say there might be some premium added to yields, not just for a day or two, maybe maybe small, but as a baseline for a long time because it's totally different dynamic. You know. Yeah, okay, so this is gonna be fun. We're gonna talk about this how many times? Yeah, I know,

we're gonna be here for a little bit. Um, what do we think on the Republican side? Um, are they Is there any cracks anywhere in the in the in the wall that may be exposed here that may lead you know, a small group of people to say, you know what, we're not standing with McCarthy anymore. Well, not yet. And again the guys on the story were better on this, and Eric was saying earlier today when we talk that

you know there's a few strongholds. Remember McCarthy took so many votes to get him in as speaker, and he had to cut some deals and you know that's made it harder because they also can kind of, let's just say, in late terms, spike him as the speaker. They have that option, so he has a lot to kind of

payback to, do you know. Eric was saying that maybe, you know, McCarthy in the end, you know, do the best for the country and say, you know, I'll followed by sword and you know, we'll make a bipartisan deal, you know, so that it may go that way. But again, I think it comes down to markets getting ginned up, stock selling off, and that being in the front of the local papers and things that policymakers may realize, oh, this is bad, and you know, we'll come up with

a deal. So it's just hard for me to believe that they won't. But like you know, one investor said to me, I don't know, never say never, you know, don't know. You know, Okay, So why throughout all of this and whatever may come yet Marcus been kind of singling like everything seems like it's not quite registered that this could go awry. Well, I think there's a few things. One is, like we said, they can't kind of know

yet exactly when we'll hit that wall. Number two there's a lot of other problems, right, you know that we're market went crazy today because it looks like FED will raise rates even further. Inflation is going to be sticky, you know, not to minimize traders, but there's only so many things they can worry about at once, right, So the death ceiling, they're kind of far away, yea far away a little bit. We have seen US credit default swaps,

which is insurance against a default in the US. They're not a huge product here and they're not that liquid, but those you know, rates have gone up, so there is a few people buying some hedges against a default. Right, So I guess there's a little concern, but I think we need to get some more clarity. You know, when this we could hit this wall from Marcus to really kind of like sell treasuries at that point in etc. Have we heard anything from the biggest holders of US

treasuries at this point? And I think about whether to Japan. We always think about China when you talk about maybe ultimately in the future, if we do get a default, they'll a lot more in terms of holding them. But have we heard anything from global investors on that front? Well, sovereign nation Yeah, no, they haven't. I think they don't want to get in the middle of this fight. I'm sure if it gets down to the wire, you know,

we've gone through this before. You know, China's a little bit and they still hold a lot, but they're a little bit less of a player. US has a lot more domestic investors than they ever had, so we're not getting into that political jockeying. And I don't think they would speak beforehand. But you do have private investors saying, like, I'm worried, Like I think I had some stories saying, oh, there's not gonna be too much volatility ahead, and one

investor emailed me, Liz the debt ceiling. You know, so there are a lot of the private investors that are concerned that this could be you know, a lot of havoc. And even if we don't get a default, if it goes down to the wire and there's real concern, you might see just see more selling of treasures. Again, we have a backdrop of rates rising, inflation being sticky. There's

a lot of concern out there. Anyway, what I like, it's it to me like it is like this thing that when we started the year, I was like, oh, that'll never happen, and then it's like, oh, wait, it totally could happen, or or how much chicken are we willing to play here with the thing that is unknown?

And politically it is a great instrument to play to play with because it's like, oh, nothing bad's really going to happen and we haven't, and so it does create this artifact that you can play with and turn into a political football. Um. And DC's obviously doing that. Um. But to me, like the most worrisome thing is like what breaks and you didn't know it was going to break and becomes very difficult to put back together on

it once it happens. And to this end, I mean, do markets have any sense of like what Treasury is actually doing behind the scenes right now just to make good on the existing promises that we have. Well, the Treasury they can't do anything shady, right They're doing this is like all official that they're allowed to do, things like not pay the retirement funds for different things like that.

They're you know, able to kind of maneuver around. They are issuing less treasury bills, which is their shortest of maturities. They've started to cut how much they issue, you know, whittling down there. They usually have what they call a cash balance, kind of like their buffer. I think something goes bad, you know, call it whatever, you know, a spam attack or something that they can't get new funding, that they have a stockpile of cash to fund you know,

maybe for five days of funding needs. So but they're whittling that down. So they're doing these things and that, but there's a limit. Josh, they can't you know, like all these kind of crazy issue the platinum coin, and we've talked about that before, it's not really Janet Yelling has said this stuff is kind of gimmicky, So you know that doesn't seem like I guess I would just say, and you know, here we are. We just marked one

year the Russian invasion Ukraine. Just these things that come at US pandemic, a war, financial crisis, just when you think things won't happen. You know. That's just a little reminder. Have a great Tuesday, everybody. Liz McCormick, thank you so much. Complicated, important issue and you laid it out so well. Liz McCormick,

as she always does. She corresponded for Global Macro Markets here at Bloomberg News is storying the upcoming new issue of Bloomberg business Week and our thanks to Jill Webber, he is the editor of Bloomberg BusinessWeek magazine. That new issue on newstands on Thursday, online Bloomberg dot com, slash business Week, and on the Bloomberg Missus Bloomberg. You're listening to the Bloomberg Business Week Podcast. Catch us live weekdays from two to five pm Easter on Bloomberg Radio, the

Bloomberg Business A Band, You two. You can also listen live to our flagship New York station, Just say Alexa play Bloomberg elve and thirty. I'm broca a Journal Radio. Yeah but you let me drive? Oh no, no, no no no, who's gonna drive home? Honney? Please, I'll do the riding gravels. I'm want to drive. It's good question. This is the drive to the Globe comkimmu thing well, driver up to other dawn on bloom Bird Radio. All right, everybody, just

about eight minutes left in today's trading session. Charlie of course breaking down the trade. Let's get to it. Let's get to our drive to the clothes gas Katie, all right, we're gonna speak be speaking with Sue Crotty. She is senior vice president and chief investment Officer over at Seagell

Marco Adviser. She joins us on Zoom from New York City and Sue, we were just listening to Ken Griffin, but if we rewind back to ten am, we heard from Jerome Powell himself the FED share and it seemed like he really shocked markets here by sticking to the script. He did seem to open the door to maybe a fifty basis point hike at the next meeting, But other than that, I mean, it was higher for longer, the same kind of messaging that we've been hearing from him.

What was your takeaway, Well, exactly that higher for longer. But I'm always amazed that people have not believed him when he's been saying this pretty clearly throughout. The problem

is not solved. We still have inflation. We saw the pattern of it coming down, you know, through the end of the year, which was good news, but it wasn't down to the levels that you know, you you could say that the market was going to be able to pause, or that he was going to be able to go the other way, which was sort of why it was amazing that the whole year end and into January phenomenon

did occur. So a lot of hope, a hope, well, fair enough, do you feel like the markets are now priced in terms of fixed income, treasury trade and equity trade priced for what? Jay Powell reminded everybody again that he's going to do. So, yeah, we're getting there, you know, we we were saying, um here at Seagle Marco through

the end of last year. This is a very data dependent market, and you know, as it zoomed through the fourth border and up through January, you know, having eye up, you know, twenty seven percent was clearly you know things or the s and p up you know equally almost equally. It got far away from itself, but you know it was the you know, the world trying to look ahead and not really listening to what the reality of the data is. These things take time. This is not a

quick reversal. It never has been in the history of the markets, and it won't be this time either. I think a lot of it is there's a lot of people out here investing in the markets that have never seen this sort of thing. So they just hoped we'd go back to the you know, to anybody really seen this sort of thing. So to be fair in that we're coming off a pandemic, we had tons of stimulus coming at us globally, you know. True. Yeah, No, we

haven't seen a pandemic before. We haven't seen that sort of consumer demand that was the first thrust of this whole inflation era. Absolutely, But we've seen inflation before, and we've known what tools are there, and we've known how long it takes for those numbers to come through into you know, the data. And no one seems to be you know, looking at history very well these days, and there's a lot of people that just keep you know, look,

we want it too. But we've always been in the camp here that raising rates is a really good thing. We were you know, when we started to raise rate before the pandemic, it reversed it all we were cheering. You can't live an world of zero rates. Zerbe is not a world where you don't create a lot of excesses and a lot of issues that are going to come to the front at some point. So in our books,

this is good news. You know, having a real return on your fixed income portfolio provides a lot of protection for people. It provides savers and retirees with money that they just couldn't get for, you know, over a decade through the eighties as we as we you know, wore off the first the GFC and then and then the pandemic, and so we don't have a ton of time here. But when you say fixed income income actually has income nowadays,

what specific are you talking about? Are you talking about treasuries? Are you looking at corporate credit as well? And just got about forty seconds, Well, yeah, both for sure. You know, we're we think you should be high quality because we are late in the cycle in terms of you know, the credit. We've funded a lot of companies you know, through the last decade plus that probably couldn't have gotten it in another environment. So you do have to be careful.

We do believe in active management as a result of that, because you know it is going to be a little trickier in corporate credit. All right, We wish we had more time. Come back soon, Sue Crotty. She's Senior VP and Chief Investment Officer at Seagull Marco Advisors. Joining us via zoom from New York City. This is the Bloomberg Business Week podcast available on Apple, Spotify, and anywhere else

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