Betterment Review 2024: Pros, Cons & How it Compares
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Our Take
5.0
Reviewed in: Oct. 2024
Period considered: Aug. - Oct. 2024
The bottom line:
on Betterment's website
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Pros & Cons
Pros
Multiple portfolio options, including customization.
Low portfolio management fee.
Fractional shares allow all cash in portfolios to be invested.
Goal-based financial planning tools.
Cryptocurrency portfolio available.
No account minimum ($10 required to start investing).
Cons
No direct indexing.
Compare to Other Advisors
Fees 0.25% with a balance over $20K or qualifying recurring deposit. Otherwise, $4/month. | Fees 0% management fee | Fees 0.25% management fee |
Account minimum $0 $10 to start | Account minimum $0 | Account minimum $500 |
Promotion Get 1% match of your net Roth and traditional IRA contributions until December 30, 2024. Terms apply. | Promotion 1% match on rollovers and contributions Terms and conditions apply. Roll over a minimum of $20K to receive the 1% match offer. Matches on contributions are made up to the annual limits. | Promotion Get a $50 customer bonus when you fund your first taxable investment account |
Learn more on Betterment's website | Learn more on SoFi Invest's website | Learn more on Wealthfront's website |
AD Paid non-client promotion | AD Paid non-client promotion | AD Paid non-client promotion |
NerdWallet doesn’t invest its money with this provider, but they are our referral partner – so we get paid only if you click through and take a qualifying action (such as open an account with or provide your contact information to the provider). Most importantly, our reviews and ratings are objective and are never impacted by our partnerships. Our opinions are our own. Here is a list of our partners and here’s how we make money.
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Full Review
Where Betterment shines
Low fees: Betterment offers multiple portfolio options, has a low minimum investment requirement, and charges a very reasonable annual management fee of just 0.25% for those who meet balance or recurring deposit requirements. Otherwise, it's $4 per month.
Fractional shares: Fractional shares allow you to purchase investments by the dollar amount rather than a full share. In this case, it means all the cash you invest with Betterment is put to work.
1% match on IRA contributions: In Sept. 2024, Betterment joined a handful of companies that have started offering matching dollars on IRA contributions, a perk that was historically only available through employer-sponsored retirement accounts like 401(k)s. Betterment says its offer is a limited promotion that is available until the end of 2024.
Where Betterment falls short
No direct indexing: While Betterment does offer tax-loss harvesting, the firm does not offer direct indexing, a more advanced tax optimization strategy that can be beneficial on taxable accounts.
Flat fee on smaller balances: Betterment's flat fee on accounts below $20,000, or that don't opt into recurring investments of $250, can be high as a percentage of assets under management.
Alternatives to consider:
For direct indexing: Wealthfront
What type of investor should choose Betterment?
Hands-off investors.
Retirement investors.
Socially responsible investors.
Users who like goal-based tools.
Investors who may eventually want to work with a financial advisor.
What the Nerds think 🤓
June Sham, NerdWallet Investing and Retirement Writer
"Betterment provides options for investors of all net worths and financial priorities. The core service's low expense ratios and account management fees are particularly notable, allowing investors to keep growing their money instead of diverting it to service fees.
"Users who want more personalized financial guidance can graduate to Betterment Premium for access to a team of certified financial planners. It requires a higher minimum investment and charges a higher fee."
Betterment at a glance
Reviewed in: Oct. 2024.
Period Considered: Aug. - Oct. 2024.
Account minimum | $0 ($10 to start investing). |
Account management fee | 0.25% annual fee on balances over $20,000 or if you set up recurring monthly deposits totaling $250 or more. Otherwise, $4 per month. |
Investment expense ratios | Expense ratios of 0.04% to 0.11% for Betterment Core Portfolio. |
Account fees (annual, transfer, closing) | $75 fee to transfer investments out of Betterment. No fee for cash withdrawals. |
Portfolio mix |
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Socially responsible portfolio options | Three socially responsible investing portfolio options: Broad Impact, Climate Impact, and Social Impact. |
Accounts supported | Individual and joint taxable brokerage accounts. Roth, traditional, inherited, rollover and SEP IRAs. Trusts. Ability to link external accounts for better-informed advice (but not direct management). |
Tax strategy |
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Automatic rebalancing | Automatic rebalancing is included in the advisory fee at no additional cost. If a client’s portfolio deviates or drifts from its allocation, Betterment will rebalance the portfolio back to its target allocation in certain circumstances. Betterment also uses any cash flow, such as a dividend or deposit, to partially rebalance your portfolio. |
Human advisor option | Betterment Digital doesn't offer access to financial advisors and no longer offers an advice package for purchase. Betterment Premium includes access to a team of financial advisors. |
Savings account/cash management option | Cash Account** with no fees or minimum balance requirements, unlimited transfers and FDIC coverage of up to $2 million in individual accounts or up to $4 million in joint accounts at program banks. |
Customer support options (includes how easy it is to find key details on the website) | Phone support Monday-Friday 9 a.m.-6 p.m. Eastern time. Email support and questions also answered through social media. |
How to sign up for a Betterment account
You can create a Betterment account through its website or mobile app. After you do, Betterment’s sign-up process takes you through a goal-setting exercise, asking for your age and current annual income. Then it suggests a series of goals based on your answers, estimating a safety net of three to six months of expenses, a retirement savings target and a general investing goal. Each goal comes with a recommended target and asset allocation, which you can adjust. You can also add other, personalized goals that will dictate the account types used and the way your money is invested. And you can set up auto-deposits into each goal.
Betterment doesn’t require any minimum investment to open an account, but there is a $10 minimum to start investing.
How much does Betterment cost?
Account management fee
Betterment’s digital investing tier charges a 0.25% annual fee on balances over $20,000 or if you set up recurring monthly deposits totaling $250 or more. If you don't meet those criteria, you'll be charged $4 per month.
Most robo-advisors charge a fee of around 0.25% across all account balances. But if you have a $10,000 balance invested with Betterment and you're paying $4 per month, you're essentially paying a 0.48% fee.
If you have a high account balance, for the portion of your household balance above $2 million, you'll receive a 0.10% discount. This means that on the Digital plan, you'll pay just 0.15% for the portion of your balance above $2 million, and on the Premium plan, you'll pay 0.30% for the portion of the balance above $2 million.
Investment expense ratio
The average expense ratio for the Betterment Core Portfolio is relatively low, ranging from 0.05% to 0.11%. This expense ratio is paid in addition to Betterment's management fee, but since they are deducted from your account, you won't see it as a separate fee.
An expense ratio is an annual fee charged by mutual funds, index funds and ETFs, as a percentage of your investment in the fund. If you invest in a mutual fund with a 1% expense ratio for example, you’ll pay the fund $10 per year for every $1,000 invested. If high, these fees can significantly drag down your portfolio returns. Nearly all robo-advisors use funds that carry expense ratios, but it's worth comparing them when deciding on the best advisor for you.
Account fees
In addition to its account management fee and expense ratios, Betterment charges a $75 outbound transfer fee.
Betterment portfolio selection
Like many robo-advisors, Betterment bases its investment philosophy on modern portfolio theory, which highlights the benefits of diversification. In the Betterment Core Portfolio, the company uses exchange-traded funds that represent about 12 asset classes for different levels of risk tolerance and your goals. Customers who want a bit more control over their investment portfolio can utilize Betterment’s Flexible Portfolio to adjust the weights of their asset classes. With the Flexible Portfolio, clients can also choose exposure to non-market correlated assets like real estate investment trusts (REITs) and commodities.
Investors can choose from several other portfolio options, including a smart beta portfolio that seeks higher-than-average returns, a technology portfolio that focuses on industries such as semiconductors, virtual reality and artificial intelligence and a BlackRock Target Income portfolio.
Betterment also offers three socially responsible portfolios. Broad Impact doesn’t focus on any one particular issue, but is intended for those who are interested in Environmental, Social and Governance investing at large. Climate Impact invests in companies with lower carbon emissions, the funding of green projects and divestment from fossil fuels. The Social Impact portfolio focuses on supporting minority empowerment and gender diversity.
Starting Nov. 20, 2024, Betterment will launch a new Crypto ETF portfolio and discontinue its existing direct-crypto portfolios.
Other key Betterment features
Accounts supported
Betterment supports individual and joint taxable brokerage accounts, Roth, traditional, inherited, rollover and SEP IRAs, and trusts. Betterment will allow you to link external accounts for personalized advice (but it will not manage those accounts directly).
Automatic rebalancing
Automatic rebalancing is regular rebalancing of your portfolio in response to market fluctuations or other factors that shift your portfolio out of its intended investment allocation. The market moves and over time, your allocation will move, too. So if your target was having 60% in stocks and 40% in bonds and your stocks are doing well, you could end up having 70% in stocks, which may be more risk than you are comfortable with. With automatic rebalancing, the computer monitors your allocation and will automatically adjust your investment if it gets out of line. Betterment’s algorithms automatically check your portfolio and rebalance them when cash flows in or out — in the form of dividends, contributions or withdrawals — or when the allocation to a particular asset class drifts 3% or more from its target level.
Savings account/cash management options
Betterment offers both checking and cash accounts. The cash account is called Cash Reserve and it comes with an interest rate of 4.25%**. Cash Reserve offers up to $2 million in FDIC insurance coverage for individual accounts, and up to $4 million in coverage for joint accounts at program banks. There's no minimum balance requirement, and you won't pay a fee on your balance. The Cash Reserve account allows you to create separate buckets of cash for specific goals and set up auto-deposits for each.
Betterment’s checking account has no minimum balance, no foreign transaction fees and no overdraft fees. The company reimburses ATM fees worldwide. There is also a joint checking account option.
Customer support options
Betterment offers phone support Monday to Friday, from 9 a.m. to 6 p.m. Eastern time. The company also has email support and will address questions through social media.
Retirement planning options
Betterment’s retirement planning tool lets you link your non-Betterment accounts, including 401(k)s, giving a full picture of all your savings and investment accounts.
With this information, the tool can offer comprehensive retirement planning advice, including comparing current savings levels with your desired spending levels in retirement, answering questions about whether you’re saving enough money, when you’ll be able to retire, and if you’re using the correct savings vehicles and investments. It updates and syncs to outside accounts daily and allows for Social Security data uploads.
Good to know about Betterment
Tax strategy
Betterment offers tax-loss harvesting on taxable accounts*. The platform reviews your investments to reduce tax exposure, and if certain conditions are met, takes action in your account. But it doesn’t have direct-indexing like Wealthfront, which provides this service on taxable accounts with balances of $100,000 or more. Direct indexing buys the single securities held by an index, rather than the ETF tracking that index. That can help single out tax-loss harvesting opportunities.
Betterment's Tax-Coordinated Portfolio is a solid attempt to bridge this gap. This is an "asset location" strategy that automatically puts tax-efficient investments into taxable accounts and investments that have a heavy tax burden into tax-advantaged accounts that will shelter them. (You need to have both taxable and tax-advantaged retirement accounts at Betterment for the strategy to work.)
Betterment offers a Tax Impact Preview tool that lets you see the potential tax hit of any portfolio moves before you make them. Betterment also has a charitable giving tool that gives customers a tax-efficient way to donate appreciated securities to charities directly on the Betterment platform.
No access to human advisors
Betterment no longer offers access to financial advisors through a la carte advice packages available for purchase. Instead, investors that want a human advisor can look into Betterment Premium.
Betterment Premium at a glance
Betterment Premium is Betterment’s upper-tier service. Betterment Premium charges a 0.65% annual fee and requires a minimum $100,000 balance in exchange for unlimited phone access to a team of certified financial planners.
» Want to compare options? Check out our roundup of the best wealth advisors
Reviewed: Oct. 2024
Period considered: Aug. - Oct. 2024
Account minimum | $100,000. |
Account management, planning or subscription fee | 0.65%. |
Setup or onboarding fee | None. |
Advisor access and credentials | Clients have unlimited access to a team of CFP professionals for no additional fee. Advisors can be reached Monday to Friday, 10:00 a.m. to 7:30 p.m. Eastern. They are available via phone and email. |
Financial planning services | Premium includes all the features of Betterment's lower-tier offering, including investing portfolios, socially responsible investing options, automatic features, such as portfolio rebalancing, dividend reinvestment, and auto-adjust. Premium CFPs will be able to help you with some financial planning, such as debt reduction and basic estate planning, but not business planning. Premium clients can also receive in-depth advice on investments held outside of Betterment. |
Brokerage options | Only manages accounts held within Betterment. |
Good to know about Betterment Premium
Higher cash reserve rate
Betterment Premium clients receive an additional 0.25% APY on top of the variable rate of 4.25%**.
Financial planning services
Betterment Premium offers clients unlimited access to a team of eight CFPs. These CFPs offer comprehensive financial planning to clients, which includes consultation on assets held outside of Betterment as well as coordination with any estate attorneys and CPAs. Consulting services could include backdoor Roth IRA conversions, transferring assets tax-efficiently, retirement planning, and more.
Limited brokerage options
While CFPs can consider accounts held outside of Betterment for planning purposes, Betterment Premium does not manage outside accounts.
Is Betterment safe?
Yes, investing in Betterment is as safe as investing at any other brokerage. Betterment is registered with the U.S. Securities and Exchange Commission and FINRA. Money kept in Betterment's Cash Reserve is FDIC-insured up to $2 million. According to Betterment, the company currently manages more than $45 billion for over 850,000 clients.
That said, investing through a safe platform like Betterment still comes with the risk of investment loss. No brokerage, Betterment included, can guarantee that you will make money with your investments.
Betterment was involved in a lawsuit regarding its tax-loss harvesting service and agreed to pay $9 million to the clients who were affected between 2016 and 2019.
Is Betterment worth it?
Betterment is a clear leader among robo-advisors, offering two service options: Betterment's digital offering provides automated portfolio management for a low fee depending on account balance; Betterment Premium provides unlimited access to certified financial planners for a $100,000 account minimum.
» Want to check out other providers? Here are our top picks for best robo-advisors.
Betterment’s goal-oriented tools and features should appeal to retirement investors, and the human advice offering through Betterment Premium is inexpensive compared with other independent hybrid advisors, such as Empower. Betterment’s variety of socially responsible portfolios are also a great option for socially conscious investors. But Betterment’s CFPs won’t be able to help you with everything a typical financial advisor can, such as business planning.
*Betterment is not a licensed tax advisor. Tax Loss Harvesting+ (TLH+) is not suitable for all investors and certain conditions apply. Read more at and consider your personal circumstances before deciding whether to utilize Betterment’s TLH+ feature. Investing involves risk. Performance not guaranteed.
**Current promotional rate; annual percentage yield (variable) is 4.25% as of 11/8/24, plus a .50% boost available as a special offer with qualifying deposit. Terms apply; if the base APY increases or decreases, you’ll get the .50% boost on the updated rate. Cash Reserve is only available to clients of Betterment LLC, which is not a bank; cash transfers to program banks (www.betterment.com/cash-portfolio) conducted through clients’ brokerage accounts at Betterment Securities.
on Betterment's website
