Last Updated: March 3, 2021
Ease of use
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. While they aren’t as big as some of their competitors, they are still the industry’s largest independent robo advisors.
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, so whether you’re looking to save money for any goal 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.
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. Regarding Betterment costs, 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.
Betterment provides a new Checking account for daily spending with a few benefits. The account reimburses all checking account fees back into your account and is FDIC-insured up to $250,000.
The cash account has a Cash Reserve function that allows you to, well, reserve cash, and create separate stashes for specific goals and even set up auto-deposits for each. A Betterment savings account also gives you access to spending analysis and guidance to help grow your savings.
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.
8 out of 10 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.
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:
- 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.
Step 2: Account Details
You will be asked to provide your first name, middle initial, last 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, need 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 your 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 you can set 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 Portfolio Options
Initially, Betterment only offered one type of portfolio, and it was based solely on the risk tolerance of the investor. The group has since branched out and now offers a variety of portfolios based on more comprehensive criteria than the investor’s risk preferences.
The standard portfolio balances several different asset classes, and consists of international stock and US bond Betterment ETFs, for true global diversification.
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.
Let’s take a look at Betterment’s features and services that make Betterment investing stand out from the crowd.
Betterment uses their proprietary algorithm to determine risk levels and investments. This means your portfolio’s asset allocation will be optimized for your goals and risk tolerance.
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. All you have to do is 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, to 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 brand new feature, and it’s 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 0.40% annual payment yield.
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 ever talk to a real person, but if investors want to talk to a financial advisor, then they would have to pay up to $299 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 Monday to Friday from 9 am to 6 pm EST to help answer questions about user experience. They also have Live Chat Support over the weekend from 11 am to 5 pm EST.
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 from $199 to speak to investment advisors.
Betterment Knowledge Base
Betterment has a wealth of educational tools and resources on their website that provides information 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.
Betterment also has an extensive FAQ section about how investing works, how to be smart with your savings, and how to plan for retirement.
Betterment Fees & Commissions
Betterment has two pricing options to accommodate every investor. The platform further offers advice packages that start at $199, where customers can set up a one-time advice call for an action plan with registered investment advisors.
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.
The 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. They also aim to make accessing your account more straightforward and more accessible. With the Betterment app, you can easily check and manage your investment on your schedule.
The app is 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 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 and there are, surprisingly, not that many Betterment reviews from 2020.
As is to be expected, most of the good Betterment reviews are from users who have experienced positive returns on their investments. We read through some other common praises about how user-friendly and easy to use Betterment is and how great the customer service is.
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 return on portfolios. 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 them a leg up over most, if not all, of their competitors. They offer 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.
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 a robo advisor, 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 pioneers of 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.
Our comprehensive Betterment review shows that this is an excellent automated investment management platform grounded in a goal-orientated investment strategy and is 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.
- No initial investment amount required
- Low annual advisory fees
- Multiple investment options
- The portfolios are flexible
- Investing is goal-driven
- Tax-loss harvesting is automated
- Automated portfolio rebalancing
- High fees for advice packages
- No direct indexing
- Limited investment products
What is Betterment?
Betterment is an 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.
Is Betterment worth it?
Betterment is an equally valuable tool for both novices starting and more experienced investors as it costs 0.25% annually.
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.
Is Betterment legit?
Betterment has been at the forefront of online wealth management for 10 years, and they are one of the pioneers of the robo-advisor industry.
What is the average return on Betterment?
The Betterment average return per year is 4.3%.
How much money does Betterment manage?
As of March 2020, the Betterment assets under management stood at $22 billion in 500,000 user accounts.
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, their investment strategy is designed to minimize risk and maximize return in the long run.