Betterment vs. Wealthfront: Which Robo-Advisor Should You Choose?
When it comes to choosing a robo-advisor, Betterment and Wealthfront are two of the most popular options. But which one is better for you? To help settle the Betterment vs. Wealthfront dispute once and for all, we’ve decided to take a deep dive and analyze both services. In this article, we’ll compare the features, fees, investment options, and more to help you choose the right robo-advisor for your needs.
Annual management fee
Available in Premium plan
Betterment is a robo-advisor that offers automated investing services and financial planning. It was founded in 2010, has more than $33 billion in assets under management, and over 700,000 customers in its database. Its mission is to help people better manage their investments, save for the future, and achieve financial independence.
In addition to traditional investment through the Betterment robo-advisor, the company offers other banking services worth considering, such as checking accounts, various cash management products, and IRA and 401(k) accounts. Its robust features include tax-loss harvesting, goal-based investing, and automated rebalancing.
The company also offers personalized advice through its financial experts. Its services are available to all US citizens and permanent residents. With Betterment, all of your investments are ensured and protected by SIPC, which covers up to $500,000 of missing assets, including a maximum of $250,000 for cash claims.
Whether you’re just starting out in your career or are already well on your way toward retirement, Betterment offers a wide range of investment options you can benefit from. The company provides access to professional advice and has low fees across the board.
Who Is Betterment For?
A Betterment investment account is a great choice for anyone looking for low-cost, automated investing options. The company offers a variety of services suited to both beginners and experienced investors. It’s also great for those who want to take a more hands-off approach to their investments.
If you are looking to make a home down payment or need advice on investing in a college fund or a retirement plan, Betterment’s algorithms will find the best option based on your risk tolerance and your long-term goals.
Those who review Betterment will see it offers a number of features specifically for retirement planning. These include automatic rollovers and tax-loss harvesting, which can help you save money on your taxes. Betterment also provides guidance on what to do when you reach retirement age.
Wealthfront is an online investment management service founded in 2008 by Andy Rachleff. It’s known for its attempt to democratize wealth management, meaning it makes wealth management available to more people through the use of technology and low fees. It also boasts a focus on personalization through automation with features such as tax-loss harvesting via direct indexing, as well as Path, an automated and comprehensive financial planning tool included within the app.
Who Is Wealthfront For?
Wealthfront’s robo-advisor and services are primarily tailored toward those who want their investments to grow over time but don’t want to oversee the process themselves or pay high fees. Wealthfront is also ideal for novices who are just beginning to manage their finances. Wealthfront manages your investments based on your risk profile, freeing up your time to focus on other aspects of your life while still growing wealth over time.
If you want to invest, but don’t know how and don’t have much time to dedicate to finding out, then Wealthfront may be right for you. If you aren’t sure what tools and services are available to you through Wealthfront, consult its free yet comprehensive investing guide.
Betterment vs. Wealthfront Fees and Plans
Betterment’s pricing plans are among the most affordable ones on the robo-advisor market.
Betterment’s checking accounts come with no fees and don’t have any requirements for minimum balance. With your checking account, you get unlimited ATM withdrawals, a Mastercard debit card, cashback rewards, and the option to pay bills online.
If you’re looking to open an investment account, you can choose between Digital investing and Premium investing.
A Digital plan goes for as low as 0.25% per year. Again, no minimum balance applies. This plan gives you access to socially responsible investing options, low-cost investing portfolios, advanced tax-saving strategies like asset allocation and tax-loss harvesting, and a string of automatic features, such as portfolio rebalancing and dividend reinvestment.
However, if you wish to get investing advice from Betterment’s licensed financial experts, you should choose the Premium plan for 0.40% per year. This plan, however, requires a minimum balance of $100,000.
If you don’t have a minimum balance of $100,000, but still wish to have professionals from Betterment review your finances and provide in-depth advice on how to manage your portfolio, you can purchase one of the flat-fee advice packages. These plans go for $299 to $399, and each includes a personalized plan of action, a tailored call with a financial expert, and access to educational content.
Wealthfront used to offer free management for the first $10,000 on your account for accounts under $100,000. That plan is now only available to investors who joined before April 2018. There are no fees for opening or closing accounts, withdrawals, or trading.
Accounts on Wealthfront are charged a flat-rate fee of 0.25%. According to the company, 96% of customers will have that fee covered by tax savings.
Wealthfront also offers tax-loss harvesting via direct indexing and automated portfolio rebalancing. This is free for all Wealthfront clients who invest in the risk parity portfolios, IRAs, and college savings accounts. Not many US robo-advisors have such an offer.
Betterment’s tools can help you figure out how much you should be saving based on your retirement goals. The financial plan is tailored based on various factors, such as your retirement age, ZIP code, and Social Security benefit level. Once you opt in, you can calculate how much to save, connect external accounts to get a bigger picture of your finances, learn to prioritize your accounts and make adjustments to your savings plan along the way.
Betterment offers various IRA accounts (traditional, Roth, and SEP), which can help you earn more money for retirement or even retire early. Conversion from a traditional IRA into a Roth IRA is also possible. It also offers 401(k) plans for companies and all employers who wish to help their employees prepare for retirement.
Wealthfront, too, provides a retirement calculator that can help you figure out how much money you’ll need to retire. You can input various data, such as your current age and compensation level, into the calculator. Its Retirement Planner software combines all of your information and creates a strategy for you. Wealthfront will review this and then tell you how much money you’ll need to save and how you can reach your retirement goals.
Everyone plans their retirement differently, so Wealthfront offers several options to better suit your needs. You can open an investment account, roll over your 401(k) from a previous job to an IRA, or set up a SEP IRA account if you’re self-employed.
The Path app we’ve previously mentioned is able to not only analyze your savings potential but also to recommend the type of savings account you should open to save up money for your retirement.
Betterment vs. Wealthfront: Customer Support
Betterment offers a wide range of support options. There’s a phone support line open Monday through Friday, from 9 a.m. to 6 p.m. (ET). Outside regular business hours, you can email the customer care team and ask for help, and there’s also the 24/7 live chat support with a virtual assistant on the website for those who prefer this form of communication.
As for Wealthfront, the support options are almost equally varied. You can reach out to the agents via phone and email or look for your answers in the help center and the official blog. Wealthfront’s customer support is available Monday to Friday from 6 a.m. to 6 p.m. and on weekends from 8 a.m. to 5 p.m. (PT). Currently, there’s no live chat option.
Wealthfront vs. Betterment: Final Thoughts
We can’t say there’s a clear winner between these two services. Each offers a comprehensive set of features, amazing apps, and lots of investment opportunities for the same annual management fee of 0.25%.
However, there are some differences in how these two services work. For example, Betterment does have human advisors, while Wealthfront is completely based on automation. So, this could steer your decision. If you want more automation, choose Wealthfront. But, if you need more control and an option to get personalized advice, then Betterment is the service for you.
Which one is better: Wealthfront or Betterment?
When Betterment and Wealthfront are compared, it becomes obvious both services come with their own pros and cons. Ultimately, it depends on what you’re looking for. If you’re after lower fees and advisor services, choose Betterment. If you are comfortable with fully automated investing, Wealthfront may be a good choice.
Does Wealthfront or Betterment have better returns?
Wealthfront currently offers slightly better returns than Betterment.
Should I invest in Betterment?
Yes, Betterment is a good choice for investors of all kinds thanks to many great features its automated app offers.
Which robo-advisor has the best returns?
In the Betterment vs. Wealthfron debate, if we’re looking strictly at returns, Wealthfront is a better choice. That being said, both services offer plenty of great features, so be sure to look into each of them before you decide.
I have always thought of myself as a writer, but I began my career as a data operator with a large fintech firm. This position proved invaluable for learning how banks and other financial institutions operate. Daily correspondence with banking experts gave me insight into the systems and policies that power the economy. When I got the chance to translate my experience into words, I gladly joined the smart, enthusiastic Fortunly team.