Robo-advisor Betterment uses exchange-traded funds (ETFs) and a high degree of automation to manage your portfolio. In addition, itâ€™s possible to speak with financial professionals to receive more tailored advice on retirement and other financial goals.
Investors most likely to benefit from Betterment include beginning investors hoping for a low barrier to entry, as well as intermediate investors who are interested in keeping a portion of their portfolio in set-it-and-forget-it accounts. Investors interested in trading individual stocks or taking a more hands-on approach arenâ€™t likely to benefit as much from Betterment.
Betterment is for investors who would like an automated approach to investing. Anyone can benefit from Betterment, but itâ€™s especially helpful for beginner investors hoping to start growing their wealth.
Because of the low barrier to entry â€” there are no account minimums and you can get started with a minimum deposit of $10 â€” itâ€™s possible for almost anyone to begin investing.
Itâ€™s also a great resource for intermediate investors looking to accomplish different goals with â€śbucketsâ€ť of money. With Betterment, itâ€™s possible to set varying levels of risk for different goals, with different asset allocations based on when youâ€™re likely to need the money.
Finally, intermediate and advanced traders can use Betterment to build a long-term retirement portfolio, although there is no active trading. Betterment offers a place for assets to grow over longer periods at a pace that is likely to track the market as a whole.
Consider your goals and what you hope to accomplish with your investment portfolio. While Betterment can potentially be a good choice for anyone who keeps a portion of their portfolio in long-term assets, itâ€™s not ideal for those who prefer to actively manage their portfolios or engage in active trading.
|Amount minimum to open account|
|Account fees (annual, transfer, inactivity)||
Three months free for new customers who are referred by an existing Betterment account holder
|Tax loss harvesting|
|Offers fractional shares|
|Ease of use|
|Mobile app||iOS, Android|
|Customer support||Phone, Email|
Bettermentâ€™s pricing starts with a 0.25% management fee for the basic Digital account. This pricing is in line with other robo-advisors like Wealthfront, which also charges 0.25%.
Balances above $100,000 earn Bettermentâ€™s Premium account status, featuring unlimited access to personalized advice for a management fee of 0.40%. This isnâ€™t out of line with other robo-advisors: Wealthsimple charges 0.40% for account balances above $100,000. Wealthfront, however, maintains the 0.25% management fee, no matter the size of your account. Once your balance reaches $2 million, your fee drops to 0.15%.
In addition to regular management fees, itâ€™s also important to note that youâ€™ll pay expense ratios on the ETFs Betterment selects on your behalf. Bettermentâ€™s recommended portfolios feature expense ratios of 0.07% to 0.15%. According to Betterment, this is much lower than the industry average.
Finally, there are additional fees if you want access to specialized financial planning. If you have $100,000 or more invested with Betterment, you get access to these services as part of your annual management fee. However, if your balance is lower, you pay a flat fee for financial advice ranging between $199 and $299 per advisory session.
Betterment chooses an investment portfolio for you based on your goals and time horizon. The core portfolio includes stock and bond ETFs allocated in a way that helps you reach your goals. Itâ€™s also possible to tweak your asset allocation in your account.
In addition, Betterment offers different portfolio options based on specific goals and targets. Here are some of the additional choices available with Betterment:
With all portfolios, Betterment handles automatic rebalancing when your assets experience a certain amount of drift. For example, if market performance is resulting in an asset allocation that is too far outside the target for your portfolio, Betterment will sell and buy different assets to bring your portfolio back to its target.
Another way Betterment automatically manages your portfolio is by using tax optimization strategies. Different assets are assigned to your accounts based on their overall tax efficiency. Additionally, when certain assets lose value, Betterment will sell them automatically in an effort to offset capital gains in other areas. With the help of the Tax Loss Harvesting+ feature, rebalancing can occur daily.
If you want a big-picture view of your finances, Bettermentâ€™s account sync feature can be helpful. With this feature, you connect some or all of your outside accounts to Betterment, which lets you view all of your financial information in one place. The app then offers personalized recommendations for managing your money.
You have the option to speak with Betterment financial professionals about planning for specific goals and life milestones. Account holders above the $100,000 balance requirement get unlimited access to personalized advice and help by phone and email as part of the management fee.
If you donâ€™t meet this threshold, you can pay for advice packages tailored to the goals youâ€™re working on. Here are some of the Betterment advice packages available for a flat fee:
The Betterment Advisor Network can also help you get your own dedicated financial advisor who can help you with almost any financial need. Betterment will help match you with a professional who is likely to fit your goals and priorities.
Betterment offers Federal Deposit Insurance Corporation (FDIC)-insured banking options. While the checking account isnâ€™t universally available yet, it is possible to use Everyday Savings to earn up to 2.04% APY. Additionally, there are no limits on withdrawals and no minimum balance. You also donâ€™t have to worry about paying fees on your balance. The money in your Everyday Savings account is actually held at partner banks â€” itâ€™s possible to opt out of a specific partner bank, if you wish.
In addition to providing a high-yield savings option, you can also decide to use the Two-Way Sweep feature. With this feature, Betterment automatically analyzes a connected account each day and will move excess cash from your connected account and into your savings account. If you need the money back in your main account, Betterment will sweep it from your Everyday Savings without the need to take further action on your part.
Betterment is always adding new goals and features. Here are some of the most helpful features it currently offers:
While Betterment is a great choice for many investors, itâ€™s not for everyone. There are some drawbacks, and no Betterment review would be complete without mentioning them.
Anytime you invest, there is a chance you could lose money. Poor market conditions can always lead to a loss. However, Bettermentâ€™s use of modern portfolio theory in its asset allocation helps reduce your exposure to risk. Additionally, Betterment carries Securities Investor Protection Corporation (SIPC) insurance, protecting each of your Betterment accounts up to $500,000 in the event of a failure by the company. (Note that market losses arenâ€™t covered by SIPC insurance.)
In addition to making sure an investment company is SIPC-insured, you also can use the Financial Industry Regulatory Authorityâ€™s BrokerCheck to find out about disclosures and actions, and search the Consumer Financial Protection Bureauâ€™s Consumer Complaint Database. The Better Business Bureau is also a good source of information.
Betterment is a great choice for beginner investors looking to get their feet wet and for long-term investors hoping to grow a retirement portfolio. For investors with more than $100,000, it can also be a decent place to keep your money if youâ€™re looking for basic advice.
However, for active traders and those who want a little more control over their assets, Betterment might not be the best choice. Instead, it could make more sense to use platforms like E-Trade or Robinhood if you want to get involved with active trading. Stockpile is also a good choice for investors who want to buy individual stocks using fractional shares.
Overall, though, Betterment is a great choice for building wealth for the long term, including setting accounts for specific goals and using tools that help you see if youâ€™re on track to meet your objectives.