Robo-advisors are automated investment management tools that make it easy for beginner investors to gain some insight into the best ways to save money. Though there are a number of robo-advising services available on the market, Betterment, an online investing service, has risen above the competition with over $13.5 billion in assets under management.
Quick Look: Best Betterment Alternatives For This Year
- Best Overall: M1 Finance – Open an Account
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Overview: What Is Betterment?
Known for its goal-based investing app, Betterment allows you to save towards retirement, a college education for your child, a new home or another long-term goal though automated investing.
When you sign up for an account with Betterment, you’ll be taken through an interview-style questionnaire that identifies your financial goals. Betterment will then create a unique asset mix of index funds and ETFs from up to 12 investing arenas.
You can even choose a “socially responsible” portfolio option, which creates your asset mix from pre-screened funds that meet certain criteria for employment diversity, environment and corporate responsibility and responsible manufacturing practices.
There is no minimum initial deposit required to get started with Betterment, and you can also sign up for Betterment Premium with a deposit of $100,000 that grants you access to more advanced savings and investing options.
While Betterment is the world’s most popular robo-advising service, it’s not the only one available. Start by reading our Betterment review – and if its app doesn’t appeal to you, consider one of our favorite Betterment alternatives. We’ve rounded up some of our favorite Betterment alternatives to help you make the right decision for your money.
Robo-Advisors vs. Human Advisors: Which is Right for You?
Robo-advisors offer you a cost-effective way to get some direction and information about where they should be putting your money to achieve your unique financial goals. How do you know if you should be using a robo-advisor or a personal financial advisor?
If any of the following situations apply to you, you may want to consider choosing a personal financial advisor in lieu of a robo-advising service.
You need holistic planning advice
Human financial planners and advisors shine when it comes to figuring out what’s going wrong (and right) in your financial management and creating a plan of action to reach your goals. Robo-advisors may be good and buying and selling assets for you, but they cannot look at your unique financial situation and provide advice for the future.
You have a high net worth or a large sum of assets
If you currently have a large amount of money that you’d like to invest or you already have a robust portfolio of stocks and bonds, your situation may be too complicated for a robo-advisor’s algorithm to handle. Consulting with a human financial advisor can help you protect your assets and grow them more effectively.
You are planning a major life change
No matter if you’re planning on buying a home, having a baby or filing for divorce, a financial planner can help you navigate the steps you’ll need to take to most effectively reach your goals in the coming months and years.
Why Betterment Might Not Be for You
Betterment may not be for you – here’s why.
You want more control over where your money is invested
As a robo-advising platform, Betterment automatically redirects your deposits into investments based on its goal-centered approach. While Betterment allows you to choose the goal that you’re saving toward and will generate a unique asset allocation strategy based on your needs, you do not have direct control over what stocks, bonds, and other assets are purchased. Experienced investors may find Betterment (and by extension, other robo-advisors) to be frustratingly limiting.
You want to keep your emergency fund in cash
Traditional financial advice has long dictated that one of your first financial goals should be to build up an emergency fund to cover unexpected car expenses, medical bills or other life-related bill. Because emergency funds are for actual emergencies, they need to be quickly accessible and held in cash.
If you “tell” Betterment that one of your financial goals is to create an emergency fund, your money will be directed into an allocation of secure stocks and bonds, which can be more time-consuming to liquidate in the event that money is needed right away. While it’s not difficult to open a separate savings account for your emergency fund, if you’re looking for an all-in-one solution, you may not like that a portion of your money is automatically diverted.
You don’t want to pay extra for access to human advisors
Part of Betterment’s management fee goes towards ensuring that you have access to human financial advisors. If you have a relatively normal financial situation, chances are that robo-advising services will be more than enough to cover your bases. If you’d like your fee to go towards other services, you may be better off choosing a different robo-advisor or investing service.
The Best Betterment Alternatives
Benzinga picked the best alternatives to Betterment based on the criteria above.
1. M1 Finance
M1 Finance is a unique robo-advising app that combines the power of technology with the personalized touch of human financial advisors. M1 Finance uses individualized mixes of stocks and bonds, called “pies,” to create the perfect combination of assets based on your goals and risk tolerance. Each individual pie can have up to 100 “slices,” each of which represents an individual stock or ETF.
Unlike Betterment, M1 Finance users can add or remove stocks and funds from their pie for a more personalized investing experience. Though M1 Finance does not currently support college 529 plans, you can quickly open a traditional, Roth, or SEP IRA, joint, taxable or trust account – or you can roll one over.
M1 Finance’s $0 minimum investment means it’s easy to get started even if you only have a bit of money to invest. It’s important to note that M1 Finance does not support the purchase of mutual funds; you are limited to stocks and ETF purchases at this time. However, if you’re looking for more control over where your money goes compared to Betterment, you’ll enjoy M1 Finance’s pie customization tools.
Wealthfront is an automated investing service with over $10 billion in assets under management, making it America’s second-favorite robo-advising platform after Betterment. Wealthfront’s management fee is a low 0.25%, which is comparable to Betterment’s services. You can check out Benzinga’s full comparison of Betterment vs. Wealthfront, too.
Like Betterment, the process of opening an account with Wealthfront starts with a questionnaire to determine your financial situation and goals. Wealthfront will then automatically allocate funds to a unique mix of 11 ETF classes. You can open a traditional or Roth IRA, SEP IRA, individual and joint taxable accounts, trusts, or even college savings plans though Wealthfront’s platform.
If your main future financial goal is to save for a child’s college education, you’ll love Wealthfront’s “Path” tool. The Path tool allows parents to create a 529 college savings plan or link one through an outside account; parents can then choose a sample college or university and the year that they would like their child to attend.
Wealthfront will project likely costs for tuition, housing, textbooks and other expenses usually associated with college. Wealthfront’s comprehensive college planning tools trump Betterment’s, which means that parents might feel more confident investing with Wealthfront if they plan to cover at least a portion of their child’s college education costs in the future. Though Wealthfront does have a minimum deposit of $500, its fees are low, the service is exceptionally streamlined and easy to understand, and it offers one of the best investing apps available.
The best robo-advisors do everything they can to keep costs low – and WiseBanyan is no exception. Billing itself as the “world’s first free financial advisor,” WiseBanyan is one of the few robo-advisors to charge no account maintenance fees or no minimum account balance, which makes it an exceptional choice for beginning investors. You can check out Benzinga’s full comparison of WiseBanyan and Betterment, too.
Though WiseBanyan charges for add-on investment services like tax-loss harvesting, these fees are capped at $20 per month. Automatic rebalancing is also offered for free on all accounts, and users can create a traditional IRA, Roth IRA, SEP IRA, or individual non-retirement account through the company’s app or desktop platform.
Like most other robo-advisors, Wisebanyan uses your individual situation and risk tolerance to create a unique mix of ETFs from 11 different asset classes suitable for your needs. WiseBanyan has also taken a page from Betterment’s book and introduced goal-based investing strategies that the company calls “milestones.”
If you like what Betterment offers but want to cut as many costs as possible, WiseBanyan is a great alternative. However, keep in mind that if you have a taxable account, you may want to choose an alternative that offers free tax-loss harvesting – you’ll be thankful you did when tax season rolls around.
Founded by Wall Street veteran Sallie Krawcheck, Ellevest bills itself as an outspoken women-centric investment firm. Ellevest’s management fees are comparable to Betterment’s at 0.25% for basic account holders, and the platform supports taxable accounts, IRAs, and 401(k) rollovers.
Unlike Betterment, Ellevest allows you to hold an emergency fund in cash – it even forgoes management fees for emergency funds to encourage their maintenance and creation. Ellevest also has one of the most expansive ETF selection profiles of the major robo-advising services, with the option to divide assets between 21 classes of funds. Ellevest supports a host of financial goals like Wisebanyan and Betterment, and the platform will automatically rebalance your accounts to place money into more conservative investments as you loom closer to accomplishment in order to limit risk and keep you on track.
If you’re under the impression that Ellevest’s female-centric platform is a marketing gimmick, know that the company offers differing investing strategies based on gender. Ellevest’s investing strategies take into account the wage gap and salary curve that separates male and female investors, recommending less risky investment profiles for women compared to their male counterparts.
Ellevest also automatically plans for a longer retirement period for female investors, as women tend to live longer than men and thus require more money during their golden years. Ellevest Premium also offers not only financial coaching, but one-on-one career planning consultations in an effort to help female investors negotiate their salary, move ahead in their careers, and close the wage gap between them and their male counterparts.
Obviously, you don’t need to be a woman to open an account with Ellevest, but the investing platform is an especially excellent choice for female investors who need a little more guidance with their saving selections.
Are you looking to navigate the stock market and grow your money without supporting unscrupulous business practices? Wealthsimple is a unique robo-advising platform that offers socially-responsible investing for beginners. Wealthsimple’s socially responsible index diverts funds into a mixture of six ETFs that focus on companies that develop clean technology, employ diverse hiring practices and invest in technology intended to forward the development of underserved populations and nations.
There is a $0 minimum investment to get started, and new account holders receive a free 15-minute phone call with a human financial planner to ensure that their robo-advising services have gotten them on the right track towards their goals.
If you are a follower of Islamic teachings, Wealthsimple also offers “halal investing” that allows users to create an asset mix solely of companies that are Shariah-compliant. Stocks in the halal investing portfolio are screened by a third-party council of experts in the Islamic faith, and companies that deal in haram products (alcohol, gambling, firearms, sex-related industries, etc.) are excluded.
The halal portfolio also excludes bonds, as Islamic law forbids followers from holding assets that accrue interest. Though Wealthsimple’s advisory fees are significantly higher than Betterment and other competitors at 0.50% of assets under management, socially-conscious and religious investors may be willing to pay the price for the added peace of mind.
Compare the Best Betterment Alternatives
CommissionsFREE automated investing
Account Min$100 for regular accounts $500 for retirement accounts
Commissions0.25% annual fee
CommissionsFree Some instances you may be required to pay transfer fees of fund fees
Commissions0.25% Of assets under management
Account Min$0 For a basic account
Betterment, Wealthfront and their robo-advising competitors are created with the hands-off investor in mind; they aim to make investing in the stock market as simple and worry-free as possible. However, if you’d like to take financial management into your own hands, a taxable brokerage account might be a better choice for you. Check out our lists of the best investing apps on the market and the best online brokerages.
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