> > Betterment Review 2024: A Robo-Advisor Worth Checking Out

Betterment Review 2024: A Robo-Advisor Worth Checking Out

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With more than $36 billion in assets under management (AUM) and thousands of satisfied customers who enjoy the platform’s wide range of services, Betterment is one of the robo-advisor leaders in the United States.

The company prides itself on being able to provide tailored financial advice beyond cold algorithms and automated responses by introducing a human touch — its team of Certified Financial Planners (CFPs). Betterment was created to serve the full range of investors — from beginners to experienced. Beyond its robo-advisor investment services, Betterment offers investors a variety of features to help them reach their financial goals.

The following Betterment review covers everything you should know about Betterment to help you determine if it’s right for you.

Betterment

Overall Rating 4.5

The Modest Wallet Overall Rating (Our Rating Methodology)

Bottom Line: Betterment is one of the largest robo-advisors in the United States, with over $36 billion in Assets Under Management (AUM). Their goal is to take sophisticated investing strategies and design portfolios with the help of AI.

Account minimum

4.5

Account fees

4.5

Portfolio construction

4.5

Accounts supported

4.5

Customer support

5.0

Features and tools

4.5

Security

4.5

Ease of use

4.5

Educational resources

4.5

Best for:

  • Passive investors
  • Long term investors
  • Hand-off investors

Pros:

  • No minimum deposit
  • Low management fees
  • Tax smart technology

Cons:

  • Not for DIY investors
  • Limited investments

What is Betterment?

Betterment is a New-York based investment platform that offers money management services, including an investment advisory service that operates through artificial intelligence. This basically means that the advice provided to each customer is determined by an algorithm the firm has cleverly designed.

Betterment’s value proposition is that they help people manage their money wisely by providing cash management, investment, and retirement planning advisory services, and they achieve this goal by collecting certain essential information from each user that allows the robo-advisor to determine the best course of action.

Betterment Homepage
Source: Betterment

>> Read Also: M1 Finance Review: A Hybrid Robo-Advisor & Brokerage


How Does Betterment Work?

Betterment offers a number of products and services that can work for you, depending on what you’re looking for in a robo-advisor. Currently, Betterment offers the following portfolios depending on your goals:

  • Betterment Core: Focused on global diversification with low-cost and tax-efficient ETFs.
  • Goldman Sachs Smart Beta: Built to outperform market-cap portfolios with Goldman Sachs ETFs.
  • Innovative Technology: A well-diversified portfolio with increased technology exposure.
  • Broad Impact: Invests in ETFs with high ESG ratings.
  • Climate Impact: Invest in ETFs that support companies with lower carbon emissions.
  • Social Impact: Invest in two main ETFs that support minority empowerment and gender diversity.
  • Betterment Cash: Cash-only strategy earning a variable interest rate of 0.10%
  • BlackRock Target Income: Bond-only strategy.

Account Minimums

No minimum deposit is required to open a regular taxable, crypto, cash reserve, or checking account with Betterment. However, the minimum amount required to build a portfolio is $10.

Meanwhile, users who want to be enrolled in the Betterment premium program will need to have an account balance exceeding $100,000 in either cash or securities. These customers will enjoy personalized human advice and a lower annual management fee.

Account Types 

When it comes to investment accounts, Betterment offers personal and joint (spouse or partner) taxable accounts, but you can also invest in existing trusts.

If you’re interested in retirement accounts, you can select any of the following:

  • Traditional IRA
  • Roth IRA
  • SEP IRA
  • Inherited IRA
Betterment Account Types
Source: Betterment

Robo-Advisor Investment Accounts

As a robo-advisor, investment accounts with Betterment work through artificial intelligence using Modern Portfolio Theory (MPT). This means that an algorithm designs your portfolio based on certain personal information you provide upon registration, and the company charges a 0.25% annual fee on your invested balance while covering all trading costs involved.

Additionally, no transaction fees are charged to users, while the funds your portfolio is invested in have an expense ratio between 0.03% and 0.50% of the total amount invested.

If you need guidance, Betterment also offers a Premium Advice investment account for a 0.40% flat annual fee on the amount invested. This service gives the user unlimited access to the firm’s team of Certified Financial Planners via phone call. 

An important note: While opening a standard account doesn’t require a minimum balance, the Premium Advice account requires a minimum of $100,000 in assets.

Retirement Accounts

Betterment offers both IRA and 401(k) accounts, and they can be rolled over from other providers if a user decides to do so.

Once the assets are received, the platform charges a 0.25% annual management fee.

Opening an Account

A Betterment account can be set up in a matter of minutes by completing the firm’s online registration process. No complicated paperwork or lengthy forms need to be filled, and the system will automatically suggest the most convenient portfolio allocation for the customer upon providing certain information.

  • Step 1 – Visit the Betterment Website: First, visit the Betterment official website and click on the blue “Get Started” button located at the upper right corner of the site. Since Betterment is a US-based financial services company, they have to comply with Know-Your-Customer (KYC) rules meaning that the user will be asked to provide both personal and financial information to open an account.
  • Step 2 – Select your type of account: once users click on the “Get Started” button, they will have to select the type of account that they would like to open, whether that is a taxable, crypto, retirement, cash reserve, or checking account. It is also possible to fill out a questionnaire to get a recommendation from the robo-advisor in regard to the most convenient account type based on your financial goals, age, and other similar details.
  • Step 3 – Provide your personal information: the user will now be prompted to provide an email, password, legal first and last name, and phone number. At this point, the user will also have to agree with the terms and conditions of the Betterment service. The user’s address, date of birth, and Social Security Number (SSN) will also need to be provided later on.
  • Step 4 – Set up the account: once into the Betterment user interface, it is now time to complete the registration process by selecting what type of portfolio you will be building (general, target-based, or retirement). The user will be prompted to fill out a brief questionnaire so the robo-advisor can determine his/her financial goals, income situation, and risk tolerance and suggest the most convenient allocation.
  • Step 5 – Link your bank account and make a deposit: once the user provides all the details needed to set up the account, a bank account will be linked to the Betterment account to make deposits and withdrawals. The user will have the chance to set up automatic deposits at this point if he/she prefers to.
Betterment Opening an Account
Source: Betterment

Betterment Features

Betterment is definitely one of the most advanced and comprehensive robo-advisors in the United States, offering an array of useful features.

Account Minimum$0 ($10 to start investing)
Fees0.25% with a balance over $20,000 or a qualifying recurring deposit. Otherwise, $4 per month.
Inactivity Fee$0
Investment TypesETFs
Account TypesTaxable, Joint, Traditional IRA, Roth IRA, Rollover IRA, Inherited IRA, SEP IRA, and Trusts
PlatformMobile (iOS / Android) and Website
Assets Under ManagementOver $36 billion
AdviceHuman Assisted
PromotionNone
Socially Responsible Investingyes
Fractional Sharesyes
Portfolio Rebalancingyes
Tax-Loss Harvestingyes
SupportLive Chat, Phone, and Email

Custom Asset Allocations

Betterment’s robo-advisor analyzes each investor’s goals and risk profile to determine the optimal asset allocation for them (how much money will be invested into which asset class) and this allocation will be executed by using financial vehicles called exchange-traded funds (ETFs). 

The custom asset allocation feature calculates the percentage of the investor’s portfolio that will go into each asset class. The calculation is based on the information provided and the portfolio will be rebalanced periodically to maintain the percentage of each asset class that was defined when the portfolio was first created. 

Tax-Loss Harvesting (TLH)

Betterment’s Tax-Loss Harvesting (TLH) feature is automatically triggered by the robo-advisor when a loss in a security has been identified.

The point of this feature is to offset taxes on both gains and income by realizing or “harvesting” a loss. Once the security that has experienced a loss is sold, it is replaced by a similar one, while maintaining an optimal allocation and expected returns.

Betterment Tax Loss Harvesting
Source: Betterment

Socially Responsible Investing (SRI)

Betterment offers Socially Responsible Investing (SRI) portfolios designed for investors who consider themselves socially-conscious and wish to invest in companies that meet certain social, environmental, and corporate governance criteria.

Betterment offers three main Socially Responsible Investing portfolios:

  • Broad Impact portfolio: This is Bettermen’s general ESG investing portfolio, and it seeks to give investors greater exposure to all of the different elements of social responsibility, such as lower carbon emissions, ethical labor management, or greater board diversity. The main asset classes part of this portfolio include U.S. Stocks, Emerging Market Stocks, Developed Market Stocks, and U.S. High-Quality Bonds. In this portfolio, you will find yourself investing in companies like Microsoft, Google, Proctor & Gamble, Merck, CocaCola, Intel, Cisco, Disney, and IBM.
  • Climate Impact Portfolio: This portfolio offers investors an alternative to investing in climate-conscious companies. The portfolio invests in ETFs with a specific focus on mitigating climate change. About half of the stocks in this portfolio are invested in a global low-carbon stock ETF.
  • Social Impact portfolio: This portfolio focuses on supporting social equity and minority empowerment initiatives. The portfolio uses the (NYSEARCA: NACP) and (NYSEARCA: SHE) ETFs as their core investment to achive its goals.

Innovative Technology Portfolio

The Innovative Technology portfolio aims to increase your exposure to leading technology companies in a number of industries and sectors including:

  • Semiconductors
  • Clean energy
  • Virtual reality
  • Artificial intelligence
  • Nanotechnology

The portfolio is generally well-diversified and built to generate healthy long-term returns at a low cost.

Betterment Automated Investing
Source: Betterment

Goldman Sachs Smart Beta

The Goldman Sachs Smart Beta portfolio is designed to achieve above-market returns while maintaining the tax-efficient and low-cost approach that characterizes Betterment’s investment offerings.

This portfolio is designed by the renowned global investment bank Goldman Sachs, and the additional returns are achieved by increasing the systematic risk of the portfolio.

It is considered a more actively managed portfolio than the rest of the alternatives offered by Betterment, as asset classes may vary depending on their potential to produce higher returns over time.

It is perhaps the most suitable choice for investors who are willing to take on some extra risk to achieve higher returns to meet certain specific (and possibly more ambitious) financial goals.

BlackRock Target Income

Blackrock’s Target Income portfolio is a choice suited for investors seeking to generate fixed income from their invested funds, as it is essentially a 100% bond portfolio that produces periodic cash inflows from interest payments.

It is usually a popular choice for retirees or for investors who want to receive a steady stream of income to cover their living expenses.

The BTI portfolio is a low-risk alternative, as the bonds included within the portfolio are usually highly rated, which means the probability of a default is fairly low, while the expense ratio of the ETFs that comprise this portfolio is a bit higher than that of stock ETFs —  between 0.21% and 0.38%, depending on the target income level.

Source: Betterment

See Also: What is Micro Investing? Is It the Best Way to Start Investing?

Flexible Portfolios

A Flexible Portfolio allows the investor to get a say in what the robo-advisor is recommending, which means that the weight of the different asset classes within the portfolio can be modified at any given point in time.

This portfolio is perhaps more suitable for those who have their own views about how certain assets may perform over time. This flexibility could also be used to increase the risk associated with the portfolio at some point if the investor seeks to increase his returns as well.

The good news is that those who choose the Flexible Portfolio will continue to enjoy the tax-savings features offered by Betterment (Tax Loss Harvesting and Tax Coordination) even though they will not be following the robo-advisor’s recommendation strictly.

These portfolios are initially constructed by using the robo-advisor’s initial recommendation, and then the weight of each class can be modified through the platform’s user-friendly interface.

Smart Tax Strategies

Betterment’s portfolio and investment strategies were conceived based on a tax-efficient approach. This means that the robo-advisor’s recommendations take into account not only the risk/return of the ETFs included within the portfolio, but also the tax implications of the asset classes selected.

By doing this, Betterment claims that you can increase the value of your portfolio by around 15% (approximately 0.48% extra return per year) over a 30-year period by reinvesting the taxes you save back into the portfolio using their strategies.

They achieve this by investing in ETFs, which are considered to be more tax-efficient than other investment vehicles.  They include certain tax-exempt securities, such as municipal bonds, to gain from their tax advantage.

Additionally, they use retirement accounts (which allow for tax deferrals) to include high-tax assets within these accounts while including the tax-exempt assets into your other taxable investment accounts to achieve a lower tax bill.

Finally, Betterment also achieves tax savings by selling assets in a certain order if you need to withdraw money from your account, taking into consideration the tax implications of selling those assets and liquidating the ones that will add fewer taxes to your annual returns first.

Betterment Investing Goals
Source: Betterment

Financial Planning Package

Along with its popular selection of portfolios designed by the robo-advisor, Betterment also provides financial planning packages for users who may be seeking a personal touch.

These packages consist of one-on-one interactions with financial experts via pre-scheduled calls, and there are various packages available for users, starting with the Getting Started Package, which consists of a 45-minute phone call with a Certified Financial Planner (CFP) who can provide step-by-step guidance on how to manage your money wisely.

The second alternative is a Financial Checkup Package, which also consists of a 60-minute call with a CFP. During the call, you’ll receive expert advice based on an analysis of your current financial situation.

There are also certain “situational” financial planning packages, like the Marriage Planning Package, the College Planning Package, and the Retirement Planning Package, all of which consist of a 60-minute call with a CFP where the user will receive guidance on certain financial aspects involved in each of these life-changing situations.

The Getting Started Package costs $199, while the rest of the packages cost $299. Calls can be easily scheduled through Betterment’s website or mobile app.

Betterment Checking

Betterment offers checking accounts to help users manage their expenses, and their customer checking accounts are provided by a third-party financial institution  (the NBKC bank, as of this writing).

The account is insured by the FDIC for up to $250,000 and comes with a Visa Debit Card. Additionally, the account offers reimbursements on ATM and foreign fees and doesn’t charge any monthly maintenance or account fees.

Both individual and joint checking accounts are available. Betterment also offers mobile banking services so account holders can check balances and movements in real-time.

Betterment Pros
Source: Betterment

See Also: Webull Review: Is Webull the Ultimate Free Investing App?

Betterment Cash Reserve

Betterment Cash Reserve is Betterment’s savings account option. It was launched as an alternative to traditional savings accounts, highlighting the fact that it produces an Annual Percentage Yield (APY) that’s six times higher than the national average.

This account is FDIC-insured as well, with coverage of up to $2 million. Moreover, withdrawing money from Cash Reserve accounts usually takes between 1 and 2 business days.

The minimum deposit required to open a Cash Reserve account is $10, and funds deposited into this account may be held by one of the following third-party institutions  (Betterment is not a bank):

  • The Bancorp Bank
  • Barclays Bank Delaware
  • Citibank, N.A.
  • Cross River Bank
  • HSBC Bank USA, N.A.
  • State Street Bank and Trust Company
  • Wells Fargo Bank, N.A.

Smart Deposits

Betterment allows users to set up auto-deposits for their accounts, which means that a certain amount will either be periodically withdrawn from one of the bank accounts registered within the platform, or money will be transferred from one of Betterment’s checking accounts into the investment account held by the user.

This feature is particularly useful for investors who may be less disciplined when it comes to depositing money into their retirement or investment accounts because it eliminates the need for executing a manual deposit on a weekly or monthly basis.

Additionally, it is a good alternative for people who follow the dollar-cost-averaging investment approach, which means that the investor purchases securities periodically instead of all at once, as temporary market fluctuations in the portfolio can be smoothed over time by using this method.

Even small deposits can be used by Betterment to increase portfolio holdings via fractional shares (which are smaller portions of the ETFs your portfolio is invested in).

Betterment Monthly Deposits
Source: Betterment

Mobile App

Betterment recently improved its mobile app to incorporate a significantly higher number of features that could previously only be accessed via the web app. 

The previous version focused on the value of the investment portfolios held by the user — and according to Betterment, it produced a high level of stress for users during times of market volatility.

Now, Betterment has incorporated other indicators, like the degree of progress the user has made toward his or her financial goals.

Betterment has also incorporated all of the financial goals available in the web-based version into the mobile app, and, as a result, users can now set up new portfolios as needed by using their smartphones.

Deposits and withdrawals can also easily be made using the app’s interface. The app also provides a set of useful reports designed to inform the user about how a portfolio has behaved over time, the fees paid, dividends received, withdrawals made, and other similar information.


Betterment Portfolio Construction

Betterment offers access to different portfolio allocations depending on each user’s financial goals, risk tolerance, employment, and income situation. These various alternatives include the so-called “core” portfolio offered by the firm, which is the usual allocation suggested for taxable investment accounts, and some other options for investors seeking to boost their returns by adopting sophisticated strategies or investing in alternative assets — i.e., cryptocurrencies.

This provider aims to create portfolios at a low cost by using exchange-traded funds (ETFs) and charging no fees on the trades they execute to this end. These portfolios are also rebalanced automatically every now and then at no additional cost, and certain sophisticated strategies like tax-loss harvesting (TLH) are automatically executed by the robo-advisor to take advantage of the portfolio’s losses to reduce the investor’s tax bill and boost returns over time.

Betterment Core Portfolio

The Betterment Core Portfolio is the typical allocation that the robo-advisor will suggest to an investor who wants to build wealth, set up and grow a retirement fund, or set money aside for a specific purpose. 

Since its inception in September 2011, the portfolio has generated annualized returns of 7.3%. As of June 2023, a $50,000 investment would have grown to $113,854 after deducting the annual management fees paid to Betterment. 

The base allocation of this portfolio is 70% stocks and 30% bonds. That is a relatively aggressive allocation. A lower stock component may be suggested for risk-averse investors or people who need to generate an income rather than grow their account balance. 

Overall, Betterment claims that the robo-advisor will choose among 101 different allocation options based on each user’s unique financial goals, risk tolerance, income, and employment situation.

All of the asset classes that make up these portfolios are added via exchange-traded funds (ETFs). For example, US stocks are incorporated via ETFs like the US Total Stock Market ETF (VTI) managed by Vanguard, while US investment-grade bonds are added by purchasing shares of the iShares Core US Aggregate Bond ETF (AGG), among others.

Socially Responsible Investing Portfolio

Socially Responsible Investing Portfolios are designed by Betterment to give conscious investors the chance to pour their money into companies that are having a positive impact on our society.

By using specific exchange-traded funds (ETFs) that only invest in companies that have high ESG ratings, have a positive environmental impact, and contribute to society, the robo-advisor can easily create three different types of portfolios that socially-conscious investors can choose from: broad impact, social impact, and climate impact.

Broad Impact

The Broad Impact Portfolio invests in ETFs that allocate their funds to the most socially-conscious companies based on their ESG ratings and other similar metrics. These companies are either working hard to reduce their carbon footprint, have embraced corporate governance policies that have a positive impact on society to either reduce inequality or promote diversity in the workplace and are committed to performing their activities in an ethical manner.

The portfolio was launched in June 2017. Since then, it has generated annualized returns of 5.2%. As of June 2023, $50,000 invested into the Broad Impact Portfolio would have grown to over $67,000. This performance is measured following a base allocation of 70% stocks and 30% bonds.

Some of the ETFs used to build this portfolio include the iShares ESG Aware MSCI EAFE ETF (ESGD), which primarily invests in top-rated international companies in terms of ESG, and the iShares ESG Aware US Aggregate Bond ETF (EAGG), which invests in fixed-income securities issued by companies that have a high ESG rating as well.

Social Impact

The Social Impact portfolio invests primarily in companies that enforce corporate governance policies that foster diversity in the workplace, empower minorities, reduce social and gender inequality, and work in favor of the communities where they are based.

Since its inception in September 2020, this portfolio has generated annualized gains of 4%. As of June 2023, that would have turned a $50,000 investment into $55,247. This performance is measured by assuming a target allocation of 70% stocks and 30% bonds.

The ETFs used to build this portfolio include the iShares ESG Aware MSCI USA ETF (ESGU) and the SPDR MSCI USA Gender Diversity ETF (SHE) for the stock component and the Vanguard Total International Bond ETF (BNDX) for the bond component, among others.

Climate impact

This portfolio focuses on companies that are making positive contributions to the goal of slowing down climate change by reducing carbon emissions. These firms may either develop technologies that help industries reduce their footprint or engage in activities and make investments that aim to dramatically reduce the harm they cause to the environment. 

Since the portfolio was launched in September 2020, it has generated gains of 4.1%. As a result, a $50,000 investment as of June 2023 would have grown to $55,474. This performance is measured assuming a target allocation of 70% stocks and 30% bonds.

This portfolio invests in exchange-traded funds (ETFs) like the iShares MSCI ACWI Low Carbon Target ETF (CRBN) and the SPDR MSCI Emerging Markets Fossil Fuel Reserves Free ETF (EEMX) for the stock component and the iShares USD Green Bond ETF (BGRN) for the bond component, among others.

Stock and Bonds Portfolio 

Aside from its Core Portfolios and Socially Responsible Investing (SRI) portfolios, Betterment also provides access to other stock and bonds portfolios; one focused on the tech sector and the other on companies that have the potential to outperform the market in the long term.

Innovative Technology

The Innovative Technology portfolio invests in companies that are developing ground-breaking technologies that can transform society in a good way. This includes businesses in up-and-coming industries like artificial intelligence, the metaverse, virtual and augmented reality, blockchain, semiconductors, and clean energy.

Since the portfolio was launched in December 2021, it has generated losses of 9.5%. As of today, $50,000 invested into this portfolio would have been turned into $43,525. This performance is measured based on a baseline allocation of 70% stocks and 30% bonds. 

It is worth noting that 2021 and 2022 were not good years for tech stocks as a whole due to changes in the macroeconomic landscape. Hence, this relatively short period is not necessarily the most convenient to analyze the performance of this portfolio in particular.

This portfolio invests in various sector and theme-focused ETFs such as the SPDR S&P Kensho New Economies Composite ETF (KOMP) for the stock component and general bond ETFs such as the iShares Core US Aggregate Bond ETF for the fixed-income allocation.

Goldman Sachs Smart Beta

This portfolio is managed by one of America’s largest investment banks — Goldman Sachs — and it is focused on identifying companies that are considered undervalued based on the intrinsic value of their businesses relative to the valuation that the market is assigning to them.

The goal of the portfolio is to generate returns that exceed those generated by passively-managed vehicles like index funds and broad-market stock ETFs. 

Since the portfolio’s inception in September 2017, it has generated annualized gains of 6%. As a result, as of June 2023, $50,000 invested into the Goldman Sachs Smart Beta portfolio would have been turned into $69,487.

It is worth noting that the annualized performance of this portfolio was 1.3% lower than that of the Core Portfolio, with a stock-heavy target allocation of 70% stocks and 30% bonds. Although the two portfolios were launched on different dates, it seems that Betterment’s passively-managed portfolio is doing much better than Goldman’s actively-managed alternative.

Crypto Portfolio

Betterment currently offers four different options to get exposure to the up-and-coming crypto market. Each of these portfolios has different approaches, with one offering broad exposure to the entire space and the others a more focalized exposure to certain corners of this huge market.

Universe

The Universe portfolio invests primarily in well-established digital assets with sound value propositions. Its goal is to be a broadly-diversified vehicle to invest in this market and to keep downside risk in check.

More than a third of the portfolio, as of October 2022, was invested in Bitcoin (BTC), while nearly a fifth of the funds were allocated to Ethereum (ETH). The remaining funds were spread across multiple cryptocurrencies, including Bitcoin Cash (BCH), Uniswap (UNI), Solana (SOL), Polygon (POLY), and others.

Data about the performance of this portfolio is not disclosed publicly by Betterment. The assets held in these portfolios are in the custody of the Gemini Trust Company.

Sustainable

The Sustainable portfolio invests solely in cryptocurrencies that are powered by environmentally-friendly consensus protocols like proof-of-stake (PoS). This leaves out Bitcoin as its network is powered by the energy-intensive proof-of-work (PoW).

As of October 2022, Ethereum accounted for more than 40% of this portfolio, followed by multiple other holdings that had a weight lower than 5% each, including Solana (SOL), Chainlink (LINK), Filecoin (FIL), and Axie Infinity (AXS).

Metaverse

The Metaverse crypto portfolio focuses on projects that are developing a decentralized version of virtual realms. These companies aim to create entire ecosystems where users can interact by using virtual and augmented reality and use their tokens to pay for digital goods and services, buy parcels of land, and engage in experiences.

Interestingly, Bitcoin and Ethereum accounted for nearly 45% of this portfolio’s holdings as of October 2022. These are not necessarily metaverse-related coins, but Ethereum’s smart contracts are used to power many of these projects.

Other coins that are directly associated with the metaverse space, like Axie Infinity, Decentraland, and The Sandbox, have weights below 10%.

Decentralized Finance

The Decentralized Finance (DeFi) crypto portfolio invests primarily in projects that are seeking to revolutionize the financial industry by using smart contracts and other similar blockchain solutions. 

This up-and-coming space has already attracted billions from investors, and several traditional banking activities can already be performed via DeFi protocols like lending and borrowing, investing, asset management, and market-making.

Bitcoin and Ethereum accounted for over 40% of the holdings in this portfolio as of October 2022, while other DeFi protocols like Uniswap, Yearn.finance, Aave, and Compound are also included in the portfolio with weights under 10% each.


Betterment Pricing & Fees

Following is a summary of how much Betterment charges for each of the services they provide:

  1. Cash Reserve Savings Account — No fees are charged on the balance of your account.  Betterment is compensated by program banks (as stated on the Betterment website).
  2. Checking Accounts — No monthly maintenance or account fees are charged, and the 1% Visa Debit Card fees are reimbursed to the account holder.
  3. Investment Accounts — Betterment charges a 0.25% fee on the amount invested per year for its standard investment accounts or $4 per month for accounts with less than $20,000.
  4. Retirement Accounts — Betterment charges a 0.25% annual management fee on the amount invested in IRA and 401(k) accounts.
  5. Financial Planning Packages — All packages offered by Betterment cost $299 for a 60-minute consultation, except for the Getting Started Package, which costs $199 and entitles the user to a 45-minute call with a CFP.
  6. Crypto — The Crypto account offered by Betterment generates a 1% annual management fee along with trading expenses. The fees for the trades that need to be executed to both build and rebalance the portfolio are 0.15% of the value of each trade per transaction.

Betterment Customer Support

The Contact Us section of the Betterment website provides access to answers to the most frequently asked questions (FAQs) made by prospective and existing customers about the services provided by Betterment.

The topics covered by this help section go from the process of opening an account to transferring money in and out of the platform and filing taxes.

It is also possible to reach out to a customer service representative of Betterment via live chat. To get in touch with an agent, the user will have to answer several questions made by a chatbot first to see if the problem can be easily responded to without querying a customer support representative.

It is also possible to reach out to Betterment via phone call to this number (718) 400-6898. Users can also send a letter to one of Betterment’s corporate offices located in New York City. 

Finally, people who sign up for the Premium subscription can schedule a call with a Certified Financial Planner (CFP) who will be there to provide unlimited support and answer any questions the customer may have. 

A one-time consultation with a “Licensed Concierge” is also available to prospective customers who have an account balance exceeding $20,000. This consultation is free and is performed by an Investment Advisor Representative (IAR). These individuals have the credentials to provide guidance to customers who want to transfer their investment account to Betterment.


Betterment User Experience

The Betterment platform is designed to hold investors’ hands in the process of building an investment portfolio and setting up a bank account. The web-based version of the service is highly intuitive and is made up of multiple workflows that move investors forward in the process of setting up an account, building a portfolio, depositing money, and managing their finances without performing any complex tasks.

Betterment provides insightful charts and data about the performance of the user’s portfolio. This includes the possibility of tracking accounts that are created specifically to achieve a certain financial goal, like funding a vacation or saving money for kids’ college tuition.

Meanwhile, the Betterment mobile app is available for both iOS and Android-powered devices. On the Apple App Store, the app has received a rating of 4.7 stars from nearly 42,000 reviews. 

Meanwhile, on the Google Play Store, it has been downloaded more than 500,000 times, and nearly 12,000 users have rated it with 4.7 stars as well.

It is also important to note that Betterment has not received the best ratings on Trustpilot and BBB, as there are some dissatisfied customers there.


Betterment Security 

Betterment is an SEC-registered investment advisor, and the firm is a member of the Securities Investor Protection Corporation (SIPC). The SIPC policy provides coverage for up to $500,000 in assets held with a member organization including up to $250,000 in cash.

In addition, the banking products offered by Betterment — Cash Reserve and Checking Accounts — are offered by program banks whose deposits are insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000.

Crypto accounts are not eligible for SIPC or FDIC insurance. The custodian for all cryptocurrencies held with Betterment is the Gemini Trust Company. 

According to the website SSL Trust, the Betterment.com website is free of malware, viruses, and phishing campaigns, and its SSL/TLS certificate is in good standing. This means that information can be safely transferred to the company’s systems through the website.


Betterment Educational Resources

Betterment is committed to helping investors learn more about investing and finance, as reflected by their rich library of educational materials, which include blog posts, videos, and webinars.

On the “Education” section of the Betterment website, users can use a search box to find information about any topic that they may want to learn more about. These available materials discuss topics including saving money, investing in real estate, planning for retirement, 401(k)s and how to use them, and investment portfolios.

There is a section called “Money 101” that shares basic information about financial topics that can be quite useful to beginners who are having their first experience with the financial markets and teenagers who would like to learn more about investing.

In addition, the Betterment Help Center can also be used as a resource library to troubleshoot platform issues and learn more about the company’s services, the types of accounts they offer, how portfolios are built, and what investors can expect from their experience with this provider.


Betterment Pros Explained

  • Streamlined Registration Process: Betterment has designed a seamless online registration process that allows users to create an account in a matter of minutes.
  • Low Minimum Investment: This provider does not require a deposit to open an account. However, the minimum investment that the robo-advisor can use to create a portfolio is $10.
  • No Fees On Banking Features: Betterment’s bank accounts, Cash Reserve, and Checking do not charge any fee to users for ATM withdrawals or PoS transactions.
  • Low Management Fees: The 0.25% annual management fee charged by Betterment is significantly lower than the rate charged by most companies in the asset management industry.
  • Ample Selection of Portfolios: Betterment provides access to an ample number of portfolios that users can choose from, including its flagship Core Portfolio and other alternatives like its Crypto and Socially Responsible Investing options.
  • All Around Fintech Company: This provider’s services can be used to manage a person’s personal finances entirely, as the combination of its investing and banking solutions covers most financial needs.
  • Robust Security Features: All investment accounts opened with Betterment are insured by SIPC for up to $500,000 in securities and cash. Bank accounts are also FDIC-insured for up to $250,000 by the program banks that support them.

Betterment Cons Explained

  • Users Cannot Trade Individual Stocks: It is not possible to invest in individual stocks by using the Betterment platform.
  • Limited Control Over Investment Selection: Users cannot take control of their portfolio choices as the robo-advisor makes all the decisions in regard to both the weight it assigns to different asset classes and the financial instruments it uses.
  • Limited Access To Human Advisors: Access to a human advisor is only possible if the user signs up for the Premium Advice package, which requires a minimum investment of $100,000.
Betterment Goal Tracking
Source: Betterment

See Also: Best Investment Apps: The Beginner Investor Toolbox


Betterment Alternatives

Betterment offers great features, but there are a few alternatives you may want to consider before making your decision. A few things to consider are security features, fees, education, and customer support.

Betterment vs. M1 Finance

M1 Finance is a guided investing platform that lets users build portfolios by using an approach called “Pies.” Differently from Betterment, users can select which securities they add to their portfolio and assign a weight based on their own opinion and judgment. 

However, M1 Finance also offers a solution called Expert Pies, which are predesigned investment portfolios that have specific goals, track a specific industry, or invest solely in a certain type of financial asset. 

M1 Finance requires a minimum deposit of $100 to activate a regular taxable investment account and $500 for retirement accounts. They do not charge a fee but offer a premium membership called M1 Plus that costs $10 per month and gives users access to better service conditions, additional perks, and lower interest rates on loans.

In summary, M1 Finance gives investors more freedom to choose what they would like to add to their investment accounts, and it is a free service. In addition, users can borrow money by using their account balance as collateral. Read our full M1 Finance review to learn more.

Betterment vs. Wealthfront

Wealthfront is a robo-advisor in the United States, offering competitive management fees for as low as 0.25% per year. They also offer to manage your account for free if you have a balance of $5,000 or less.

Wealthfront requires a minimum investment of $500 and does not offer fractional shares. Other than that, they pretty much offer all features you would expect from a good robo-advisor. 

Overall, Wealthfront is a great alternative to Betterment. If you are a young investor, this robo-advisor is something you should look at.

You can out our full Wealthfront review to learn more.

BettermentM1 FinanceWealthfront
Our Rating

4.5

4.0

4.5

Minimum Investment$0$0$500
FeesDigital — 0.25%/yr and Premium — 0.40%/yr$00.25%/yr
PromotionUp to 1 year free (*for qualified deposits)Get up to $500 (*when you sign up for M1 and make a deposit of $1,000 or more within 14 days).None
HighlightEasy to set up and human advisors availablePersonalization and automation in one single platformAutomatic rebalancing included with basic plans
Best ForPassive investorsPassive investorsPassive investors

Who is Betterment Best For?

Betterment is a good choice for investors seeking a hands-off approach to their investments, as the simplicity of Betterment’s portfolios and the user-friendliness of their platforms make investing as easy as it gets.

Other robo-advisors offer similar value propositions, but the platform’s wide range of extra features makes it an interesting choice. Plus, the fees Betterment charges for managing portfolios are on the low end for the industry.

But Betterment may not be the best choice for investors who want to have a say on what they do with their funds, as the portfolios only allow for modifications to the percentage of assets allocated to each asset class, but not to the individual ETFs included.

Additionally, individual stocks are out of the picture, and no DIY portfolios can be built, either.


Notable Betterment Updates and News

  • Betterment released its Retail Investor Survey 2023, which analyzes what individual investors’ opinions are at the moment amid the changes that the macroeconomic landscape has experienced lately, along with other pressing factors that have affected the performance of their portfolios.
  • Betterment announced that it increased coverage for its Cash Reserve savings accounts by spreading customers’ deposits across multiple banks. The announcement was made in response to customers’ concerns regarding the collapse of the Silicon Valley Bank back then.
  • Betterment raises $160 million from investors, including $60 million in equity that was poured into the company during its Series F funding round. The firm claims that it manages over $32 billion in assets for its more than 700,000 customers.

Betterment FAQ

We’ve found some of the most frequently asked questions with regard to Betterment; here are our answers.

How Does Betterment Make Money?

For checking accounts, Betterment makes money on the interchange fees generated when holders use their debit cards with different merchants. They also get a small portion of the net interest margin from the volume of deposits received on the accounts.

For savings accounts, Betterment expects to receive annual revenues higher than 0% of the average volume of deposits held with program banks (banks that provide the actual accounts for Betterment customers),  but they also put a cap of 0.25% on these revenues.

For investment portfolios, Betterment earns 0.25% per year on the total amount users invest using their platform and $4 per month for customers that have less than $20,000 invested.

Additionally, Betterment receives compensation from the 45-minute and 60-minute consultations provided as part of their Financial Planning Packages, which cost between $199 and $299 per consultation.

How is Betterment Different from Other Robo-Advisors?

Betterment services are fairly similar to those provided by other robo-advisors like Wealthsimple or Wealthfront. However, compared to Wealthfront, Betterment comes up on top as you are not required to have a minimum investment.

On the other hand, when compared to Wealthsimple, Betterment limits the asset classes incorporated in their portfolios to stocks and bonds, while its competitor also includes real estate and natural resources assets.

Finally, Betterment does not allow users to set up DIY portfolios, which may make it more interesting for investors who have a more hands-off approach when it comes to managing their money.

How Does Betterment Protect My Money?

Checking and savings accounts offered by Betterment are insured by the Federal Deposit Insurance Company (FDIC) for up to $250,000 and $2,000,000 per account, respectively.

Meanwhile, investment accounts are protected by SIPC for up to $500,000 per legal account. This protection does not cover market value fluctuations of your investment portfolio (as that is outside the scope of the program).

The SIPC protection was designed to protect investors from failed investment funds, which means that you will be compensated by the SIPC if Betterment is liquidated or goes out of business.

How Easy Is It to Make Withdrawals?

Withdrawing money from Betterment is fairly easy, and it can be done from the web app or the mobile app.

You can withdraw up to $500 per day from your checking account by using an ATM, and the fees involved in the transaction will be reimbursed. Point-of-Sale (PoS) transactions have a daily limit of $2,000.

For bank transfers, withdrawals take between 1 and 2 days to be credited, and the amount you can withdraw is unlimited, except for withdrawals made on your checking account, which has a $10,000 maximum limit.

Does Betterment Offer Human Advice?

Yes. The Premium Advice investment plan entitles the user to unlimited over-the-phone access to the company’s team of Certified Financial Planners (CFPs).

Additionally, investors can also sign up for one of the company’s financial planning packages described above, which entitle the customer to a 45-minute (Getting Started Package) or 60-minute consultation (for the rest of the packages) with a CFP for a fee that ranges between $199 and $299 per consultation.

In A Nutshell

  • Account Minimum: $0
  • Fees: 0.25% per year for the digital service or $4 per month for accounts with less than $20,000
  • Promotion: None
Betterment

on Betterment’s website


Final Thoughts

If you are looking for a robo-advisor, Betterment is definitely one of the best available. 

Their straightforward fees, user-friendly web-based and mobile platforms, easy-going approach, and customer-centric philosophy make this robo-advisor one of the best choices for investors in the United States.

Whether you are a hands-on or a hands-off investor, you can benefit from Betterment’s services. 

You can use their robo-advisor to set up a specific portfolio to achieve simple financial goals, or you can rollover your entire balance to them, whether it includes IRAs or individual investment accounts. Once you make your deposit, they will take it from there.

Finally, it is important to note that due to SEC regulations, Betterment does not offer its services to non-residents of the United States.

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