Case study: Amy’s experience
Betterment is an online financial advisor that creates an investment portfolio for you based on your preferences, risk tolerance and financial goals. It’s a solid choice for those new to investing but a 0.25% annual management fee applies.
Stock trade fee
Minimum deposit to open
|Account types||Robo-Advisor, Individual, Joint, Trust, Traditional IRA, Roth IRA, SEP IRA, 401(k)|
|Minimum deposit to open||$0|
|Annual fee||0.25% on balances up to $99,999 |
0.4% on balances of $100,000+
|Asset types||Stocks, Mutual funds, ETFs, Real estate|
Betterment is a robo-advisor that also offers checking and savings accounts.
The platform’s investing philosophy focuses on a diversified portfolio of low-cost index funds. It targets low-cost, tax-efficient ETFs across domestic and international markets.
Investors can sign up for an individual account, joint account, Roth IRA, Traditional IRA, Rollover IRA or SEP. Once the account is set up, it can be managed from the platform’s online dashboard or mobile app.
Choose from different risk profiles with a mix of stocks and bonds based on when you plan to access the money in your account. Plans range from low-risk profiles with 100% bonds to profiles with higher percentages of stocks for riskier investors.
And while you can’t avoid market fluctuations, up to $500,000 is insured by SIPC in the event that Betterment goes under. Plus, your account has safeguards like two-factor authentication to protect against unauthorized activity and fraud.
Betterment’s triad of financial products make it an appealing option for investors who want to manage the majority of their finances from a single platform:
Investors can choose from one of Betterment’s three curated portfolio strategies or control their own portfolio through the Flexible Portfolios option.
This portfolio favors investments in funds that meet social, environment and governance criteria for socially responsible investing. In a nutshell: It encourages investments in companies that strive to make a positive social impact — think clean energy and ethical labor standards.
The portfolio contains low-cost SRI ETFs made up of large-cap US stocks, emerging market stocks and developed market stocks. It’s ideal for the socially conscious investor.
The Goldman Sachs Smart Beta portfolio is designed by — you guessed it — Goldman Sachs. Its a diversified portfolio that attempts to outperform conventional market-cap strategy with tax-efficient, low-cost, globally diversified stocks and bonds.
This portfolio drives toward higher returns by navigating away from market capitalization weightings across equity asset classes. It may underperform a market-cap portfolio in the short term, but is designed to provide a higher rate of return in the long run.
Investors with greater risk tolerance are best suited to this portfolio strategy.
The BlackRock Target Income portfolio, built by BlackRock, is a low-risk portfolio that seeks to minimize losses. The portfolio invests exclusively in bonds and aims to provide steady cash income while sheltering investors from stock market volatility.
Thanks to its conservative approach, the BlackRock Target Income portfolio is ideal for those near to or already enjoying retirement.
Investors who want more control over the investment process will appreciate Betterment’s fourth and final portfolio option: Flexible Portfolios. This portfolio strategy lets investors adjust individual asset class weights based on their preferences.
Flexible Portfolios offers all the advantages of a Betterment portfolio — namely, automated rebalancing and tax-loss harvesting — with an added layer of control for investors who prefer to be a little more hands-on with how their assets are allocated.
Flexible Portfolios is worth considering for investors that want to rely on the expertise of a robo-advisor while exercising greater control over individual asset class weights.
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 0.50% that both Wealthsimple and FutureAdvisor charge. This plan is suitable for investors seeking a set-it-and-forget it experience.
The Betterment Premium plan 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|
Betterment was launched in 2010 and is headquartered in New York City. It maintains an A+ rating with the Better Business Bureau and has six 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 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.
Overall, Betterment receives a lukewarm reception from investors. As of October 2020, it isn’t an accredited business with the Better Business Bureau (BBB) but receives an A rating despite its 39 BBB complaints. It has a Trustpilot page but its 3.2 out of 5 TrustScore is the result of just two customer reviews — one positive, one negative. It has six complaints on the Consumer Financial Protection Bureau and Reddit feedback is mixed.
On a positive note, Betterment’s mobile app is well received, scoring 4.3 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.
Get in touch with Betterment by:
With competitive management fees, 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 account withdrawal delays have been reported.
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