According to their site, Betterment has an annual fee of 0.25% for their digital plan - much lower than the average 1% fee of traditional money managers. Betterment provides tax loss harvesting at the index fund level, but Wealthfront delivers more for those with more than $500K invested: By providing tax loss harvesting at the stock level Betterment replaces emerging market stocks and large-cap US stocks with three ETFs dedicated to socially responsible investing. Wealthfront provides a regularly updated report on its historical returns. First, letâs lay an overview of what an investment robo-advisor does. Betterment performance returns vary by client because each one has a different risk profile and financial goals leading to different allocations. (That said, weâre committed to providing honest reviews.) Betterment also offers a series of financial advice packages, with fees ranging from $149 to $399. Wealthfront only uses 11 asset classes to create portfolios. Each company has a wide variety of portfolios you can invest in that have varying returns. And for the more socially-conscious investor, Betterment also provides socially responsible investing (SRI) portfolios, which allow users to pick investments that align with their values. This category requires a portfolio between $100,000 and $500,000. Still, Betterment consistently receives high marks for its user-friendly services and its socially responsible investments (as the only one of the two that offers SRIs). The packages address basic financial planning, such as preparing for college, marriage, and retirement. Betterment’s Premium plan offers access to live financial advisors, and an annual advisory fee of just 0.40%. Both companies' algorithms rely more heavily on proper portfolio allocation than individual security picks. However, because Wealthfront offers stock-level tax-loss harvesting, the company claims the strategy can help increase annual investment returns by up to 2%. Which is the better of the two? It involves an actively managed portfolio, offering potentially higher rewards with correspondingly higher risks. The above results are for a portfolio based on an investor with a risk score of 8.0. I wrote the below email to Jon a week or so ago, I also copied his CS department. This is something of a financial advisory, but it’s software-based. Wealthfront vs Betterment Returns. The app can be used to run “what if scenarios”, such as seeing the projections of increasing your savings or determining how much financial aid your child might be eligible for in college. Betterment Cash Reserve offers a 0.40% APY. In my opinion, Wealthfront's $500 minimum isn't much different for â¦ Personal Capital: investment performance. © 2020 TheStreet, Inc. All rights reserved. On the other hand, Wealthfront has a $500 minimum for their accounts. Like all robo-advisors, Betterment uses Modern Portfolio Theory (MTP) to create and manage your investment portfolio. But the best part of this checking account is that, thanks to Betterment’s partnership with Dosh, you’ll also get the Betterment Visa® Debit Card that offers cash back when you use your card at participating businesses. Though Betterment has only been in business since 2008, Betterment portfolio performance has surpassed that of its competitors, many of whom have existed for decades or more. Opinions are the author's alone. Both Betterment and Wealthfront have consistently received high ratings from analysts and customers alike. Betterment has been recommended for low-balance, hands-off investors who want easy access to automatic rebalancing for their portfolios and personal financial planning. And you’ll be notified every time Betterment finds rewards for you, making it easy to keep track of how much you’ve earned. But because both Betterment and Wealthfront use ETFs, you can basically track their returns by tracking the overall market. Here weâll delve a little deeper into Betterment vs. Wealthfront vs. M1 Finance to help you to decide the best option for your circumstances. For a Premium account, you'll be paying 0.40% in fees. In the final analysis, both Betterment and Wealthfront platforms. In 2020, investors have plenty of options - including Robo-advising sites and apps like Betterment and Wealthfront. These are the kind of investment strategies more typically available with higher cost, traditional investment advisors. Vanguard vs. Betterment & Wealthfront vs. Vanguard. Betterment offers two service tiers: Betterment Digital and Betterment Premium, available as â¦ Comments may be held for moderation and will be published according to our. *Disclosure: Please note that this article contains affiliate links which means that â at zero cost to you â I might earn a commission if you sign up through the affiliate link. While both sites offer relatively similar services, there are notable differences that might prompt a customer to choose one over the other. Here's Wealthfront's historical performance for a risk score of 9.0. Both these robo-advisors have very competitive pricing, offering an annual fee of 0.25% that is quite affordable. This holds the potential to outperform the general stock market, as measured by the S&P 500. But where Wealthfront departs from Betterment is that it also diversifies into natural resource stocks and real estate investment trusts. Betterment provides two types of investment accounts: there is a Digital plan, which requires an annual fee of 0.25% with a $0 minimum balance. Based on the research, itâs highly unlikely youâll outperform the market on your own. Each asset class will be represented by an individual exchange traded fund (ETF), giving your portfolio exposure to literally thousands of individual securities. The direct indexing feature is only available for investors holding $100,000 or more in their account with Wealthfront. Jon and I had exchanged a few emails when I was considering his company. As some of the biggest (and pioneering) Robo-advising companies, Betterment and Wealthfront have had years to hone their offerings. Betterment launched in 2010 and is one of the original robo-advisors. No Cash Holdings: neither holds your assets in cash, instead investing whatever you deposit into securities. Depending on the account size, up to 1,000 stocks will be chosen from the S&P 1500 index. The whole point of going with a Robo-Advisor is the ease of use. Your cash back offers are also tailored to your own personal buying preferences. Like other robo-advisors, Wealthfront starts by having you complete a questionnaire, the answers of which will provide the basis of your portfolio. But if you prefer investing in value stocks, Betterment will be the better option. Otherwise, the two platforms are largely identical. The screenshot below shows an interactive graph enabling you to calculate returns over various time frames, going all the way back to 2004 (which is a tad meaningless, given the platform was only launched in 2008). It represents a form of active portfolio management, and is available for portfolios of $500,000 or more. You won’t need a minimum balance and you’ll pay no monthly fees. Wealthfront has also received top marks for its full-service bar of planning tools and low fees. Wealthfront is the second largest independent robo-advisor, with at least $10 billion in assets under management. The differences between these two big robo-advisors largely come down to â¦ These companies all have something similar to offer, but there are some crucial differences. While returns are always subject to the individual portfolio, market and a variety of other factors, Robo-advising, in general, has a decent track record compared to traditional financial advisers. According to information gleaned from Bettermentâs website, Betterment historical returns would have â¦ Wealthfront is at 7.62% on its taxable portfolios, and 8.52% on its tax-advantaged portfolios . Betterment is a Robo-adviser investment company that provides investors with efficient investment advice, low fees, and minimums and a variety of account options. It enables you to borrow up to 30% of your account value, and make repayments on your own schedule. For example, up to 500 stocks will be purchased out of the S&P 500 index. Also, individual portfolios will vary in their asset allocations based on investment goals, time horizons, and investor risk tolerance. You can sign up for the platform with no money at all. Funds can be borrowed for any purpose, and since you’re borrowing from yourself, you can repay on your own terms. But Wealthfront is exclusively focused on maximizing your after-tax returns. However, Wealthfront provides the superior tax-optimized investing service through its Direct Indexing feature that it claims can amplify after-tax annual returns by as much as 2.03%. When comparing Betterment vs. Wealthfront vs. Vanguard, Vanguardâs site is admittedly the least intuitive and streamlined of the three. Each offers smart beta, socially responsible investing, various forms of financial advice, and the ability to open an account with little or no money. This Betterment vs. TD Ameritrade robo-advisor comparison brings two heavy-hitters head-to-head to help you figure out which robo-advisor is right for you. The use of index-based ETFs and automated investment management keeps investing expenses low, maximizing your investment returns. And, Betterment offers a Smart Saver account which can earn users up to 2.19% with the low-risk investing. So, you can start an account with as little as $0 with Betterment. However, due to limited performance data provided by Betterment, the comparison is no better than approximate. The results will be different for each risk score level, which is part of what makes it difficult to make a direct comparison with Betterment or any other investment platform. Gone are the days when investors had to turn to a stock exchange to invest or pay hand over fist for a financial adviser. Your portfolio will then be created from a mix of 14 different asset classes, including six for stocks and eight for fixed income investments. One of Wealthfront's main draws is its stock-level tax-loss harvesting option - which won't trigger until you invest $100,000. You can easily locate participating merchants in Betterment’s mobile app. Wealthfront also offers investments in things like real estate and natural resources, while Betterment offers a BlackRock Target Income portfolio (for investors looking to generate income through investment). This is a fraction of the 1% to 2% fee charged by traditional human financial advisors. Each charges a basic fee of 0.25% for the vast majority of investors. MPT stresses proper asset allocation based on targeted risk levels. They’re displayed for one year, three years, five years, and since the inception of Wealthfront on October 14, 2011. That works out to an average annual return of just under 8.8%. And, unlike Wealthfront, the company offers support by phone or email seven days a week. Sign Up for free weekly money tips to help you earn and save more. This is just one of 20 potential asset allocations, since the Wealthfront risk scores run in increments of .5, from .5 up to 10. However, this only applies to its Digital account - Betterment Premium requires a $100,000 minimum (which will get you unlimited access to certified financial planners via phone). Lastly, let's take a look at how Betterment's returns compare to Wealthfront âanother popular robo-advisor. Betterment vs. Wealthfront â Similarities. However, all credit card information is presented without warranty. |. Still, one of the main bonuses Wealthfront offers is that it offers direct indexing - which allows investors to hold individual stocks (as in the S&P 500). There is no definitive answer to that question. Over the course of the next forty years or so (or however long â¦ The company offers comprehensive financial planning tools that are even available to users without an account and brags low fees to boot. Founded in 2008, Betterment is one of the first Robo-advising sites and provides investment advising for a variety of accounts and pricing tiers. We report pre-tax returns because that's the industry standard. Betterment also provides personal guidance for various financial situations including saving for retirement, purchasing a home and other financial events. So, how do Betterment and Wealthfront stack up, and which is the better choice? We set the graph from October, 2011, because it lines up with Wealthfront’s data going back to its inception on October 14, 2011. If you have $100,000 to spare, Wealthfront users also have the option to receive a line of credit using the assets in their account as collateral (a feature Betterment doesn't currently have). Betterment vs. Wealthfront: Investment performance, Final thoughts on Betterment vs. Wealthfront, Wealthfront starts by having you complete a questionnaire, regularly updated report on its historical returns, This is a more complex investment strategy, This is something of a financial advisory, but it’s software-based, Betterment Review: The Way Investing Should Be, Wealthfront Review: Automated Investing And Financial Planning That’s Free Up To $10,000, The Best Investment Accounts For New Investors, Individual and joint taxable accounts; traditional, Roth, SEP and rollover IRAs; trusts and non-profits, Individual and joint taxable accounts; traditional, Roth, SEP and rollover IRAs; trusts and 529 plans, Digital: 0.25% to $2 million; 0.15% over $2 million; Premium: 0.40% to $2 million; 0.30% over $2 million, Yes, through Smart Beta and Stock-level Tax-loss Harvesting (min. Betterment and Wealthfront are the two largest independent robo-advisors in the field, and probably the best-known. Learn more about Betterment: read our full review or visit their site! However, Wealthfront also offers 529 college savings accounts as well as high-yield savings accounts (unlike Betterment). Compare our recommended robo-advisors, stock-brokers and mutual fund accounts. Unlike Wealthfront, Betterment offers human advisers in addition to their Robo-advising capacities. Unlike Wealthfront, Betterment also offers a charitable giving service that allows users to donate appreciated shares to charities through the service. Learn which could be best for you by comparing their features and pros â¦ Wealthfront has comparable management fees of 0.25%. Article written by Edward Canty Ed is a financial planner and personal finance enthusiast. We thought it would be helpful to include a comparison of investment performance between the two robo-advisor giants. For TurboTax users, you can even input your Wealthfront information to link any tax-loss harvesting information when filing taxes. We invite readers to respond with questions or comments. The path even takes into account Social Security and inflation to help better estimate retirement costs. Better yet, if you tried to do it on your own, it would be much more expensive. As an added perk, Betterment performs tax-loss harvesting - which maximizes your earnings by using algorithms to automatically invest in securities or investment vehicles that optimize tax losses and decrease your capital gains for reporting to the IRS. According to their site, Wealthfront's AUM total some $12 billion among roughly 200,000 customers (as of 2018). For Betterment, my portfolio consisted of 90% stocks and 10% bonds. Touted as the better service for set-it-and-forget-it investors, Betterment provides two accounts - Betterment Digital (with a 0.25% fee) and Betterment Premium (with a 0.40% fee) that provide various levels of services including access to human advisors. They're very similar, but there are a few differences that set them apart. Betterment offers checkings and savings account with an annual APY of up to 2.38%. Best High Yield Savings Accounts Compared, Understanding Overdraft Protection and Fees, The Beginner’s Guide To Saving For Retirement, How Much Do You Need To Have Saved For Retirement, How Much Should You Contribute To Your 401(K), How To Pay Medical Bills You Can’t Afford, Bestow’s Chief Insurance Officer, Jackie Morales. Betterment is available online as well as on iOS and Android. As always, the best option for you largely depends on your investment goals and resources. As a bonus, Wealthfront added the Wealthfront Risk Parity Fund last year - which gives investors with $100,000 the opportunity for higher risk-adjusted returns in a taxable account (although it has a higher expense ratio). Kevin Mercadante Both accounts require a minimum of $100,000 for several additional perks - including some tax-loss harvesting and credit line features. Your cash back rewards are automatically deposited into your checking account in real-time, so you don’t have to wait to redeem them. Wealthfront charges the same 0.25% annual advisory fee that Betterment charges, but it also charges a fund fee of 0.07% to 0.16%, depending on the funds your money goes into. Given that the fourth quarter of 2018 was unusually volatile, that can skew the performance data in favor of Betterment. As your portfolio grows, each offers the ability to take advantage of more sophisticated investment options. Still, while there are several differences, Wealthfront and Betterment have fairly comparable services and options - so the quality of Robo-advising is relatively similar for both companies. Based on the numbers above, Betterment has an average annual investment return of just under 8.8%. Your entire portfolio won’t be fully SRI, but a large portion will be. Betterment is not only the original robo advisor, but itâs also the largest independent robo (along with Wealthfront), with $21 billion in assets under management. For example, it uses just three stock classes – US stocks, foreign developed stocks, and emerging market stocks. However, for large account customers with $2 million in their account, Betterment reduces annual fees to 0.15% for their Digital account and 0.30% for their Premium account. While both Betterment and Wealthfront offer similar investment vehicles and Robo-advising services, there are some differences in their investment options. A robo-advisor refers to software that functions by providing online investment and financial management advice. After several years in business, Wealthfront now has more than $12 billion in assets under management (AUM). Unlike Wealthfront's account, Betterment's account is subject to their fees because it is technically an investment account. It’s not designed to be a margin loan, but it offers you total flexibility. The screenshot below shows Wealthfront investment results through February 28, 2019, for both taxable portfolios and tax-advantaged portfolios (retirement accounts). ou’ll also get the Betterment Visa® Debit Card that. The first step will involve completing a brief questionnaire, that will identify your investment goals, time horizon, and risk tolerance level. Depending on the numbers above, Betterment has consistently ranked highly for its no-minimum.... 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