Low fees and a well-designed app make it a great option for beginners.
Betterment is an online financial advisor that picks and maintains investments on your behalf. It’s a solid choice for new investors, but active traders may be frustrated by the lack of autonomy.
- Consider Betterment if you’d like a robo-advisor to manage your investments for you.
- Look elsewhere if you want to buy and trade your own securities.
What's in this review?
What we think of Betterment
As far as set-it-and-forget-it investing goes, Betterment is a solid bet for market newbies. Its sleek, clean interface makes for intuitive navigation, and its mobile app scores well among Android and Apple users alike. Plus, the platform is equipped with discrete tooltips that can help you learn more about unfamiliar investing terms and concepts — you know, if you’re into that sort of thing.
What we like most about Betterment is that it’s a low-pressure, low-commitment service. You don’t need to talk to a person ever, if that’s what you prefer. But reps stand at the ready to lend a hand by phone and live chat seven days a week.
Plus, it’s equipped for tax-loss harvesting: an investment strategy that sells down investments at a loss to help investors save on capital gains tax. Betterment also employs certified financial planners to help optimize your portfolio, but you’ll need to meet the account minimum for its Betterment Premium service: a hefty $100,000 minimum.
If it helps, think of robo-advisors like Betterment as a revved-up savings account — except with potentially better returns. The industry average for a high-yield savings account tends to hover around the 0.55% mark, whereas we’ve seen a moderate portfolio at Betterment average 9.7% over three years. But that portfolio also took a deep dip during the COVID market crash.
And while it fully recovered and went on to make even more over the next year, that temporary dip could have been a problem if the portfolio holder hadn’t been able to wait for the market to recover. When investing with any platform, there’s no guarantee your investments will perform well.
A team member at Finder who uses Betterment let us dig into her portfolio. She made an initial opening deposit of $2,030 back in 2018 and made no additional deposits. We took a look at the performance of her portfolio from June 18, 2018 to June 3, 2021. Here’s what we uncovered:
- Asset allocation strategy: 55% stocks, 45% bonds
- Portfolio strategy: Betterment Core
- Initial investment: $2,030
- Account balance after three years: $2,683.23
- Total earnings: $669.34
- Dividend yield: $156.59
- Management fees: $16.11
- Annualized rate of return: 33%
- Money saved from tax-loss harvesting: $158.04
For comparison, Redditors claim Betterment returns of anywhere between 5.6% to 21.5% — with most reporting returns in and around the 10% mark.
Keep in mind that the average return of any portfolio depends on two factors. The first is your asset allocation strategy, which Betterment determines and sets based on your financial goals. The second is the broader performance of the overall market, which is tied to the US economy.
Fees and costs
Betterment’s investment plans are designed to cater to two different types of investors. The standard Betterment Digital plan has no minimum deposit and an annual management fee of 0.25% — on par with Wealthfront’s 0.25% fee and cheaper than the 1% Titan charges for accounts over $10,000. This plan is suitable for investors seeking a set-it-and-forget-it experience.
The Betterment Premium plan is best for investors with more capital who want access to personal account management services to optimize investments. A higher management fee applies, but the plan’s unlimited access to financial planners may be worth the extra cost for the right investor.
|Betterment Digital||Betterment Premium|
|Annual fee||0.25% + fund fees||0.40% + fund fees|
|Annual, transfer and closing fees||None||None|
How do I sign up?
Here’s the process to get started with Betterment:
- Navigate to the Betterment homepage and select Get started.
- Create a Betterment account with your email address, name and phone number.
- Choose from four financial products in your Betterment dashboard or hit Get started to answer a series of questions to get a personalized recommendation.
- Enter your personal and financial information, including your address and Social Security number.
- Confirm your email address.
- Fill in your bank account details to set up your first deposit.
Here’s what you’ll need to use Betterment:
- Be 18 or older
- Valid US residential address
- Valid government-issued ID
- Valid Social Security number
During the enrollment process, you’ll need to provide the following information:
- First and last name
- Address, phone number and email
- Social Security number
- Valid government photo ID
- Employment information
- Bank account information
What portfolios are available?
Since Betterment is an automated investment service, you won’t get any research tools because you can’t choose specific securities. Instead, you’ll select an investment strategy based on your financial goals and risk parameters among Betterment’s portfolios.
- Betterment Core Portfolio. This portfolio strategy is based on the Modern Portfolio Theory, Nobel Prize-winning research for asset allocation, and is geared towards global diversification.
- Goldman Sachs Smart Beta Portfolio. A diversified portfolio with Goldman Sachs ETFs that strives to outperform conventional market-cap strategy with tax-efficient, low-cost, globally diversified stocks and bonds.
- Socially responsible investing. This portfolio favors investments in funds that meet social, environmental and governance criteria for socially responsible investing.
- BlackRock Target Income. Built by BlackRock, this low-risk portfolio seeks to minimize losses by investing exclusively in bonds.
- Flexible Portfolio. Investors who want more control over their asset allocation strategy can opt for Flexible Portfolio and adjust individual asset class weights based on their preferences.
What else can I do with Betterment?
Betterment is best known as an investment app. But it can also be put to work as a more holistic finance app thanks to its lineup of additional accounts and services.
- Checking account. Betterment’s checking account has no minimum balances, no maintenance fees and offers ATM and foreign transaction fee reimbursements, so your money is always at your fingertips.
- Savings account. Betterment’s savings account — called the Betterment Cash Reserve — comes with 0.40% APY and has no transfer fees or limitations.
- 401(k)s. Betterment operates as a full-service partner for employers interested in offering 401(k) accounts to employees.
- IRAs. Betterment’s lineup of individual retirement accounts includes traditional, Roth and SEP IRAs. It’s also equipped to facilitate 401(k) rollovers.
Pros and cons
Weigh out both sides of the coin before deciding.
Betterment portfolios come with a few distinct advantages:
- Automatic rebalancing. To ensure your investments are never more than 3% off their target ratios, portfolios are adjusted daily, and when you make contributions or withdrawals, or receive dividends.
- Diversified investments. Put your money in vetted ETFs, and investments are spread across more than 10 asset classes.
- Fractional shares. Invests in fractional shares, so no uninvested cash is left sitting in your portfolio.
- Tax benefits. Automates asset allocation and tax-loss harvesting to minimize taxes and increase your wealth.
- Portfolio options. Offers four portfolios for investors to choose from with varying levels of risk tolerance.
- Deductible charitable giving. Investors can directly donate to charities they support for tax deductions.
- Financial services. In addition to its robo-advisor, Betterment also offers savings and checking account options for those that want to group their financial services.
Although Betterment has its perks, consider the following drawbacks before investing:
- No direct indexing. Betterment only invests in ETFs and doesn’t offer its investors access to direct indexing opportunities.
- Minimum balance on premium accounts. To access certified financial planners and other investment advice, you’ll need at least $100,000.
- Withdrawal delays. Some customer reviews mention issues or delays when withdrawing money from their accounts.
Is Betterment legit?
Yes, Betterment is a legit financial advisor. It launched in 2010 and is headquartered in New York City. It maintains an A- rating with the Better Business Bureau (BBB) and has 12 complaints to its name on the Consumer Financial Protection Bureau.
Betterment’s brokerage services are provided by Betterment Securities, an SEC-registered investment adviser and member of the Financial Industry Regulatory Authority (FINRA). Its savings accounts are FDIC-insured for up to $1 million, and its checking accounts are insured for up to $250,000. The platform uses two-factor authentication to protect sensitive financial data.
Betterment reviews and complaints
Overall, Betterment receives a lukewarm reception from investors. As of June 2021, it isn’t an accredited business with the BBB but receives an B+ rating despite 59 lodged complaints.
It has a Trustpilot page, but its 3.1 out of 5 TrustScore comes from only two customers review. It has 12 complaints on the Consumer Financial Protection Bureau, and Reddit feedback is mixed.
On a positive note, Betterment’s mobile app is well-received, scoring 4.5 out of 5 with Android investors and 4.8 out of 5 with Apple investors.
Investors speak highly of its easy-to-navigate platform, automatic portfolio rebalancing and intuitive user interface. Common complaints include the platform’s unresponsive customer service and account withdrawal delays.
How do I contact Betterment support?
Get in touch with Betterment by:
- Phone. Call 646-600-8263 weekdays from 9 a.m. to 6 p.m. ET.
- Email. Send an email to firstname.lastname@example.org for a response from the team.
- Live chat. Speak with a rep on Betterment’s website weekends from 11 a.m. to 5 p.m. ET.
Alternatives to Betterment
Betterment’s clear interface and well-reviewed mobile app make it a viable option for those new to investing. It even has savings and checking accounts for those who prefer to keep all of their financial services under one roof. But no platform has it all, and Betterment is no exception.
Or maybe you’d like a little more say over your portfolio and want to try your hand at picking investments. If so, check out M1 Finance: It lets you pick your portfolio holdings but monitors and rebalances your investments on your behalf.
The right service for your investments is out there — it’s simply a matter of comparing investment accounts by features and fees to ensure you’ve found the right fit.
With competitive fees, tax-loss harvesting, numerous account options and multiple portfolios to choose from, Betterment can accommodate both new and experienced investors seeking a robo-advisor. But you’ll need at least $100,000 to access the platform’s premium service, and there have been reports of account withdrawal delays.
Compare your options before choosing the right investment platform for you.