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Betterment Review 2019

4.9 5 stars · Sep 2019

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What is Betterment?

Betterment logo

Betterment is one of the biggest US-robo-advisors founded in 2011. It is regulated by top-tier regulators such as the Securities and Exchange Commission (SEC), and the Financial Industry Regulatory Authority (FINRA).

At the time of the review, Betterment was available only for US clients.

 

 

Betterment is recommended for USA customers looking for low fees, easily personalized investment portfolios, and user-friendly investment platforms.

Betterment Review 2019
Betterment pros and cons

Pros:

  • Low investment and non-investment fees

  • Great portfolio personalization options, many model portfolios

  • Easy and fully digital account opening

Cons:

  • Missing fee reports on the investment platforms

  • Only bank transfer is available for deposit and withdrawal

  • Only USD-based accounts

Betterment Review 2019
Fees ★★★★★

Betterment has low investment fees both for basic and premium services. There is no deposit and withdrawal fees.

Which fees you should take into account for robo-advisors? You can see a handy summary of relevant fees here:

Robo-advisor fees explained
Definitions Description
Investment fees Robo-Service fee Fee is charged by the robo-advisor for managing the account. This fee is charged annually based on how much you have invested in a particular account. Sometimes it is called a Management fee.
Other investment fees Those fees which are not charged directly by the robo-advisor. The most important fee is the ETF management fee which depends on the ETFs the robo-advisor invests in.
Non-investment fees Other fees that could be charged based on your funding activities, like fees for deposit & withdrawal or fees, FX conversion.

Worth mentioning is that personal advisory services, when the robo-advisor's experts advise on how to allocate the assets, have higher Robo-Service fee.

We also compared Betterment's fees with those of two similar robo-advisors we selected, Wealthsimple and SoFi Wealth. This selection is based on factors like products offered, client profile, fee structure, etc.

Let's start with the investment fees.

Investment fees 

For the better comparison of robo-advisors' Robo-Service and other investment fees, we calculated two benchmark fees, an annual fee for both basic and premium services.

We made this separation because robo-advisors usually offer multiple tiers of their service which differ in fees, minimum investment, and personal advisory. 

  • Basic service usually includes a discount or zero fees, low smallest investment, and limited personal advisory services.

  • Premium service usually includes higher fees, higher minimum investment, and an option for personal advisory.

In our benchmark calculation, we used a $30,000 account balance for basic and $100,000 for premium accounts

Betterment has low investment fees for basic and premium services. 

Betterment annual fees benchmarked
  Betterment Wealthsimple SoFi Wealth
Basic service's annual fees $108 $210 $0
Premium service's annual fees $510 $600 Premium service not available

Betterment's basic service is called Digital Plan, while the premium service is called Premium plan. In the table below, we summarized the Betterment fee structure.  

Betterment fee structure
  Betterment Digital Betterment Premium
Investment amount $0 $100.000
Investment fees 0.25% Robo-Service fee + 0.11% ETF management fee

0.40% Robo-Service fee + 0.11% ETF management fee

Non-investment fees

Betterment has low non-investment fees. It has no account, deposit, or withdrawal fees. It is similar to its competitors.

Betterment non-investment fees
  Betterment Wealthsimple SoFi Wealth
Account fee No No No
Deposit fee No No No
Withdrawal fee No No No

Betterment Review 2019
Account opening ★★★★★

Betterment has a fast and fully-digital account opening process. The minimum investment amount is $1 and you can choose from a lot of account types. On the flip side, Betterment is available only in the USA. 

Can you open an account?

Betterment is available only for US residents.

Minimum investment amount

Betterment’s minimum investment amount is $1. It’s suitable for clients preferring investing with lower amounts. The premium accounts require a $100k minimum deposit.

Account types

Betterment offers two account levels called plans, based on the service offered and the minimum account balance required:

  • Digital plan: no minimum deposit, and your money is invested automatically, using Wealtshimple's algorithms. No personal advisor is provided unless you buy one of the Betterment packages. These packages are not cheap.
  • Premium plan: $100k minimum account balance required. You’ll get a personal financial advisor.

Betterment offers other account types which vary based on the ownership and the tax-advantage provided.

Betterment account types
Account type Description
Individual Account is owned by an individual
Joint Account is owned by two or more individuals
Roth / Traditional / Rollover IRA Accounts Tax-advantaged individual retirement accounts
Trust Account is held by a Trustee (separate legal entity) for your benefit

In this Betterment review, we tested the Individual Investment Account called Personal Account.

How to open an account

Opening an account at Betterment is easy, fully digital, and fast. Our account was verified within one business day. 

Six steps at Betterment to open an account:

  1. Register a Betterment account, starting with answering the question whether are you retired or not and state your age and yearly income
  2. Choose between the pre-set portfolios (retirement, safety net, general investing, etc.)
  3. Register your email address
  4. Add some personal information, like name, address, Social Security Number, etc.
  5. Add additional security questions and answers
  6. Personalize your goals with additional information like what are your goals for the next future (buying a house, or retirement)

Betterment review - Account opening

Betterment Review 2019
Deposit and withdrawal ★★★☆☆

Betterment doesn't charge fees for withdrawals or deposits, moreover, the whole process is easy and convenient. On the negative side, you can use only bank transfer, and only USD base currency is available for investing. 

Account base currencies 

At Betterment the base currency is the USD, which is not a surprise given the fact the broker serves US-based customers. It equals with SoFi Wealth, however, Wealthsimple has a wider offer.

Base currencies at Betterment vs. similar robo-advisors
  Betterment Wealthsimple SoFi Wealth
Number of base currencies 1 3 1

Why does this matter? If you fund your robo account in the same currency as your bank account, you won't be charged a currency conversion fee

A convenient way to save on the currency conversion fees can be to open a multi-currency bank account. Revolut or Transferwise both offer bank accounts in several currencies with great currency exchange rates as well as free or cheap international bank transfers. The account opening only takes a few minutes on your phone.

Deposit fees and options

Betterment doesn't charge deposit fees and supports automatic deposits. However, you can use only bank transfer, no electronic wallets or credit/debit cards are accepted.

After initiating the deposit, your fund is invested within 1-2 business days into Betterment’s portfolio. Keep in mind, that a bank transfer can take several days.

Deposit options
   Betterment Wealthsimple SoFi Wealth
Bank transfer
Credit/Debit card
Electronic wallets 

Betterment review - Deposit and Withdrawal - Deposit

Withdrawal fees and options 

Betterment also does not charge withdrawal fees, however, the withdrawal is only available through bank transfers. It’s the same for Betterment’s competitors.

You have to take in consideration, that fund withdrawals with robo-advisors take a long time, at around 6-7 business days.

Betterment Review 2019
Investment platforms ★★★★☆

Betterment offers its services through web and mobile platforms. The investment platforms have clear structure and user-friendly layouts. Both are providing two-step authentication. On the negative side, we missed a clear fee report.

Betterment offers in-house developed web and mobile investment platforms. They are available in English.

Web investment platform ★★★★☆

Betterment's web investment platform is user-friendly and easy-to-use. The most important information can be overseen on the landing page, which is your main portfolio screen. The design was constructed to foster the investing process and to increase transparency.

For the login, you can set a two-step verification. Just scroll down to the bottom of the lefthand sidebar. Select “Settings”, then “Security”. There you will be able to find the option to activate Two-Factor Authentication.

When it comes to the portfolio reports, Betterment performs great, however, we missed the clear fee report. You can easily see your accounts, their balances, total earnings, and your projected growth by clicking on the "Home" page "Performance" menu. You can also check each asset’s performance and value separately along with a full record of your portfolios activities such as withdrawals, deposits, dividends earnings, and fees paid. Upon clicking an active portfolio, you can easily change its asset allocation and risk levels.

Betterment review - Web investment platform

Mobile investment platform ★★★★☆

Betterment’s mobile investment platform is available on both iOS and Android. We tested the iOS version. 

The mobile platform is considered to be a perfect copy of the Web investment platform, as such it’s user-friendly, offers two-step authentication, and you can easily oversee the performance of your portfolio. We missed the clear fee report.

Betterment review - Mobile investment platform

Betterment Review 2019
Product offer ★★★★★

Betterment offers highly flexible portfolios. You can easily set your risk preferences and your investment goals, plus both the time horizon and the target amount can be personalized. There are extra features, like socially responsible investing or tax-loss harvesting. 

If you compare the robo-advisors, you should concentrate on the following three questions:

  • Personalization: how can you personalize your investment preferences and how many model portfolios you can choose from?
  • Asset allocation:  what is the distribution of the assets the robo-advisor invest in?
  • Extra features: can you benefit from extra services, like an option for socially responsible investing or tax-harvesting?

Let's see the answers for Betterment.

Personalization

When you start investing with a robo-advisor, you can usually add your investment goal, risk preference, the investment’s time horizon and target amount. Based on your inputs, the robo-advisor recommends one of their model portfolios and you can decide which one you want to go with. The robo-advisors differ in the depth of personalization and the number of available model portfolios.

Betterment offers a very high number of model portfolios. The level of personalization is great too. 

  Betterment Wealthsimple SoFi Wealth
Number of model portfolios 400 30 10
Can you set goals/plans? Yes No Yes
Can you change the risk? Yes Yes Yes
Can you set the time horizon? Yes No No
Can you set a target amount? Yes No No

Betterment shines in the flexibility of its portfolios and risk levels. First, you have to select the portfolio's main theme, like major purchase or retirement, and give some financial data. Based on your inputs Betterment gives you a recommendation, which can be easily modified in many ways: duration, risk profile, target amount, etc.

Betterment review - Product offer

Product range 

Betterment invests mainly in big US-based ETFs, however, there are significant volumes of Emerging Markets and Developed Markets ETFs as well.

Depending on your risk settings, the distribution between stock and bond ETFs are varying.

Betterment's conservative and aggressive asset allocations
ETF types Betterment conservative Betterment aggressive
US Treasury bond ETF 80.0% 0.0%
US Short-term bond ETF 20.0% 0.0%
Developed markets stocks ETF 0.0% 25.9%
Emerging markets stocks ETF 0.0% 15.2%
US Total Stock Market ETF 0.0%

35.3%

US Large cap ETF 0.0% 9.4%
US Mid cap ETF 0.0% 7.7%
US Small cap ETF 0.0% 6.5%

Additional Features

Betterment offers great additional services:

  • Tax-loss harvesting: a practice when the assets are sold and bought in order to optimize your taxes.
  • Socially Responsible Investing: a portfolio strategy that only invests in socially responsible companies and investments.

Betterment Review 2019
Customer service ★★★★☆

Betterment has fast and relevant customer support. On the flip side, it is not 24/7 and live chat is not provided.

You can contact Betterment via:

  • Email: Responsive within 1-2 days and provided great answers
  • Phone: Reached within a couple of minutes also provided relevant responses

Unfortunately, customer service is not 24/7. You can contact them

  • between 9:00 am to 6:00 pm EST from Monday to Friday via the phone and email
  • between 11:00 am to 6:00 pm EST from Saturday to Sunday via the email.

Betterment review - Customer service

Betterment Review 2019
Safety

Betterment is regulated by top tier financial authorities, the SEC and FINRA. You are also protected by a high investor protection amount, $500,000 which includes $250,000 for cash.

Is Betterment regulated? Yes, it is regulated by the Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA).

Betterment is based in the USA and was founded in 2008. Is it safe? To be certain, it is best to check two things: how you are protected and the background of the robo-advisor.

How are you protected 

This is important because the amount of investor protection differ from regulator to regulator. This is not an issue in this case as all the customers are covered by Betterment Securities LLC and the US investor protection scheme, called SIPC. 

The SIPC investor protection scheme protects against the loss of cash and securities in case the broker goes bust. The limit of SIPC protection is $500,000, which includes a $250,000 limit for cash. This amount is substantially higher than the amount most investor protection schemes provide.

Background 

Betterment was established in 2008. The longer the track record of any company, the more proof we have that it has successfully survived previous financial crises.

Being regulated by top-tier regulators and offering a high level of investor protection are all great signs for Betterment's safety.

Betterment Review 2019
Bottom line

Betterment is a robo-advisor based in the USA. 

Betterment offers low fees. You can easily personalize your investment portfolios. The account opening is fully digital and easy. 

On the negative side, we missed the clear fee reports in the investment platforms. You can use only bank transfer for deposit or withdrawal.

As it is easy to open an account, the fees are favorable, feel free to try Betterment.

AUTHOR

Gergely Korpos
Gergely Korpos
Co-founder, CPO
Gergely's aim is to bring more clarity into personal investing. He has 10 years of experience in financial markets with GE Money, KPMG and MOL. He concluded thousands of trades as a commodity trader and financial portfolio manager
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