Betterment Review – Should You Use This Robo-Advisor?

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By Theo Madsen

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Betterment Review

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Betterment Review

  • Ease of Use
  • Features
  • Investment Options
  • Pricing
  • Customer Service
4.5

Summary

Betterment is an online investment company and robo-advisor founded in 2008. This robo-advisor is designed to build and manage investment portfolios while also including financial planning and banking features. Betterment includes four portfolio options tailored to your risk preference as well as retirement planning, checking accounts, rewards programs, and more. Learn more about this robo-advisor by reading our complete Betterment review.

Pros

  • Transparent pricing: low annual costs based on investment account balance
  • No minimum investment to open an account and get started
  • Robo-advisor with automatic rebalancing and built-in tax-loss harvesting
  • Flexible portfolio options: choose from preset options or customize your own
  • Access to human advisors who are certified financial planners
  • Socially responsible investing (SRI) and cryptocurrency ETFs available
  • Unlimited one-on-one support at the Betterment premium plan
  • Betterment cash reserve account, free checking account

Cons

  • One-on-one financial and planning costs are a bit higher than expected
  • Lower overall annual returns when compared to Wealthfront
  • Investors are limited to a fixed set of ETFs

Betterment is a leading online investment company featuring robo-advising, financial planning, and banking services. The bulk of Betterment’s focus is on retail investors: those focused on building wealth using low-fee, automated, diversified, client-tailored portfolios composed of low-cost exchange-traded funds (ETFs). Your portfolio is automatically rebalanced and managed by the Betterment system, making this a passive, hands-off investment service.

As a low-cost investment platform with no minimums, Betterment helps investors access a range of wealth-building services. The company focuses on passive, long-term investing while providing additional resources such as retirement accounts, goal planning, investment advice, and tax-loss harvesting. Access Betterment on your desktop, via browser, or by app: iOS or Android.

Betterment Website

About Betterment

Founded in 2008 and launched in 2010, Betterment is an original pioneer of the robo-advisor – automated, algorithm-driven portfolio management. Betterment is a broker-dealer and SEC-registered investment advisor approved by FINRA. The company is a Registered Investment Advisor (RIA) with the SEC. At the time of writing, Betterment only serves U.S. clients.

This private company boasts over $435 million in funding across ten funding rounds. A recent acquisition of Maraka allows Betterment customers to invest in diversified cryptocurrency portfolios. As of March 2022, the company has over 730,000 customers totaling over $33 billion in assets under management (AUM).

Betterment focuses on three customer segments: individuals, employers, and financial advisors. The primary service is the automated investment platform for retail investors. Employers can partner with Betterment to offer 401(k) accounts to employees, while financial advisors can access the strengths of Betterment robo-advising without losing clients.

 

Betterment Features

In this section, we will focus on the features Betterment offers retail investors. Using either the browser-based Betterment platform or app, retail investors gain access to three main sets of features: investments, retirement planning, and everyday use.

Betterment Dashboard

Before we get into the details of the features, I’ll walk through the registration with Betterment. Account registration only takes a few minutes. You’ll need to provide personal information like phone number, address, social security number, income, and total investment portfolios. Betterment will also ask you about your investing experience and tax filing status.

While registering is free and quick, adding funds to your Betterment investing account could take several days or more. Investors looking to roll over a 401(k) may have to wait longer before funds are deposited into Betterment.

Read on below for our review of the Betterment features and services.

Investments

Betterment is a leading robo-advisor that builds and manages your investment portfolios automatically. Below I’ve listed out some of the basic details around minimums, account types, and fund transfers.

  • $0 account minimum balance for regular Betterment accounts, $100,000 for premium Betterment accounts
  • Three account types: individual taxable, joint taxable, trust
  • Transfer funds through bank deposit or 401(k) rollover

Once you have your Betterment account created, you can log into the Betterment dashboard. This is your homepage, where you can see information about your net worth, portfolio list, transfer activities, and cash options. You can also track your overall investment portfolio performance, including dividends earned.

To access the robo-advising service, you’ll need to create a portfolio. I found creating portfolios easy and intuitive. You can create multiple portfolios with different objectives, like general investing or building an emergency fund.

Betterment Investing Objectives

Each portfolio is made up of a basket of low-cost ETFs tailored to your risk tolerance. So, for example, if you want a low-risk portfolio as an emergency fund, your portfolio will have all-bond ETFs. Your portfolio is automatically rebalanced as ETF prices and the overall market change. 

Betterment Risk Tolerance

Betterment ETFs

Below are the four core portfolio options and their sub-options:

  • Standard: Betterment core portfolio, smart beta, innovative technologies
  • Socially responsible investing (SRI): Broad impact, climate impact, social impact
  • Low risk tolerance: All-cash or all-bond
  • Flexible: Build-your-own

Betterment Portfolios

Betterment does a great job of providing different portfolio types matched to different investing goals. They even offer diversified crypto portfolios for investors who want exposure to cryptocurrencies.

An additional feature that Betterment offers with its robo-advising service is automated tax-loss harvesting. This means that the Betterment system will attempt to maximize your tax gains by selling securities at a loss to offset capital gains. These savings can add up come tax time, making tax-loss harvesting an important cost-savings feature.

Retirement Planning

Retirement planning is a core offering of Betterment. Using goal-based planning, Betterment tailors your portfolio with a selection of ETFs. For example, your portfolio will have different ETFs depending on if, say, you want to focus on retirement income or general retirement investing.

Betterment Goals

When setting up your retirement account, you’ll have the option to choose from three account types:

  • Traditional IRA
  • Roth IRA
  • SEP IRA

This section of Betterment has a selection of planning tools and ways to educate yourself. The dashboard has features to help you set goals and plan for a comfortable retirement. The retirement calculator is a nice touch that will help you visualize your savings plan.

Just like a regular portfolio, when you create your retirement investing plan, you can choose the portfolio strategy you want and even customize your portfolio. For those who want more personal, one-on-one advice, Betterment offers planning packages. These packages include the following types:

  • General planning
  • Financial check-up
  • College planning
  • Marriage planning

Everyday Use

Betterment aims to be your holistic solution to savings and spending. After you create an account and deposit money, you’ll have access to three nice-to-haves to help you manage your everyday spending. The below items are standard fare for online investment companies like Betterment.

  • No-fee mobile-focused Betterment checking account with Visa debit card
  • Designated Betterment cash reserve account for short-term savings
  • Rewards program when you make purchases with your checking account or Visa debit card

The Betterment checking account is FDIC-insured up to $250,000. For those who like mobile payment options, your account has mobile options like Google Pay and Apple Pay. Paper checks are issued. Also, ATM fees and foreign fees are automatically reimbursed, a nice perk.

Betterment Pricing

One of the clear advantages of robo-advisors is the pricing structure. Betterment has a straightforward pricing structure based on your total assets under management (AUM) and the service tier. Both above tiers include free access to the no-fee checking account, Visa debit card, and cash reserve accounts. Below is a breakdown:

  • Standard plan: 0.25% annual fee, total AUM. $0 minimum balance. The Betterment standard plan includes all of the features in the investing section except one-on-one financial planning advice.
  • Premium plan: 0.40% annual fee, total AUM. $100,000 minimum balance. The Betterment premium plan includes all of the features in the standard tier plus unlimited support and additional investment advice services from certified financial planners.

Additionally, your Betterment investment account will be charged expense ratio management fees for each ETF in the portfolio. The expense ratios vary for each ETF, and range from approximately 0.003% AUM to 0.39% AUM.

Betterment also has several different advisory and one-on-one financial advisor planning packages, listed below:

  • Over-the-phone financial advisor package, $299 to $399 per package
  • One-on-one planning, $399 for a 60-minute call
  • Financial check-up, $399 for a 60-minute call
  • College planning, $399 for a 60-minute call
  • Marriage planning, $399 for a 60-minute call.

Betterment Customer Service

Betterment offers several customer service contact methods. Phone-based customer support is available Monday through Friday, 9 am to 6 pm Eastern. The company also operates several email addresses for different support issues. Outside of operating hours, you can chat with the customer support chatbot 24/7, which will help you find answers to common problems. If you want to skip the chatbot, you can find help articles at the online help center.

How Does Betterment Compare?

Robo-advisors come in all shapes and sizes. Today, the leading robo-advisors by assets under management (AUM) include Vanguard Robo-Advisors, Schwab Intelligent Platforms, Betterment, and Wealthfront. Betterment’s nearest competitor is Wealthfront, compared below.

  • Betterment vs. Wealthfront. Both services have nearly identical total assets under management, management fees, robo-advising services, ETF selections, and tax-loss harvesting. Betterment has lower account minimums and access to human advisors. Wealthfront has direct indexing and lower average ETF expense ratios.

Who is Betterment Best For?

Betterment is built for beginner and intermediate investors who want low-cost automated portfolio management from an established, trusted financial management company. Retail investors who prefer passive investing but want help structuring a portfolio will find Betterment a solid choice. Betterment offers tax-loss harvesting, which could be an important sell for some. More advanced investors, or those who need access to more comprehensive trading tools or financial advice, should look to other services.

FAQ: Betterment Review

What exactly is a robo-advisor?

A robo-advisor is a computer program that builds and manages your personalized investment portfolio automatically. Think of this as digital financial planning and management without a person.

Does Betterment have a breakdown of the ETFs per portfolio type?

Yes, you can find the ETF list here and Betterment methodology here.

Is Betterment trustworthy?

Betterment is a leading name in the robo-advisor investing industry. The company is an SEC-registered Investment Advisor. Betterment Securities, the trading entity of Betterment, is an SEC-registered broker dealer and is a member of both FINRA and SIPC.

Final Verdict: Betterment

Betterment is a goal-oriented, automated investing option for the hands-off investor. The platform is intuitive, registration is simple, and overall costs are low. Investors who are focused on long-term investing, and who may need access to human advisors, will be well-served by this industry-leading robo-advisor.

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Theo Madsen

Theo has been actively trading the forex markets since 2013. Over the past five years, he has gained experience trading currencies, stocks, options, and futures. Theo's trading experience led him to test out over one hundred different trading services and he shares his insights in reviews to help other traders.