Both Betterment and Robinhood let you trade securities and are geared toward specific types of investors. Betterment is a robo-advisor that puts your portfolio in the hands of a computer algorithm, while Robinhood doesn’t have the commissions and fees.
Which one we like better?
Choose Betterment if you want a portfolio curated by an expert.
Choose Robinhood if you want to pick and choose individual securities.
Betterment and Robinhood get you access to the stock market, with no account minimums so you can start investing with as little as $1. The better platform depends on your investment management style. Betterment matches you to a recommended portfolio. While it allows you to make changes, it doesn’t have the research tools to screen and analyze securities. Instead, it uses algorithms to manage and allocate your funds for a fee, making it better suited for a hands-off investor not looking to actively trade on the stock market. If you’re looking to break into the stock market and buy securities yourself, Robinhood might be a better option. Its commission-free trades and basic research tools make it a good place for newbies and cryptocurrency traders. But you won’t find any tax-saving features or get any financial planning advice.
Betterment is an online financial advisor that makes investing easy by creating a portfolio just for you, based on your preferences and financial goals. It’s a solid choice for those new to investing.
Robinhood is an online trading platform that offers self-directed brokerage services. Investors can trade commission-free stocks, ETFs and options with 24-hour access to 17 different cryptocurrencies. It’s well-suited to new investors looking to start buying and selling their own stocks.
Annual fee
0.25%
0%
Minimum deposit to open
$0
$0
Benefits
Customizable portfolios. Start with its recommended portfolio and make changes as you see fit.
Tax benefits. An algorithm that checks your portfolio daily for securities that have lost value so you can sell them to help offset taxes on capital gains.
Automatic rebalancing. Your portfolio adjusts daily so it doesn’t stray more than 3% off its target allocation weight (or 5% off if you have mutual funds). Your risk level doesn’t change, even when you deposit or withdraw funds.
No minimum deposit. Its digital account doesn’t have an account minimum. But you’ll need $100,000 to open a premium plan.
$0 commissions and fees. Trade US-listed stocks, ETFs and options for free. And unlike most brokers, Robinhood doesn’t charge commissions on options contracts.
Trade crypto. Unlike its competitors that only trade crypto futures, you can buy and sell cryptocurrency directly from Robinhood.
Instant deposits. Utilize your funds immediately with a deposit of up to $1,000.
No account minimums. Robinhood doesn’t have a minimum account balance or initial deposit requirement. Sign up and start investing any amount.
Drawbacks
Advisory fee. Although Betterment charges a management fee of 0.25% — lower than the industry standard of 1% — it doesn’t cost anything to use Robinhood.
No direct indexing. Betterment’s tax-loss harvesting service doesn’t include direct indexing.
No immediate deposits. Deposits generally take one to two business days to process before the money is invested.
Limited customer support. Customer service is only accessible by email and it takes about 24 hours to get a response.
Limited securities. Investments are limited to stocks, ETFs, options and crypto. Unlike Betterment, you can’t trade bonds.
No IRAs. Robinhood only offers individual brokerage accounts, whereas Betterment offers traditional, Roth and SEP individual retirement accounts.
Lacks in-depth research tools. The free service tier comes with basic stock analysis data and news feeds about the market and specific companies from sites like the New York Times and MarketWatch. No detailed fundamental or technical analysis is available for experienced traders.
Tools and research
Online financial planning tools. Choose a financial goal, such as saving for a house or retirement, and answer a series of questions to see an investment portfolio for your situation.
Certified financial planners. Get one-on-one guidance from Betterment’s network of financial advisors on its premium plan, or buy an advice package for a one-time call.
Educational resources. Betterment has a library of free financial articles, quizzes to test your knowledge and calculators to help you plan for the future.
Basic charting. Analyze market trends with line and candlestick charts for stocks and cryptocurrency. No screeners to filter stocks, ETFs or options.
News feed. Browse articles and market highlights from sites like Reuters and the Financial Post.
Third-party research reports. Robinhood Gold members who upgrade to a $5 monthly subscription can access research reports from Morningstar and Nasdaq Level II Market Datastock.
Reputation and customer reviews
Reviews are mostly negative.
Customers praise its intuitive user interface and tax-loss harvesting feature.
Customers complain about account transfer delays and long wait times for customer service.
Reviews are mostly negative.
Customers praise its beginner-friendly interface, crypto access and commission-free trades.
Customers complain about being locked out of their accounts and slow account transfers. Intermittent service outages from a flood in trading activity left investors trapped in adverse positions, resulting in monetary losses. But Robinhood has pledged to upgrade its platform.
When it comes to transparency around how they make money, Betterment has Robinhood beat for two reasons. First, it’s up front about how it makes money. Second, it doesn’t profit from payment for order flow, as Robinhood does.
Robinhood profits from payment for order flow
Robinhood markets itself as a commission-free trading platform, and it is. But it profits from a somewhat controversial practice called payment for order flow — something it largely fails to communicate to its traders. Payment for order flow (PFOF) is a process where a broker like Robinhood routes its investors’ orders to middlemen called market makers. These market makers may fill the order at a slightly better price than the investor was willing to pay. The difference between the price the trader was willing to accept and the actual price the trade is executed is called the spread — and this is what the market makers pocket. In return for investor orders, market makers pay brokerages a fee: payment for order flow. Brokers and market makers don’t make much per order. Robinhood published an article on PFOF that said it earned an average of $0.0023 per equity share traded in the fourth quarter of 2020. Doesn’t seem like much, but it’s certainly enough to keep Robinhood afloat, and it’s not overly forthcoming about it: The information is available on Robinhood’s website, but you’ll have to hunt to find it.
Betterment profits from management fees
Betterment is more transparent in its profitability. It doesn’t benefit from payment for order flow, but that’s because it charges a management fee. Betterment is up front about this fee too: You can find it clearly outlined right on its homepage. Betterment has also written to the Securities and Exchange Commission to call for clearer disclosures from brokerages on how they make money from investors. It’s worth noting that while the letter advocates for public investors, it isn’t entirely selfless. Clearer disclosure requirements might help Betterment look more appealing than some of its competitors.
Bottom line
Betterment’s advisory fee is lower than its competitors, and the platform matches you with a recommended portfolio built for your financial goals and timeline. And if you want more personalized advice, you can buy a one-time call to speak with a financial advisor. Robinhood is better suited for investors who want to trade on the stock market regularly. Its platform is free to use and stocks, ETFs and options trade for free. But what sets Robinhood apart from other brokers is the ability to trade cryptocurrency. Experienced traders looking for in-depth research tools might want to consider other trading platforms.
What investments does Betterment offer? Betterment’s portfolios are made up of stocks and bonds. Can I buy fractional shares on Robinhood? Yes, you can buy fractional shares of stocks and ETFs with as little as $1. What is Robinhood Gold? Robinhood is a subscription-based account that lets you trade on margin, get access to additional research reports and make bigger instant deposits.
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Finder is not an advisor or brokerage service. Information on this page is for educational purposes only and not a recommendation to invest with any one company, trade specific stocks or fund specific investments. All editorial opinions are our own.
Kimberly Ellis is a personal finance writer at Finder, specializing in banking and financial literacy. After teaching in public and private schools, Kimberly zeroed in on personal financial education to help families and kids develop lifelong money skills. She hails from New York City, graduating summa cum laude from Queens College with a BA in elementary education and mathematics, as well as a New York State teaching certificate. She’s also an aspiring polyglot, always in a book and forever on the hunt for the perfect classic red lipstick. See full bio
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Shannon Terrell is a lead writer and spokesperson at NerdWallet and a former editor at Finder, specializing in personal finance. Her writing and analysis on investing and banking has been featured in Bloomberg, Global News, Yahoo Finance, GoBankingRates and Black Enterprise. She holds a bachelor’s degree in communications and English literature from the University of Toronto Mississauga. See full bio
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