Betterment Review – Helping You Invest Better

Are you interested in investing but not sure 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 can offer you an easy and accessible introduction to the world of investing. The start-up process is simple, and Betterment offers 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.

What is Betterment?

Betterment is an investment advisor that is committed to helping you figure out how to best allocate your money 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 so that you have 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, all you need to do is visit Betterment’s website and click on the “Get Started” button.
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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 onto 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 needs to collect your date of birth and social security number to verify your identity. I appreciate that Betterment makes it clear 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 a wide variety of personal goals and situations.
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To help Betterment give you the best advice, they’ll also ask you about your financial background and tax filing status.
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Betterment will also ask some regulatory questions.
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Finally, you’ll set up a couple of 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 set up process. Now that your account has been created, you’ll be able to get personalized recommendations from Betterment.
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You can also go ahead and start exploring Betterment’s products on your own.
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If you want to get Betterment’s personalized recommendations, here’s what that process looks like.
First, Betterment will allow you to review and edit your profile based on the information that you entered during the initial account setup process. This includes your employment background, tax filing status, annual income, federal tax bracket, and your investable assets.
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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.
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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.
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At the bottom of the page underneath your recommendations, Betterment lists other goals that you may want to consider. You can toggle these options if you want to include any of them in your plan.
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After you’ve selected the goals that you want to include, you can click on the “Update plan” button at the bottom of the page.
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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 get to work to make sure that your money is working for you.

How much does Betterment cost?

Most robo advisors offer more than one plan option, and Betterment is no exception. Here is what you can expect:

Digital 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%, which is based on your account balance.
The digital plan comes with several benefits, including unlimited rebalancing, no additional transaction fees, and no additional fees to transfer your funds to or from your account. Betterment’s digital plan includes automatic rebalancing, as well as advanced tax-saving strategies including tax-loss harvesting and asset location.
Your digital account comes with personalized financial advice, including your recommended asset location, how much you should invest, and more. You’ll also benefit from Betterment’s satisfaction guarantee. If you’re unhappy with your experience, Betterment will work to make it right, which may include waiving the fees on your accounts for 90 days.

Betterment Premium plan

Betterment’s premium plan has a $100,000 minimum balance, as well as a 0.40% annual fee. Again, your annual fee is based on your account balance.
This plan comes with everything that is included in the digital plan, plus some. As a premium plan member, you’ll receive in-depth advice on investments outside of Betterment. This includes advice about creating a plan for managing your 401(k)s, real estate investments, and individual stocks. You’ll also receive unlimited access to guidance from Betterment’s Certified Financial Planners. These financial planners can provide you with financial guidance for major life events such as getting married, retiring, having children, and more.

Advice packages

Betterment also offers the opportunity to set up advice calls with financial experts to help you create an action plan.
Better offers financial advice packages if you want to develop a more robust investment strategy. Choose from two packages:

Getting Started package

If you want step-by-step support in setting up your Betterment investment account, pay $199 for a 45-minute call with a certified financial planner (CFP) who can help.

Specialized packages

If you more specific assistance with retirement planning, preparing for wedding costs, or college planning, this package gives you a 60-minute call for $299. This is also a good package if you want to do a financial checkup every year. The call includes a financial planner preparing an action plan for you to follow and will review different account types you may need

Betterment features

Betterment categorizes its products into four different sections for cash management

Spend

Betterment does more than investing, it is a full 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 up to $250,000 and there is no minimum deposit 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 0.40% -- it's a variable APY that tracks the Federal Fund Rate. Betterment claims that this is 8x 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, and traditional IRA, 401k, and rollovers), minimum, Better works to increase your after-tax returns.

Tax Los Harvesting

Also meant to increase after-tax returns, Betterment will sell ETFs that are 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 3months so it continues to follow your goals.

Invest

Betterment’s investment products are designed to help you meet your financial goals, whether they be 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 that 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 that you set for yourself. Betterment also considers smart tax strategies when suggesting strategies that will 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 give you advice on 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 for you.
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 of these things are handled “behind the scenes,” so you don’t need to spend your day-to-day life worrying about it.
You can monitor your progress in your Betterment account. In your account, you’ll be able to take a look at your portfolio balancing as well as your tax savings. If you’d like, you can also use your retirement accounts to rebalance your investment portfolio.

Betterment investments

Assets and Allocations

Betterment only investments 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 five Betterment portfolio options that you can choose from.
  • Betterment Core Portfolio. The standard portfolio provided by Betterment uses a mix of ETFs and bonds personalized for your goals and risk tolerance.
  • BlackRock Target Income Portfolio. This portfolio is made up of only bond funds to generate income with low risk.
  • Goldman Sachs Smart Beta Portfolio. This portfolio invests in companies that are deemed low volatility and high quality to provide better returns.
  • Socially Responsible (SRI) Portfolio. This portfolio invests in companies that have a positive impact on the environment and social economics for socially responsible investing.
  • Flexible Portfolio. You can elect to create your portfolio with the help of Betterment for advice.

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 if you see them on the screen in front of you, it 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 & 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.

Betterment vs. competitors

CompanyStarting plan statsPremium plan stats
Betterment$0 minimum account balance, 0.25% annual management fee$100k minimum account balance, 0.40% annual fee
Charles Schwab$5,000 minimum account balance$25k minimum account balance, $300 planning fee, $30/mo advisory fee
Fidelity$0 account minimum, $0 to 0.35% annually fee$25k minimum account balance, 0.50% advisory fee
Wealthfront$500 minimum account balance, 0.25% annual fee$500 minimum account balance, 0.25% annual fee

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 a variety of account options to choose from, 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, which is considerably less expensive than Betterment’s premium plan option. However, you’ll also need to factor in the additional planning fee and monthly advisory fee.

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.
  • If your balance is less than $10,000, you’ll pay $0.
  • If your balance is between $10,000 and $49,000, you’ll pay $3 monthly/
  • If your balance is $50,000 or above, you’ll pay 0.35% annually.
Another cool thing about Fidelity is that they allow you to view your investment proposal without any commitment. This is a huge difference compared to Betterment because you don’t even need to provide any of your 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.

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 provides 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.

The bottom line

Betterment is a great platform if you’re looking to get started in financial planning and investing. Their 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 get started in 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.
Overall, 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 not quite sure whether you want to invest yet, or what your goals might be.

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