Robo Profile: Betterment

Betterment is Ranked #1 for First-Time Investors

Betterment is Ranked #3 for Digital Financial Planning


Overview: 

First launched in 2010, Betterment is one of the original robo advisors.  They have raised a total of $250 million in venture funding and have grown to be one of the leading digital advice providers. In their most recent annual disclosure, Betterment reports over $16B in assets under management (AUM) on their platform and services nearly 420,000 clients.  With no investment minimum and a 0.25% management fee, Betterment’s digital-only product is a strong choice for investors. They also offer various financial-planning packages that provide personal consultations with a financial planner on an as-needed basis, so that users only have to pay for personalized professional help as they see fit.  They offer a tiered service model, which allows investors to upgrade as their needs grow. Recently, Betterment has introduced a high-yield savings account to their platform and has announced plans to offer checking accounts in the near future.

Pros:

  • No account minimum for Digital plan
  • Access to advisor with Premium plan
  • Direct indexing offered
  • Robust digital financial planning tools

Cons:

  • No dedicated financial advisor

Platform Facts:

Last updated: 09/30/2019

Account MinimumDigital: No minimum; Premium: $100,000
Advisory FeeDigital: 0.25%, 0.15% above $2M;  Premium: 0.40% (unlimited chat and calls with advisor), 0.30% above $2M
Average Weighted Expense Ratio (Betterment Taxable)0.08%
Accounts SupportedIndividual, IRA, Roth IRA, Trust

Performance Figures:

Last updated: 09/30/2019


Trailing 2-Year Return (annualized)Trailing 2-Year Sharpe Ratio
Betterment Taxable4.10%.28
Betterment IRA 4.38%.26
Betterment ActiveN/AN/A
Betterment SRIN/A N/A

Digital Advice Ratings:

Access to Advisors (3/5) 

Betterment’s premium tier gives clients access to a financial advisor who is accredited as a CFP ® or other relevant professional designation.  However, clients will not have access to a dedicated advisor. The premium plan requires a minimum balance of $100,000.

Financial Planning (4.5/5)

Investors can build multiple financial goals with different risk tolerances that factor in assets held in outside accounts.  Betterment then provides recommendations to help investors achieve each independent goal. Betterment lags behind Wealthfront and Personal Capital because there is no way to view a unified plan, taking into account the interaction between each independent goal.  Also, these planning tools are only made available to paying clients.

Transparency and Conflicts (5/5)

Betterment provides easy access to traditional and blended portfolio benchmarks to assess performance.  They provide white papers detailing investment strategy and detail performance of their models online. They do not invest any of their portfolios in proprietary products.

Features and Customer Experience (3.5/5)

Automatic deposits, fractional shares, auto-rebalancing, and tax loss harvesting are some of the features available at Betterment. Also, they provide flexibility around concentrated positions and unrealized gains. Customers are easily able to access their account through the website or Betterment app.

Costs  (4/5)


Management Fee*Fund Expenses*Total Cost*
Digital Plan$25$8$33
Premium Plan$40$8$48

*Per $10,000 invested

Betterment is a great value when considering both their Digital plan and Premium plan with access to live advisors, who are CFP ® professionals and licensed financial experts.  The only downside to the Premium plan is that it requires a minimum balance of $100,000.