Betterment Review: Is It the Best Investing and Saving App for You?

By John Csiszar

July 12, 2021

GOBankingRates Score

4.7

Our Take: Betterment is a financial services company that began in 2010 with the mission to make investing simpler for everyone. It pursued this mission by pioneering the "robo-advisory" industry, which uses statistics-based algorithms to compute optimal portfolio allocations for investors. Since that time, the firm has broadened its financial services capabilities, and now it offers customized retirement plans, access to financial advisors and a cash management suite, including a checking account with a Visa debit card.

• Overall Score
  4.7
• Financial Services
  4.9
• Mobile App
  4.5
• Fees
  4.5
• Interest Rates
  4.8

How did we calculate this?

Over the years, the firm has tweaked its core robo-advisory product, experimenting with different pricing strategies and capabilities. However, it has always relied on Nobel Prize-backed research in developing its algorithm and focused on keeping costs as low as possible for customers.

As a pioneer in the robo-advisory world, Betterment has done a great job in honing and refining its core product. If you’re searching for the simplicity and low costs which are the hallmarks of robo-advisors, you’ll likely be happy with Betterment’s offerings.

Pros and Cons

Betterment is one of just a few online-based firms that provide certified financial planner-based consultations, but like all of its competitors, it has both pros and cons.

About Betterment

Betterment’s approach to portfolio management is to drive down costs and invest more efficiently through technology. Since its founding in 2010, Betterment has grown to become the largest independent online financial advisor in the world. As of June 30, 2019, the firm had more than $22 billion in net equity.

Features

Account Features

Betterment is primarily a robo-advisor, so it doesn’t offer the wide range of brokerage services offered by many well-known names in the financial service industry. But for investors seeking this type of broker, Betterment excels in many categories. Here’s a breakdown of how Betterment delivers its services to customers across various categories.

Accounts

Betterment offers a no-fee checking account with no account minimums or opening deposit amounts. The account comes with a free Visa debit card and reimbursed ATM fees worldwide. In addition, a high-yield account allows you to earn 0.30% APY on cash reserves.

Trading Experience

Although the mathematics and statistics behind the Betterment robo-advisor are complicated, the trading experience provided to customers is simple and seamless. There’s a four-step process to begin investing with Betterment.

Step-By-Step on Starting with Betterment

1. You’ll be asked questions about what you’re saving for.
2. The algorithm will build a portfolio of ETFs for you based on your answers.
3. The firm will help you decide how much to invest.
4. The robo-advisor will invest and manage your money, reinvesting dividends and making allocation shifts as the algorithm dictates.

Betterment doesn’t offer the traditional “trading experience” you might get with other online brokers, such as Fidelity or E-Trade, as it doesn’t offer a customer-facing trading platform — all of your trading is handled in-house by the algorithm tailored to your goals and risk tolerance.

Account and Investment Minimums

Betterment has no account minimums for its basic, Digital platform. For the financial advisor-based Premium platform, the account minimum is $100,000.

Commissions and Fund Expenses

The annual fee you pay for account management at Betterment includes all of your commissions and trading expenses. Individual ETFs within portfolios do have their own expense ratios, but they are the same as if you bought any ETF yourself on the open market. Betterment doesn’t charge any excess trading or management fees when portfolios are reallocated or rebalanced, or when new purchases or sales are made.

Trading Technology

As Betterment doesn’t offer an online trading platform, it doesn’t have the same types of trading technology as online trading firms. All trades are executed at no additional charge by Betterment’s advisory service.

Usability

Betterment’s driving purpose is to make investing more accessible, and its trading platform reflects this simple and customer-friendly approach. The user interface is beautifully done and easy to understand. There is a lot of data entry required to open and set up your account, but after your portfolio is established, the interface is intuitive and full of useful information.

Mobile and Emerging Tech

As Betterment is a “next-wave” financial platform, it offers a mobile app with all of the functionality of the desktop. Entering information for account setup can be easier using a computer, but the mobile app offers a great user experience for monitoring and maintaining portfolios.

Download the app:

• App Store for iPhones and iPads: Betterment iOS, 4.8/5 stars, 30.2K reviews
• Google Play Store for Android: Betterment, 4.2/5 stars, 5.8K reviews

Range of Offerings and Investment Selection

Betterment only offers ETF portfolios that are managed by its robo-advisor, so you won’t find a wide range of investment options. For example, if you decide you want to add some individual stocks or bonds to your Betterment portfolio, you’re out of luck. You’ll have to buy those types of securities from a different brokerage. Of course, with Betterment managing your portfolio, you also won’t have to make the toughest decisions of investing, such as when to sell a stock.

Within the Betterment universe, portfolios are constructed out of six broad equity categories and eight fixed-income categories:

• U.S. Total Stock Market
• U.S. Value Stocks: Large-Cap
• U.S. Value Stocks: Mid-Cap
• U.S. Value Stocks: Small-Cap
• International Developed Market Stocks
• International Emerging Market Stocks
• U.S. High-Quality Bonds
• U.S. Municipal Bonds
• U.S. Inflation-Protected Bonds
• U.S. Short-Term Treasury Bonds
• U.S. Short-Term Investment-Grade Bonds
• International Developed Market Bonds
• International Emerging Market Bonds

Each investment category has a primary ETF that is used for investment, although some categories may have one or more additional, secondary ETFs. For example, the selected ETF for the U.S. Short-Term Investment-Grade Bonds category is ticker symbol NEAR, but the U.S. Municipal Bonds category uses the ticker symbol MUB as its primary ETF and a secondary ETF with the ticker symbol TFI.

News and Research

Betterment doesn’t provide the type of up-to-the-second market data and commentary you might find at some online or full-service brokerages. However, this is befitting its mission to offer easy-to-understand, robo-advised portfolios rather than individual stock and bond trading. You can find answers to general investing questions in the firm’s FAQ section, but you won’t find the type of in-depth stock research or insights you might expect from a stock brokerage.

Security

Betterment has various policies in place to address data security, fraud protection, privacy and advanced login protection. Browser encryption, secure servers, automatic logout and two-factor authentication are just some of the many protective features you’ll find when using Betterment’s systems.

Costs

Depending on your perspective, costs are generally pretty low at Betterment. Traditionally, full-service brokerage firms would charge 1% or more of assets — sometimes, much more — to professionally manage and monitor a portfolio.

Good To Know

At just 0.25% per year, the Digital plan at Betterment seems to be fairly low-cost, considering you’re getting a diversified portfolio of ETFs tailored to your risk tolerance and investment objectives, and there are no additional trading costs along the way. Compared with competitors, the fee is higher than some and lower than others.

Recently, many online brokerages such as Schwab and Fidelity have announced that they will no longer be charging commissions for individual stock and ETF trades, so this is another data point for comparison with the Betterment strategy.

Fees

Betterment aims for a low fee structure, with many of the fees you typically see at other financial institutions or brokerages non-existent. Two you should look out for are:

• Annual management fee: 0.25% to 0.40%
• CFP access: $299 to $399

Who Is Betterment Best For?

Betterment is best for investors looking for the following features:

• Customer service
• Usability
• Commissions and fund expenses
• Mobile and emerging tech

Betterment’s focus on making investing easier extends to its customer service and mobile tech offerings. Commissions are not zero, as with some online stock brokerages, but Betterment is not a do-it-yourself financial services firm.

That 0.25% starting annual fee, which amounts to just over $20 per month on a $100,000 portfolio, includes the planning, allocating, monitoring and rebalancing of your portfolio without any additional charges.

Betterment Disadvantages

Here’s where Betterment comes up short compared with some other brokers:

• Range of offerings and investment selection
• News and research

Betterment is not a stock-trading firm, it’s a robo-advisor. As such, its customers don’t really need the moment-by-moment tracking of stock prices and market movements that do-it-yourself investors might prefer. However, it’s true that there’s also not a wide variety of ETF options in Betterment’s portfolios either.

Competitors

Betterment is hard to compare with traditional online brokers like E-Trade and Fidelity. A more apt comparison is with fellow robo-advisors, as outlined below.

Betterment vs. Personal Capital

Personal Capital is geared towards higher-net-worth individuals. Fees are higher at 0.89% for all account holders with balances up to $1 million. To get closer to Betterment’s 0.40% fee, you would need to have a balance of $10 million or more, a 0.49% fee.

Betterment vs. Schwab Intelligent Portfolio

Both robo-advisors offer a checking account and are known for low-fee investing. However, Betterment has no account minimums whereas Schwab requires opening with at least $5,000.

Betterment vs. Fidelity Go

For smaller account balances, Fidelity Go has no fee on balances up to $10,000. Otherwise, you will pay $3 per month up to $49,999 and .35% above that balance. The biggest difference between Betterment and Fidelity Go is investment type — Betterment offers ETFs while Fidelity Go offers low-cost mutual funds.

Should You Invest With Betterment?

If you’re a do-it-yourself trader, Betterment isn’t the best option for you. However, if you’re new to investing, have a smaller amount to manage or feel more comfortable entrusting a firm to run your portfolio, Betterment can be a solid choice.

Pricing Tiers

One of the strengths of Betterment in the robo-advisory world is that it has two tiers of pricing and service for customers. The original, traditional robo-advisory plan, now known as the Digital plan, charges just 0.25% annually to manage portfolios of any size, with no minimum.

This level can be a great entry into investing for those new to the markets, as they’ll become familiar with how to balance risk and reward and the value of diversification across asset classes. With its newer, more advanced Premium platform, Betterment is expanding its appeal to customers with larger portfolios that need more advanced services.

Access to Certified Financial Planners

The Premium tier both has a higher minimum balance — $100,000 — and a higher annual fee — 0.40% of assets — but it provides access to certified financial planners and other financial professionals who can provide a much higher level of personalized service.

Of course, one of the key attributes of a certified financial planner is that these advisors have a fiduciary duty to clients, meaning they must put your financial interests ahead of their own. This type of impartial, professional advice can be invaluable and is usually only found at the best brokers, so it can be worth far more than the 0.40% annual fee to many investors.

Editor’s Favorite

Overall, Betterment offers an attractive package for both newer clients and those with more substantial assets. Active stock traders or those looking for zero-commission trading won’t be happy here, but investors seeking long-term diversified portfolios may appreciate the simplicity and scientific modeling that they can get at Betterment.

Is My Money Safe With Betterment?

With 10 years of experience in the still-new robo-advisory field, Betterment has tweaked its model enough to be a safe industry leader for your money. The bottom line is that if you’re looking for a robo-advisor, Betterment has plenty to offer. If you’re looking for a traditional brokerage, it’s best to look elsewhere.

Cynthia Bowman contributed to the reporting for this article.

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About the Author

John Csiszar

After earning a B.A. in English with a Specialization in Business from UCLA, John Csiszar worked in the financial services industry as a registered representative for 18 years. Along the way, Csiszar earned both Certified Financial Planner and Registered Investment Adviser designations, in addition to being licensed as a life agent, while working for both a major Wall Street wirehouse and for his own investment advisory firm. During his time as an advisor, Csiszar managed over $100 million in client assets while providing individualized investment plans for hundreds of clients.