Betterment review - Logo

Account Minimum:

 

None

Management Fee:

 

0.25%-0.40%

Automatic Rebalancing:

 

Yes

Tax-loss Harvesting:

 

Yes

Editorial Rating

Betterment Review

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Account Minimum:

 

None

Management Fee:

 

0.25%-0.40%

Automatic Rebalancing:

 

Yes

Tax-loss Harvesting:

 

Yes

Ease of use

 

4/5

Fiduciary:

 

Yes

Betterment review - Logo

Editorial Rating

The 2008 financial crisis hit America like a hurricane, and rebuilding financial investments, especially in the wake of the real estate crash, became a risky proposition. In 2010, in response to the crisis, Betterment, the first online investment advisor, was founded, and a new industry was born.

Over the last decade, Betterment has been firmly at the forefront of online investment management firms or robo-advisors. Even as new competitors emerge, Betterment remains the industry’s largest independent robo-advisor.

This Betterment review will highlight how the Betterment robo advisor works, some of the standout features and services, and whether you should consider transferring to a robo advisor.

What Is Betterment Best For?

Betterment provides holistic investment services. Whether you’re looking to save money for the near term, make a long-term investment, or start a retirement fund, Betterment does it all. The platform further offers a checking account for daily spending with zero fees. On top of that, the Betterment innovative technology portfolio exposes investors to companies’ pioneering emerging technologies.

Betterment’s core portfolio strategy is based on Nobel-prize winning research and aims to achieve global diversification using modern portfolio theory as the basis for asset allocation.

Betterment has no minimum initial investment amount required, so it’s excellent for those brand-new to investing who can start with a $0 balance and fund the account through regular deposits. The brokerage also has a low annual advisory fee, so it would be perfect for people too busy to manage their investment portfolio or those looking for more diverse investment management.

Betterment Service Overview

The platform is committed to providing full-service financial advice at an affordable cost, and the Betterment financial solutions on offer reflect this promise. To that effect, the Betterment account types are categorized based on function.

Spend

Betterment provides a Checking account for daily spending with a few benefits. The account reimburses all checking account fees back into your account and is FDIC-insured for up to $250,000.

Save

The Betterment Cash Reserve is a high-yield savings account that allows you to, well, reserve cash, create separate stashes for specific goals, and even set up auto-deposits for each. The Betterment savings account also gives you access to spending analysis and guidance to help grow your savings.

Invest

Depending on what you’re investing for and when you want it, Betterment will recommend an equity portfolio specific to your needs. Built on Nobel-prize winning research, the diversified portfolio is designed to enable wealth generation over time.

Retire

Eight out of ten workers think they’ll need to work for income in retirement. But with an adequate retirement plan, this needn’t be the case.

No matter what your dream retirement looks like, our Betterment retirement review indicates that the company will set up a personalized plan and recommend the right accounts to help you save for the future you envision. Betterment IRA is the first step towards a secure retirement.

Accounts under this category include:

  • Roth IRA: The Betterment Roth IRA allows investors to save for retirement beyond the 401(k). The beauty of this account is that growth on the investment is tax-free for investors who make less than $139k ($206k if filed jointly).
  • Traditional IRA: A Traditional IRA is an Individual Retirement Account that allows investors to contribute pre-tax or after-tax dollars. This gives you immediate tax benefits if your contributions are tax-deductible.
  • SEP IRA: This is a retirement plan for self-employed individuals and small businesses with no employees.
  • Inherited IRA: An Inherited IRA is an account with tax advantages that holds the assets inherited from a late person’s IRA.

Betterment Setup & Ease of Use

Signing up for Betterment is straightforward and takes about 10 minutes, and because there is no minimum balance required, almost anyone can sign up. To start your initial Betterment investment, you will need to provide the following information:

  • Age
  • Whether you’re retired or not
  • Annual gross income

Step 1: Goal recommendation

Based on your age and income, Betterment will recommend an investment goal to start with. If you don’t have a specific planning purpose that aligns with its specified items, the advisor allows you to use Betterment General Investing Goals. This allows you to personalize ideas that will be recognized as goals by the investment advisor.

Step 2: Account details

You will be asked to provide your name and email address, then select a password to create your profile. You will also be required to provide your contact information — complete address, phone number, and how you heard about Betterment.

Step 3: Identity verification

Even though Betterment is not a bank, they are still a financial institution and, as such, needs to verify every customer’s identity to comply with state laws. You will be required to provide your social security number, date of birth, and gender.

Step 4: Financial information

Since Betterment is an investment service, they are required to ask a bit about your background so they can ensure that they give you the best possible financial advice. Betterment will require knowing your employment status, annual household income, and the estimated value of any liquid assets you own.

Step 5: Security & submit

In the final step, you will need to answer a few regulatory and security questions before setting up your Betterment account.

You will be prompted to add a bank account to fund your investment account, and once you’ve created your account and chosen your Betterment goals, Betterment will give you a portfolio recommendation to start with.

Betterment Investment Options

Initially, Betterment only offered one portfolio type, and it was based solely on the investor’s risk tolerance. The group has since branched out and now provides a variety of portfolios based on more comprehensive criteria than the investor’s risk preferences.

Standard portfolio

The standard portfolio balances several different asset classes and consists of international stock and US bond Betterment ETFs for proper global diversification.

Flexible portfolio

The flexible portfolio includes the same individual asset classes as the standard portfolio. If you, however, want to change exposures, this portfolio allows you to make changes to your Betterment allocation.

Socially responsible investing portfolio

This portfolio invests in socially responsible companies exclusively, so if you want to, for example, put your money into environmentally-friendly ventures, then this might be for you.

Goldman Sachs smart beta portfolio

This portfolio uses the smart beta (a hybrid between value investing and market hypothesis) to choose investments in the hopes of getting investors a more significant return while minimizing risk.

BlackRock Target Income portfolio

This income-focused, all-bond portfolio is made up of BlackRock ETFs and invests solely in bond funds, so the risk is small. On the flip side, the reward is lower too. This is the best Betterment portfolio for retirees.

Betterment Portfolio Management

The Betterment portfolio is constructed using a two-part process – asset allocation and fund selection. Together, they determine the ETFs that make up your portfolio. Betterment’s portfolio offerings and tax-efficient investment management technology are automated and flexible, enabling personalized investment strategies.

Betterment Features

Let’s take a look at the features and services that make Betterment investing stand out from the crowd.

Portfolio optimization

Betterment uses its proprietary algorithm to determine risk levels and investments. This means your portfolio’s asset allocation will be optimized for your goals and risk tolerance.

Automatic rebalancing

Using traditional professional investment management usually means having to continually monitor and rebalance your investment to maintain a consistent asset allocation. Betterment does this all for you. You just set a goal, and your risk tolerance and Betterment takes care of the rest.

Tax-loss harvesting

Simply put, tax loss harvesting is strategically selling investments at a loss to offset the taxes you’d pay on the gains from selling shares that have increased in value. Betterment automatically buys and sells assets at the best times to reduce your tax impact.

Financial advice packages

In addition to robo-advising, Betterment offers the ability to connect with a certified financial planner. Through its advisor platform, Betterment Institutional, you get expert input on significant life events like changing jobs, having a baby, buying a home, and planning for retirement.

Cash reserve & checking

This is a mobile-first checking account and debit card for hassle-free daily spending. Betterment promises easy account set-up for this feature and offers a 2.00% annual percentage yield.

*The annual percentage yield (“APY”) on the deposit balances in Betterment Cash Reserve (“Cash Reserve”) is 2.00% and represents the weighted average of the APY on deposit balances at the banks participating in Cash Reserve (the “Program Banks”) and is current as of September 12th, 2022. This APY is variable and subject to change daily. Deposit balances are not allocated equally among the participating Program Banks. A minimum deposit of $10 is required, but there is no minimum balance required to be maintained. The APY available to a customer may be lower if that customer designates a bank or banks as ineligible to receive deposits. APY applies only to Cash Reserve and does not apply to checking accounts held through Betterment Checking. Cash Reserve and Betterment Checking are separate offerings and are not linked accounts.

Betterment Cons

While Betterment is a good option overall, there are some cons to consider:

  • High fees for advice packages

Betterment is entirely automated, so there is no need to talk to a real person, but if investors want to talk to a financial advisor, they would have to pay between $299 and $399 for a 60-minute consultation.

  • No direct indexing

Betterment doesn’t allow direct indexing, as it only permits you to hold broad market ETFs, which can further help savings for investors with taxable accounts.

  • Limited investment products

Betterment only invests in ETFs, so those with more complex portfolio needs may find investing with Betterment too narrow. The company also is more suited for investors comfortable with passive asset allocation. So, if you’re after active asset allocation, you might be better off looking elsewhere.

Betterment Customer Service

The Betterment customer support team is available via phone Monday to Friday from 9 am to 6 pm EST to help answer questions about user experience. It also has 24/7 live chat support.

Whether you have questions about Betterment Checking and Cash Reserve, need help setting up your investment accounts, or require assistance completing a rollover, Betterment is here to help.

Pretty much any Betterment review mentions that the support team is relatively easy to reach and helpful. Our Betterment Investing review, however, shows that they offer support with basic account issues. If you’re looking for more frequent support and ongoing consultation, then you’re either going to have to upgrade to the Premium Plan or pay between $299 and $399 to speak to investment advisors.

Betterment Knowledge Base

On its website, Betterment has a wealth of educational tools and resources on investing, saving, and retirement. The Betterment calculator can be used to project your retirement income and how much social security income you can expect in retirement.

The investment advisor also has an extensive FAQ section about how investing works, how to be smart with your Betterment savings, and how to plan for retirement.

Betterment Fee Structure

Betterment has two pricing options to accommodate every investor. The platform further offers advice packages that start at $299, where customers can set up a one-time advice call for an action plan with registered investment advisors.

Checking plan

Betterment’s checking plan is free and has no minimum balance requirement. It includes an FDIC-insured checking account and a Visa debit card. It also provides advice and planning tools, as well as its Cash Reserve feature.

Digital Investing plan

The digital plan has an annual fee of 0.25% based on the account balance, which drops to 0.15% per year on assets under management of over $2 million. The fee is charged on the portion of the balance that exceeds $2 million.

Premium Investing plan

The Betterment premium plan has an annual fee of 0.40% based on the account balance, and unlike the digital plan, there is a $100,000 minimum balance required. In the premium plan, the annual fee drops to 0.30% on the balance of over $2 million, and the underlying exchange-traded funds incur an annual Betterment management fee of between 0.07% and 0.15%.

Betterment Mobile Apps

Betterment seeks to offer more than just automated financial planning services. It also aims to make accessing your account more straightforward and more accessible. With the Betterment app, you can easily check and manage your investment on the go.

The app is available for both iOS and Android devices. It’s super sleek and easy to use, while the Betterment dashboard allows users to check the balances and returns of your portfolio in real-time, deposit and withdraw money any time, manage your portfolio’s stock and bond allocation and review your goals and account activity.

An added benefit is that users can send messages and communicate with a digital investment advisor through the app.

Betterment Promotions

Betterment has a referral program where users earn special offers by inviting their friends to use the platform. The Betterment sign-up bonus is not static and depends on funds invested on the platform over a specified period.

Betterment User Reviews

We combed through a ton of Betterment reviews on websites like Trustpilot, Best Company, Consumer Affairs, the Better Business Bureau, Reddit, and Yelp, among others, to get a sense of how customers feel about the service. Surprisingly, there were not that many Betterment reviews from 2022.

The positives

As is to be expected, most of the good reviews are from users who have experienced positive Betterment return rates. We read through some other common praises about how user-friendly and easy to use Betterment is and how great the customer service is.

The negatives

There are more than 40 Betterment complaints on the Better Business Bureau. Most of the Betterment BBB reviews are from customers who had trouble with rollover and fund transfer requests. The other common negative Betterment reviews include problems with the Betterment withdrawal, the lack of customer support, and, of course, a lack of positive Betterment portfolio performance in 2021. One Betterment review on Reddit meanwhile referred to their fees as ‘misleading’.

Is Betterment The Best For You?

Our Betterment review can’t answer that. What we can tell you, though, is that the company has 10 years of experience behind as one of the founding robo-advisors and that gives it a leg up over most, if not all, of its competitors. It offers low-cost, high-quality investing for digital natives looking to start a retirement portfolio or save towards a specific goal.

Betterment is an excellent platform for newer investors, who might not be familiar with wealth management, looking to get into investing. It’s also great for experienced inventors who might want to loosen the reigns and let someone else be their fiduciary. Betterment is also a good pick for investors keen on optimizing portfolio performance.

The only barrier to adoption might be the lack of human interaction, Betterment has little to no human supervision, but if investors can get beyond that and consider robo trading, they’ll be able to take advantage of a platform teeming with potential for consistent returns.

Alternatives of Betterment

How does Betterment stack up against some of its competitors? Let’s find out.

Betterment vs Wealthfront

Betterment and Wealthfront were both among the pioneer robo-advisors, and they have some similarities in their features. They both offer cheaper options, but the main difference is that with Betterment, the option of a  person-based service interaction is available (only if you upgrade to the premium package).

Wealthfront has a few things over on Betterment, namely stock-level tax-loss harvesting, college savings management, and a portfolio line of credit. Betterment, on the other hand, has the option of fractional shares, which reduces uninvested cash, plus no account Betterment minimum deposit, while Wealthfront requires a minimum investment of $500.

Betterment vs SoFi

SoFi requires only $1 for an initial investment, so the difference with Betterment is negligible, but the real difference between the two is that SoFi doesn’t have any management fees. Free robo-advisors aren’t that rare, but what sets SoFi apart is the slew of additional services they offer.

Over and above low-cost robo-advising, SoFi also offers active investing, crypto investing, and stock bits. SoFi is excellent for DIY investors who would prefer to keep their investing, borrowing, and cash management under one roof.

Wrap Up

Our comprehensive Betterment review shows that this is an excellent automated investment management platform. It’s grounded in a goal-orientated investment strategy and bolstered by lower fees, great customer support, and a portfolio made for you.

It’s simplified investing and financial planning that brings together the financial technology of a robo-advisory service with the expertise of a traditional financial planner to create a diversified way to manage your portfolio.

Pros

  • Investing is goal-driven
  • Low annual advisory fees
  • Flexible portfolios
  • Multiple investment options
  • Automated portfolio rebalancing
  • Tax-loss harvesting is automated
  • No initial investment amount required

Cons

  • No direct indexing
  • Limited investment products
  • High fees for advice packages
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Editorial Rating

Betterment FAQ

What is Betterment?

Betterment is an SEC-registered online investment management company and registered financial advisor that was a pioneer in the robo-advisor industry.

How does Betterment work?

Depending on whether you’re looking to save, invest, or start a retirement fund, Betterment will recommend a portfolio specifically for your goals. Betterment will then act as your fiduciary and invest in a diverse pool of assets to lower your risk but stabilize your returns in the long run.

Who owns Betterment?

Betterment is a privately-held company owned by Betterment Holdings Inc. It was founded by current Chief Executive John Stein and Eli Broverman in 2008. The company was launched at TechCrunch Disrupt New York in 2010.

How does Betterment work?

Depending on whether you’re looking to save, invest, or start a retirement fund, Betterment will recommend a portfolio specifically for your goals. Betterment will then act as your fiduciary and invest in a diverse pool of assets to lower your risk but stabilize your returns in the long run.

Is Betterment worth it?

Betterment is an equally valuable tool for both novice and more experienced investors. Reviews also rave over Betterment’s performance compared to peers.

Is Betterment safe?

Yes, it is. When you manage your investments through Betterment, then all the assets and Betterment securities in your portfolio are strictly under your ownership.
Betterment’s average expense ratio of 0.11% is also an indicator of strong corporate governance.

Is Betterment legit?

Betterment has been at the forefront of online wealth management for 10 years, and it’s one of the pioneers of the robo-advisor industry.

What is the average return on Betterment?

The Betterment annual return depends on the portfolio’s stock-to-bond allocation, investment strategy, and market volatility. Estimates point to rates between 4.3% and 8.8%, but no official data confirms an average.

How much money does Betterment manage?

As of September 2021, the Betterment assets under management stood at $32 billion in 700,000 user accounts.

What is the Betterment Emergency Fund?

The Betterment Emergency Fund is a safety net users can fall back on when they find themselves in a tight spot.

Suppose you lose your job or a medical emergency occurs. In that case, you will be in a safe position, with a Betterment investment advisor helping you with a plan and recommending a target savings amount.

Does Betterment invest in index funds?

An Exchange-Traded Fund (ETF) is a basket of securities that tracks an underlying index. ETFs contain different asset classes like stocks and bonds. Betterment uses ETFs in both its stock and bond portfolios primarily because of their tax efficiency and low management fees.

What funds are available in a Betterment fund?

The Betterment portfolio consists of a mix of globally-diversified stock and ETFs to maximize on the US market as well as international developed and emerging markets. Your money is invested in various companies through fractional shares.
The Betterment funds in a portfolio include stocks and bonds across mature markets.

Is Betterment better than Vanguard?

It’s all up to preference. Betterment is great for small to medium-sized investors and people starting in the game. Vanguard, on the other, is excellent for bigger investors and people more comfortable with managing their own money.

Is Betterment a good investment?

Yes, it is. Our Betterment review outlines how affordable and easy to use it is and is an excellent point of access into the investing world for less confident investors. Plus, its investment strategy is designed to minimize risk and maximize return in the long run.