Betterment is our top robo adviser due to a combination of traits. First, the company has the lowest account minimum at $0. Second, Betterment’s management fee is competitive, at 0.25% of the portfolio annually for the basic service and 0.4% for the premium.
Betterment’s basic plan helps clients invest in low-cost globally diversified portfolios, offers automatic rebalancing, and advanced tax-saving/tax-loss strategies.
The premium plan helps users create plans for real estate, 401(k)s, and offers unlimited access to CFP professionals.
Customer service is solid, as customers can talk to financial advisors through app messaging/email for the basic plan and through the phone for the premium plan.
Lastly, Betterment has a respectable AUM of $9 billion, meaning that you can trust the company to manage your savings.
Who’s it For?
The services rendered by the firm include Financial Planning, Retirement, Rollovers, Tax Loss Harvesting+ and Tax-Coordinated portfolio.
Beginners & Passive Investors
Betterment is THE right choice for those investors, who will want their money work overtime for them, with minimal contribution from them in terms of time and inputs.
The firm offers a host of options for retirees such as traditional IRA, Roth and SEP IRA. The breadth along with the tax-efficient investment pursued by the firm should appeal to the retirees.
The firm’s daily tax loss harvesting option and its tax-coordinated investments are a lure for those seeking to maximize their after-tax returns. The firm organizes assets based on taxes, ie tax-exempt municipal bonds go into your taxable account and other bonds, which are taxable, are added to the tax-advantages IRAs.
Tax loss harvesting is a strategy, which envisages selling of loss-making investments to help offset the taxes associated with the taxable portfolio. Betterment does this on a daily basis, with the firm claiming that this strategy adds an estimated 0.77 percent per year to your after-tax returns.
Fees and Commission
Betterment charges no trade and transfer fees, while only an annual management fee is applicable. The firm promises to rebalance portfolio automatically and efficiently, with no additional charge.
For a digital subscription, the annual management fee is 0.25 percent of the account balance and there is no minimum balance requirement. Meanwhile, an annual management fee of 0.40 percent is charged for a premium account, with the minimum balance requirement at $100,000.
The fee would be taken directly from the Betterment account. However, you will not be charged if the account balance is $0.
All portfolios are subject to fund-level fees, which means on top of the fund fees, you also pay the applicable management fees.
Platforms and Tools
Betterment’s mobile investment app is available for both Android and iOS and can be downloaded from Google Play and App Store, respectively. The app is available for free and allows you to:
- Check the balance and returns of your portfolio in real time
- Deposit and withdraw money anytime anywhere
- Manage your portfolio’s bond and stock allocation
- Review your goals and account activity
It also allows monitoring of all accounts in one place, helping to diagnose how much your outside accounts are costing you in fees and uninvested cash. You can sync your outside accounts such as bank accounts and other investments.
By way of research, the firm provides clients with technical specifications, white papers etc. Some of the content found under research include:
- Our Approach to Building an SRI Portfolio
- How We Derive Our Assumption On Inflation
- Our Financial Planning Model: An Overview
- White Paper: Tax-Coordinated Portfolio
Betterment’s support center has a text box to key in your questions. Additionally, the firm also provides answers for some popular questions under different heads.
The firm’s customer support team is available seven days a week to answer questions. It can be contacted through phone or live chat from Monday through Thursday between 9 am ET and 8 pm ET and on Fridays between 9 am ET and 6 pm ET.
On Saturdays and Sundays, chat option is alone available between 11 am ET and 6 pm ET.
The firm can be contacted via e-mail using the address email@example.com.
Ease of Use
The firm offers a free 15-minute call option to help one get acquainted with Betterment and also to get started. The firm provides round-the-clock access to its licensed financial experts to whom you can pose questions about investing, retirement, tax planning, college savings, mortgages and other debts.
Betterment also facilitates in-depth financial advice over the phone, where you will be guided by Certified Financial Professionals. These professionals are available for unlimited calls under the firm’s Premium plan. Alternatively, it also provides access to a dedicated one-on-one advisor.
For getting started, you will be guided by posing a few short questions such as ‘Are you retired?’ , ‘What’s your primary reason for investing?’ , ‘Are you currently investing?’ , ‘What are your investable assets?’ etc.
As basic information, it seeks your email address and password and then collects your contact details.
Once you key in your investment goals, based on your risk disposition, the firm’s automated system recommends a stock/bond portfolio, which is cheap as well as tax efficient.
Cancellation of an account can be done anytime, and the fee is charged on a pro rata basis, for only the period of the month when you had an account balance.
Through their referral program, you get a month’s service free for every friend who funds and when your first three friends fund, you get an extra year free.
Asset Classes (tradable securities)
- Vanguard U.S. Total Stock Market Index ETF (VTI)
- Vanguard US Large-Cap Value Index ETF (VTV)
- Vanguard US Small-Cap Value Index ETF (VBR)
- Vanguard FTSE Developed Market Index ETF (VEA)
- Vanguard FTSE Emerging Index ETF (VWO)
- Vanguard Short-term Inflation-Protected Treasury Bond Index ETF (VTIP)
- Vanguard US Total Bond Market Index ETF (BND)
- iShares National AMT-Free Muni Bond Index ETF (MUB)
- iShares Corporate Bond Index ETF (LQD)
- Vanguard Total International Bond Index ETF (BNDX)
- iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB)
Quite apt for the millennials, given the zero minimum balance, low management fees, and automatic rebalancing, Betterment is a safe choice for those who don’t want to take on the headache of micromanagement of their portfolio. However, the firm may not appeal to seasoned and sophisticated investors, who look for choice in asset classes and seek to actively manage their portfolios.
Use Betterment if:
- You are a laid back investor
- You are worried about after-tax returns
- You are a retiree, who can choose from Betterment’s diverse options
- You are looking for socially responsible investment options
Don’t Use Betterment if:
- You are a hands-on investor
- You are sensitive to fees charged and the minimum account balance
- You are crazy about sophisticated trading tools and techniques