Betterment Review – Helping You Invest Better
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Betterment's goal-centered approach makes it simple to identify your goals, and you can count on them to suggest products and strategies based on these goals.
9/10
Cost
8.5/10
Features
9/10
Ease of use
9/10
Services
8.5/10
Are you interested in investing but need help figuring out where to begin? A new player is making it easier for people to invest, and it has been getting rave reviews in the financial world. Betterment is a robo-advisor platform that offers an easy and accessible introduction to the investing world. The start-up process is simple, and Betterment provides a simple process in which you can outline your goals and assign the appropriate financial strategies to help you meet them. Let's take a closer look in this Betterment review.
In this article
What is Betterment?
Betterment is an investment advisor committed to helping you figure out how to allocate your money best to help you meet your goals. If you open an investing account, Betterment promises to invest your money at a low cost and manage it appropriately for a better outcome. The company claims its robo advisor outperforms financial advisors by 88%.
You can also count on Betterment to advise you on how to manage your money to help you meet the goals that you set for yourself.
How does Betterment work?
To begin the sign-up process, you must visit Betterment’s website and click on the “Get Started” button.
The first thing Betterment will ask you to do is enter your email address. This will also serve as your username to log into your account after it has been set up.
Betterment will also ask you to set your password at this point, which you’ll also use to log in after your account has been created.
Now you’ll move on to your basic information, such as your name and address. You can only sign up for a Betterment account if you have a mailing address in the United States, so that’s made clear on this page.
Like any financial institution, Betterment must collect your date of birth and social security number to verify your identity. I appreciate that Betterment clarifies that they won’t be using your information to run a credit check when it asks you for this information.
Betterment asks about your employment background so that they can suggest the most appropriate accounts to use based on your situation. The choices include retired, self-employed, and student, making it clear that Betterment can be personalized to work for various personal goals and situations.
To help Betterment give you the best advice, they’ll also ask about your financial background and tax filing status.
Betterment will also ask some regulatory questions.
Finally, you’ll set up some security questions for your Betterment account.
Now all that’s left is agreeing to Betterment’s terms and conditions.
That’s the end of the initial setup process. Now that your account has been created, you’ll be able to get personalized recommendations from Betterment.
You can also go ahead and start exploring Betterment’s products on your own.
If you want to get Betterment’s personalized recommendations, that process looks like this.
First, Betterment will allow you to review and edit your profile based on the information you entered during the initial account setup process. This includes your employment background, tax filing status, annual income, federal tax bracket, and investable assets.
After you’ve confirmed your basic information, Betterment will ask a few more questions to get a better picture of what your financial goals may be. The first question is whether or not you have children.
The next question is whether you own a home.
Before giving you your recommendations, Betterment will ask you what you’re looking to achieve through investing.
Now you can see what Betterment recommends based on your goals and situation. You can review the goals and products they recommend and decide whether or not to include them in your plan.
At the bottom of the page, Betterment lists other goals you may want to consider underneath your recommendations. You can toggle these options if you want to include them in your plan.
After selecting the goals you want to include, you can click on the “Update Plan” button at the bottom of the page.
After you’ve updated your plan, you’ll be taken to a page that lists all of your goals. Each goal will have a link underneath it that you can click on to finish setting up the account that goes along with that goal. Once the accounts have been set up, Betterment will work to ensure that your money is working for you.
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How much does Betterment cost?
Most robo advisors offer multiple plan options, and Betterment is no exception. Here is what you can expect:
Investing plan
The Betterment digital plan comes with a $0 minimum balance, making it an affordable option for anyone that wants to start investing. It also comes with an annual fee of 0.25%, based on your account balance, or $4 per month, depending on a few things.
The digital plan has several benefits, including automated rebalancing, advanced tax-saving tools and traditional and Roth IRAs.
Crypto
This plan includes Bitcoin and Ethereum, two of the most popular crypto tokens. There's still no minimum balance requirements, and you also get automated rebalancing and risk and investment advice. Betterment charges a 1% fee plus any trading expenses.
Betterment features
Betterment categorizes its products into four different sections for cash management.
Spend
Betterment does more than invest. It is a complete personal finance company, offering its no-fee Betterment checking account that is "mobile-first." You will receive a Visa Debit card, and there are no ATM fees, no foreign transaction fees, and no overdraft fees with this bank account accessible via a mobile app. And if you get charged a fee using another ATM or internationally, Betterment will refund you. Better yet, the account offers cashback rewards. The account is FDIC-insured for up to $250,000, and no minimum deposit is required.
Save
Betterment can help you save in multiple ways, including:
Cash Reserve
Betterment offers Betterment Cash Reserve, a no-fee, high-yield cash savings account with interest rates up to 4.75% -- it's a variable APY that tracks the Federal Fund Rate. Betterment claims that this is 11x the national average. This account comes with no limits on how often you can move your money and no fees to move your money as you see fit.
With the Betterment Cash Reserve account, you’ll also get access to your spending analysis and guidance to help you save the right amount of money to grow your savings to build an emergency fund or save for milestone events. Plus, it is member FDIC insurance, so your money is safe.
Tax coordinated portfolio
If you have multiple portfolios with one taxable account and one retirement account (including SEP IRA, Roth IRA, traditional IRA, 401k, and rollovers), minimum, Better works to increase your after-tax returns.
Tax loss harvesting
Also meant to increase after-tax returns, Betterment will sell ETFs experiencing losses and replace them with similar ETFs to offset your capital gains tax and losses.
Automatic rebalancing
Similarly, you won't have to worry about your portfolio as Better automatically rebalances it every three months, so it continues to follow your goals.
Invest
Betterment’s investment products help you meet your financial goals, whether buying your dream home, paying for your child’s education, or taking a luxurious vacation. By following Betterment’s brokerage and diversification recommendations, they claim you could earn 38% more money over 30 years if you compare them with an average investor.
As you can see in our overview of the sign-up process, Betterment will tailor your investment portfolio based on the goals you set for yourself. Betterment also considers smart tax strategies when suggesting strategies to meet your goals.
Retire
Betterment’s retirement plan allows you to do more than setting and forgetting a retirement account with your employer. You can count on Betterment to advise how much to save based on what you want to spend during the retirement phase of your life using its Retirement Guide. This includes helping you decide which retirement account makes the most sense.
No matter what you’re starting with, Betterment will help you figure out how to save. They can also customize your plan with auto-deposits and tax-smart features. All these things are handled “behind the scenes,” so you don’t need to worry about it.
You can monitor your progress in your Betterment account. In your account, you’ll be able to look at your portfolio balancing and your tax savings. You can also use your retirement accounts to rebalance your investment portfolio if you'd like.
Betterment investments
Assets and allocations
Betterment only invests in exchange-traded funds (ETFs) with a variety of different asset classes, including:
Stocks
You will find U.S. Total Stock Market; U.S. Value Stocks with Small, Mid, and Large Caps; and International Developed and Emerging Market Stocks. Fractional shares are available.
Bonds
You will find U.S. High-Quality Bonds, Municipal Bonds, Inflation-Protected Bonds, High-Yield Corporate Bonds, Short-Term Treasury and Investment Grade Bonds, and International Developed and Emerging Market Bonds.
Portfolios
There are 11 portfolio options you can choose from. In addition to its core portfolio, it offers three socially responsible, five stocks and bonds and three crypto portfolios.
Who is Betterment best for?
Beginners
Betterment is a great place to start if you’re a beginner. Their process makes it simple to create an account. While some robo advisors ask questions that can be confusing to a true beginner, you can count on Betterment to ask straightforward questions and gently guide you through the sign-up process.
People who aren’t sure what their goals are
One of the things I appreciate about Betterment’s process is its goal-centered approach. You may not be able to think of financial goals when asked, but seeing them on the screen in front of you seems a bit easier. Betterment’s goal-centered approach makes it simple to select the goals that make sense for your life and leave off the ones that don’t.
Who shouldn’t use Betterment?
Experienced investors
If you’re an experienced investor, Betterment may not be the right choice for you. Overall, their investment options aren’t quite as robust as you might find elsewhere. If you’re already working with a financial planner or advisor, it may be best to stick with their advice. Otherwise, you may be paying more for one-time consultations with Betterment.
Pros and cons
Pros
- Employment background. Betterment’s initial set-up process is a bit different than some of its competitors. I appreciate that they include employment background questions in their initial information gathering process. Your employment status can have a drastic effect on your financial situation, so your robo advisor must understand where you’re coming from.
- Goal-based focus. The fact that Betterment is goal-based makes this service accessible for nearly any user. If you have a vague idea of what you want to save for, Betterment can help you. If you can’t articulate your goals, that’s fine too, because Betterment will lay out the options that it suggests for you.
- Plan options. Betterment can make your money work for you, no matter how much money you have to invest. The digital plan makes investing accessible with its $0 minimum account balance. If you have money to invest, the premium plan offers additional services to benefit you as long as you meet the minimum account balance.
Cons
- Additional cost for human support. Robo advisors can be beneficial in many ways. They’re a more affordable way for many people to begin investing, and their automated approach makes it easy to set it and forget it. However, if you’re looking for someone to help show you the ropes directly, robo advisors such as Betterment may not be right for you. Unless you have enough money to meet the minimum account investment of Betterment’s premium plan, you’ll need to pay extra to get direct financial advice from a human.
- Management fees. While Betterment's management fees are competitive, they can still be a drawback for some investors, especially when compared to self-managed or lower-cost robo-advisor options. Betterment charges an annual fee based on the percentage of assets managed. This fee is in addition to the expense ratios of the ETFs in which your funds are invested. For investors with large balances, even a small percentage fee can amount to a significant cost over time.
- Limited customization in investment strategy and risk tolerance. Betterment uses algorithms to determine an investor's risk tolerance and then automatically invests in a diversified portfolio of ETFs based on this assessment. While this approach is efficient and suitable for many investors, it may not fully accommodate those who want more direct control over their investment choices or those with unique investment strategies. Investors seeking to invest in individual stocks, specific sectors, or alternative investments may find Betterment's offerings too restrictive. Additionally, investors with a very high or very specific risk tolerance might not find the automated risk assessment aligning perfectly with their preferences.
Betterment vs. competitors
Related: Acorns vs Betterment vs Wealthfront
Company | Account minimum | Fee |
Betterment | $0
| 0.25% of assets annually for Investing, 1% for Crypto |
Schwab Intelligent Portfolios | $5,000 for basic tier, $25,000 for premium | Free for basic, $30 monthly for premium |
Fidelity Go | $0 to open, $10 to invest | Up to 0.35% |
Wealthfront | $500 for investment accounts, $1 for cash management accounts | 0.25% of assets each year |
Charles Schwab
Charles Schwab is a leading investment firm that offers its robo advisor platform called Schwab Intelligent Portfolios.
Working with a big brand advisor comes with a price. While robo advisors are known for being an affordable alternative to traditional investing methods, this one has a higher starting fee than most.
Charles Schwab’s robo advisor platform does offer many of the same features as Betterment. You have various account options, including the ability to roll over retirement accounts that you’ve started with your employers.
Charles Schwab’s premium plan offering allows you to work with a financial planner at no additional cost. To qualify for this plan, you must have a starting account balance of $25,000, considerably less expensive than Betterment’s premium plan option. However, you’ll also need to factor in the additional planning and monthly advisory fees.
Read a full review on Charles Schwab.
Fidelity
Fidelity also offers a robo advisor platform called Fidelity Go. There is no minimum account balance with a Fidelity Go account. The cool thing about this robo advisor is that your advisory fees vary based on your account balance.
- You won't pay any fees if you have a balance of under $25,000.
- If your account has a balance of $25,000 or more, you'll pay an advisory fee of 0.35%
Another cool thing about Fidelity is that it allows you to view your investment proposal without commitment. This is a huge difference compared to Betterment because you don’t need to provide any contact information to explore Fidelity Go.
Fidelity also offers a free financial assessment, which can be a huge asset for beginners and experienced investors alike.
Read a full review on Fidelity.
Wealthfront
Like Betterment, Wealthfront is one of the newer kids on the block. It, too, is going after younger, newer investors to make it easier with a minimum investment of $500 and a 0.25% annual fee. The company provides a checking account called a Cash Account and free financial planning to help set you on the right path with its retirement planning and investment planning tools. It's literally creating a path as its Path management program.
FAQs
Who can use Betterment?
Betterment is available to anyone with a permanent United States mailing address. Unfortunately, if you’re a United States citizen living or working abroad, you may not be able to use Betterment. You must currently reside in the country, have a valid U.S. social security number or an ITIN, and have a checking account from a United States bank. If you’re a military member living abroad, you can use Betterment as long as you have a valid U.S. address on file.
Is Betterment a fiduciary?
Yes, Betterment is a fiduciary. This means that they must act with your best interests in mind.
Can I invest in individual stocks or funds at Betterment?
Betterment does not allow investment in individual stocks or funds (like the S&P 500 index or a specific company's stock). Instead, they focus on a globally diversified portfolio made up of low-cost, liquid ETFs that cover over 5,000 companies. This approach is based on passive investing principles.
What types of accounts can I open with Betterment?
Betterment offers a variety of account types, including Roth IRA, Traditional IRA, SEP IRA (single participant only), Inherited IRA, and Individual taxable accounts. There are no minimum balance requirements for additional accounts.
What are the investment options in the Betterment portfolio?
Betterment's Core portfolio is comprised of a mix of stock and bond ETFs. These are globally diversified and personalized for each investment goal and time horizon. You won't be picking and choosing your own investments or buying stocks in specific companies or industries.
What support is available for personal advice at Betterment?
Betterment provides support through a team of CERTIFIED FINANCIAL PLANNERS™ for personalized guidance. This service is available either as a one-time package or with continuous support in their Premium plan. They also have a Concierge Team for assistance with transitioning significant financial assets.
Can I transfer between my Betterment Checking accounts?
Yes, you can transfer funds instantly between your Checking accounts that are in your name.
How does the Betterment Visa®️ Debit Card work?
Each Betterment Checking user receives one Betterment Visa®️ Debit Card. If you have multiple Checking accounts, you can switch the card to transact between these accounts, though it requires a processing time of approximately one hour.
The bottom line
Betterment is a great platform if you’re looking to get started in financial planning and investing. Its goal-centered approach makes it simple to identify your goals, and you can count on Betterment to suggest products and strategies based on these goals.
Using a platform such as Betterment can help you start investing at a low cost, saving you money in the long run. Instead of paying major fees upfront, you can create your account at no cost while you explore whether Betterment is right for you. If Betterment is right for you, you can start investing with no minimum account balance and a low annual fee.
While Betterment’s investing options may be slightly limited, it’s an excellent place for new investors to start. It can also be a great opportunity to explore if you’re unsure whether you want to invest yet, or what your goals might be.
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Ashley Hart is a lead copywriter and digital marketing expert covering finance, law, real estate, music, entertainment, health and wellness.
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