Competitive management fees and flexible portfolio options to help you reach your financial goals.
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.
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.
Shannon Terrell is a writer for Finder who studied communications and English literature at the University of Toronto. On any given day, you can find her researching everything from equine financing and business loans to student debt refinancing and how to start a trust. She loves hot coffee, the smell of fresh books and discovering new ways to save her pennies.
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.
Account types
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:
Spend. This mobile-first checking account has no minimum balances, no maintenance fees and offers ATM and foreign transaction fee reimbursements.
Save. Betterment’s savings account comes with 0.40% APY and has no transfer fees or limitations.
Invest. A variety of investment accounts are available with four portfolio options to choose from.
What portfolios are available?
Investors can choose from one of Betterment’s three curated portfolio strategies or control their own portfolio through the Flexible Portfolios option.
Socially Responsible Investing
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.
Goldman Sachs Smart Beta
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.
BlackRock Target Income
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.
Flexible Portfolios
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.
Pricing and fees
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
Features
Personalized financial advice
Globally diversified investment portfolios
Automatic rebalancing
Tax saving strategies
All of the features of the digital plan
Advice for investments outside Betterment
Unlimited access to certified financial planners
Account minimum
$0
$100,000
Annual fee
0.25% + fund fees
0.40% + fund fees
Annual, transfer and closing fees
None
None
Pros and cons
Pros
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 location 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.
Cons
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.
How safe is Betterment?
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.
Case study: Amy’s experience
Amy Stoltenberg Publisher
I opened an account with Betterment because I wanted to compare it with the more traditional investment firm I was used to. Maybe it’s the fact that I’m a millennial to the core, but there’s something alluring about trusting a robot.Betterment streamlines investing so you can drop your money in and walk away, without the need to make an appointment or plot a complex strategy. It’s a step up from a high APY savings account, but not as intimidating as walking into a regular brokerage firm. The design is clean and easy to navigate, and sometimes when I’m bored or procrastinating I’ll mosey on in just to see what’s happening.It’s great for people who don’t operate in the world of finance, but still have a curiosity about dividends and what it means to rebalance a portfolio. It feels more hands-on than Wealthfront, but the language is still easier to digest than traditional investment lingo. I probably won’t hang on for life, but it’s useful as an entryway into a world I’d like to get to know better when I have the time.
Betterment reviews and complaints
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.
How do I contact support?
Get in touch with Betterment by:
Phone. Call 646-600-8263 weekdays from 9 a.m. to 6 p.m. ET.
Live chat. Reach out to a rep on Betterment’s website weekends from 11 a.m. to 5 p.m. ET.
Compare with other robo-advisors
Bottom line
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.
No, Betterment doesn’t allow you to invest in individual stocks or mutual funds. Your profile is made up of diversified low-cost and liquid ETFs across more than 5,000 companies to optimize returns.
Betterment rebalances your portfolio by selling or buying shares. Over time, the value of individual ETFs in a diversified portfolio drift away from its target ratios. Rebalancing brings you back to your target allocation.
Investor funds are automatically invested within one to two business days.
Yes, you are limited to deposits of $10 to $300,000 every two business days. You must wait 60 days to withdraw from an IRA Rollover deposit. You can wire funds into your account, but your bank may charge wire fees. Also, you can only make one allocation change per day.
Yes, you can use the Automated Customer Account Transfer Service (ACATS) to transfer ETFs, mutual funds and select single stocks to your Betterment account. However, you may be charged a transfer fee, and any assets that are not part of Betterment’s ETF portfolio may be sold as soon as the transfer is complete.
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