Betterment and Wealthfront are the two largest and most well-known independent robo-advisors in the sector. Both platforms are at the forefront of online, automated investing, and both have progressively expanded their investment offerings. Wealthfront, in fact, just launched a service that automatically invests extra funds from your checking or cash account in a taxable investment account, cash account, etc.
Most investors start their robo-advisor search with one or both of these services, and this is probably not an exaggeration.
What is Betterment?
Betterment is a robo-advisor that provides financial planning and automated investment services. It was formed in 2010, and it now manages over $33 billion in assets and has over 700,000 consumers on its database. Its goal is to assist individuals in better managing their finances, saving for the future, and achieving financial independence.
Other banking options worth considering include checking accounts, different cash management tools, and IRA and 401(k) accounts, in addition to traditional investment through the Betterment robo-advisor. Tax-loss harvesting, goal-based investment, and automatic rebalancing are among its many features.
Through its financial professionals, the organisation also provides individualised guidance. Its services are open to all citizens and permanent residents of the United States. SIPC, which covers up to $500,000 in lost assets, including a limit of $250,000 for cash claims, ensures and protects all of your investments with Betterment.
Betterment has a wide choice of investing alternatives for you to choose from, whether you’re just starting out in your career or are well on your way to retirement. The firm offers skilled guidance and charges affordable rates across the board.
Who Is Betterment For?
Anyone seeking for low-cost, automated investing choices may consider a Betterment investment account. The firm provides a range of services suited to both novice and seasoned investors. It’s also ideal for people who want a hands-off approach to their assets.
Betterment’s algorithms will determine the optimal solution for you based on your risk tolerance and long-term objectives, whether you’re wanting to make a house down payment or need advice on investing in a college fund or a retirement plan.
Reviewers of Betterment will see that it has a lot of features tailored to retirement planning. Automatic rollovers and tax-loss harvesting are two options that can help you save money on your taxes. Betterment also offers advice on what to do when you’re ready to retire.
What is Wealthfront?
Andy Rachleff launched Wealthfront, an online investment management business, in 2008. It’s recognised for attempting to democratise wealth management, which means that it uses technology and inexpensive costs to make wealth management accessible to a wider range of individuals. It also emphasises personalisation through automation, with features like direct indexing for tax losses and Path, an automated and comprehensive financial planning tool built into the app.
Who Is Wealthfront For?
Wealthfront’s robo-advisor and services are geared for those who want to see their assets increase over time but don’t want to manage the process or pay excessive fees. Wealthfront is also a good option for people who are just getting started with money management. Wealthfront manages your assets according on your risk tolerance, allowing you to focus on other elements of your life while still growing your money.
Wealthfront may be a good fit for you if you want to invest but don’t know where to start or don’t have a lot of time to do so. Consult Wealthfront’s free yet comprehensive investing guide if you’re not sure what tools and services are accessible to you.
Betterment vs. Wealthfront
Fees and Plans
Betterment’s pricing plans are among the most cost-effective on the market for robo-advisors.
Betterment’s checking accounts offer no monthly fees and no minimum balance requirements. You get unlimited ATM withdrawals, a Mastercard debit card, cashback benefits, and the ability to pay bills online with your bank account.
If you want to create an investment account, you have the option of choosing between Digital and Premium investing.
The cost of a Digital plan is as little as 0.25 percent every year. Again, there is no requirement for a minimum balance. This plan provides you access to socially responsible investing alternatives, low-cost investment portfolios, advanced tax-saving tactics like asset allocation and tax-loss harvesting, as well as a slew of automated features like portfolio rebalancing and dividend reinvestment.
If you want to obtain investment advice from Betterment’s qualified financial advisers, you’ll have to pay 0.40 percent each year for the Premium plan. This plan, however, has a $100,000 minimum balance.
You may purchase one of the flat-fee advising packages if you don’t have a minimum balance of $100,000 but still want Betterment specialists to analyse your finances and give in-depth advice on how to manage your portfolio. These programmes range in price from $299 to $399 and include a personalised action plan, a customised conversation with a financial expert, and instructional content.
For accounts under $100,000, Wealthfront used to offer free management for the first $10,000. Only investors who joined before April 2018 are still eligible for this plan. Opening and cancelling accounts, withdrawals, and trading are all free.
Wealthfront charges a 0.25 percent fixed fee on all accounts. According to the corporation, tax savings will cover the price for 96 percent of clients.
Wealthfront also offers automatic portfolio rebalancing and tax-loss harvesting via direct indexing. All Wealthfront clients who invest in risk parity portfolios, IRAs, or college savings accounts are eligible for this benefit. There aren’t many robo-advisors in the United States that provide such a service.
Betterment’s tools can assist you in determining how much you should save based on your retirement objectives. The financial plan is customised depending on your retirement age, ZIP code, and Social Security benefit amount, among other criteria. Once you’ve signed up, you’ll be able to figure out how much to save, link external accounts to obtain a more complete view of your finances, learn to prioritise your accounts, and make changes to your savings plan as needed.
Betterment provides a variety of IRA accounts (regular, Roth, and SEP) that can help you save more for retirement or perhaps retire sooner. It is also feasible to convert a regular IRA to a Roth IRA. It also provides 401(k) programmes for businesses and those employers who want to assist their employees in saving for retirement.
Wealthfront also has a retirement calculator that can assist you in determining how much money you’ll need to retire. The calculator allows you to enter information such as your current age and compensation level. Its Retirement Planner programme compiles all of your data and develops a plan for you. Wealthfront will go through this information and tell you how much money you’ll need to save and how to meet your retirement objectives.
Because everyone’s retirement plans are different, Wealthfront offers a variety of choices to better meet your needs. If you’re self-employed, you can start an investing account, roll over your 401(k) from a prior employment to an IRA, or set up a SEP IRA account.
The Path app, as we previously discussed, can not only analyse your savings potential but also suggest the form of savings account you should start to save money for retirement.
Betterment provides a variety of assistance services. Outside of regular business hours, you can contact the customer service staff for assistance, and those who prefer this kind of communication can also use the website’s 24/7 live chat support with a virtual assistant.
When it comes to Wealthfront, the assistance choices are virtually as diverse. You can contact the agents via phone or email, or search the support centre and the official blog for answers.
We can’t claim that one of these services is clearly superior to the other. For the same 0.25 percent yearly management charge, each provides a complete set of services, excellent applications, and a plethora of investing options.
However, there are some distinctions between the two services. Betterment, for example, has human advisors, whereas Wealthfront is entirely automated. As a result, this might influence your selection. Choose Wealthfront if you want greater automation. Betterment, on the other hand, is the solution for you if you want greater control and the ability to obtain tailored guidance.