When it comes to building market-tested passive investing portfolios at a reasonable cost, Betterment is a pioneering robo-advisor fiduciary that still delivers exceptional value.
Betterment has emerged in recent years as a popular alternative to traditional banks due to its competitive pricing and convenient features. Even if you are not yet ready or prepared to create an investing account with Betterment, you can still use its checking and cash management accounts to manage your day-to-day and long-term finances with ease.
Is there anybody who wouldn’t benefit from Betterment? However, that’s not quite the case. Betterment’s automatic asset management tools are both high-tech and accessible to newcomers, but the platform lacks a do-it-yourself option and doesn’t cover more exotic investments like cryptocurrency, FX, or options. Furthermore, Betterment only provides access to two different types of deposit accounts.
Betterment is still worth a deeper look, whether you’re looking to switch financial advisors or are just interested in a better online bank.
Products and Key Features of Betterment
Improvement Tools and Their Main Attributes
Bonus for Opening an Account
Open a Betterment account and make a qualifying contribution within 45 days, and we’ll manage your money for free for up to a year. You will receive a bonus of a certain percentage after you reach a certain threshold of funds in your account:
- 1 Month Free: Deposit $15,000 to $99,999 into your account within the qualifying period.
- 6 Months Free: Deposit between $100,000 and $249,999 into your account throughout the qualifying period.
- 12 Months Free: Deposit at least $250,000 into your account throughout the qualification period.
This promotion is valid exclusively in the United States and cannot be used in conjunction with any other discounts or special offers. For more information, have a look at our best brokerage account promos list.
Pricing and Investment Strategies
Digital and Premium are Betterment’s two investment tiers. Individual retirement accounts (IRAs) and other types of tax-advantaged brokerage accounts are available to participants in both plans.
- Individual and combined general investment accounts (taxable brokerage accounts)
- Traditional 401(k)s
- Roth IRA accounts
- SEP IRAs
- Rollover IRAs
Those who aren’t eligible to make Roth IRA contributions due to their income or tax filing status can still convert their conventional IRA balances to Roth IRA balances through the Betterment app. The tax benefits of this strategy, known as a “backdoor Roth conversion” or “Roth conversion” for short, can be substantial.
Betterment Digital Plan
In contrast to traditional savings accounts, the Digital plan does not have a minimum deposit or minimum balance. The cost is 0.25% of AUM every year, regardless of the size of the account. The features and benefits of the Digital plan are as follows:
- Your risk tolerance, financial goals, and investment objectives are used to construct a customized portfolio (a variant of Betterment’s basic portfolio, made up of sector and ETFs backed by low-cost issuers like Vanguard).
- The option to invest in one of Betterment’s three socially responsible investing (SRI) portfolios: Broad Impact, Climate Impact, and Social Impact. These portfolios aim to achieve various environmental, social, and governance goals (focused on minority empowerment and gender diversity)
- Routine robo-advisor portfolio management features, such as automatic rebalancing to improve asset allocation and dividend reinvestment by purchasing a portion of a share
- Tax-loss harvesting and other automatic tax reduction operations (which reduces taxable capital gains). Gaining free use of the Betterment Checking and Cash Reserve accounts
No matter what kind of account you have or how you want to invest, you can take advantage of these tools and perks on Betterment. They are yours to keep under the Digital plan regardless of whether you invest in a taxable or tax-deferred account.
Premium Plan for Betterment
When a client’s combined tax-deferred and taxable assets reach $100,000, Betterment will recommend them switch to the Premium plan, even if they are already enrolled in the cheaper Digital plan. This update is completely discretionary.
A fixed yearly cost of 0.40% of AUM is applied to the premium. In addition to having access to a wide range of low-cost exchange-traded funds spread over numerous customizable portfolios, as well as having automated rebalancing as part of the plan’s standard features, the Digital Plus plan also includes the following:
- Betterment offers clients unrestricted phone and text messaging access to a team of CFP® consultants (CFP professionals)
- Financial planning services, such as asset allocation and tax-cutting advice, from Betterment’s in-house advisors for investments held elsewhere (such as with other brokerages).
- Possibility to invest in Goldman Sachs Asset Management’s Smart Beta Portfolios, a more complex (and, hence, possibly riskier) investment option
Products for Banking and Cash Management
The Betterment Checking Account and the Betterment Cash Reserve Account are two fee-free deposit accounts offered by Betterment.
Through its partner bank, NBKC Bank, Betterment offers its customers an online checking account called Betterment Checking, which is insured by the FDIC for up to $250,000. Each person or couple can open an account. The best parts of Betterment Checking are:
- A Visa debit card that can be used with only a tap, and which can be used to earn rewards at thousands of merchants, including large consumer goods companies like Adidas and national shops like Walmart.
- Reimbursement of Service Charges and Other Fees worldwide
- Locking cards and other security features are available in the Betterment app.
Betterment Cash Reserve
Betterment Cash Reserve is a cash management account with a competitive annual percentage yield (APY) and almost no account fees. Its primary attributes include:
- FDIC protection up to $1 million, compared to the standard savings account limit of $250,000 per account No restrictions on making or receiving transfers to or from external accounts
- Goal-oriented savings accounts that make regular contributions on their own
Retirement Planning Instruments
Saving and investing for retirement has never been easier than with Betterment, which provides free resources for do-it-yourselfers. These are helpful for Betterment customers who aren’t sure how to get started saving for retirement or other long-term objectives, but they can’t replace personalized, one-on-one guidance from a human financial adviser.
Betterment’s retirement planning tools do a lot of things, but one of them is assisting users in determining how much money they will need in retirement and offering semi-personalized guidance on how to save for it in the most effective way.
Betterment Savings Goals
Betterment may also help with short-term objectives like putting money down for a new car and long-term ones like paying for a child’s college education.
Packages of Financial Advice
If you’re on the Digital plan or using Betterment for banking alone and don’t have access to Betterment’s infinite financial planning services, you may purchase a 45- or 60-minute session of financial guidance a la carte for $299 and $399, respectively. These collections concentrate on five major topics:
- 45 minutes to get started with Betterment (basic account setup and optimization).
- Retirement planning, 60 minutes
- 60-minute financial audit (broad evaluation of investments and financial status)
- College planning, 60 minutes
- Wedding preparations, 60 minutes
Guaranteed Betterment Satisfaction
While there are a few caveats, you may rest assured knowing that Betterment offers a satisfaction guarantee. If for any reason you are unhappy with your Betterment advisory service, Betterment will pay for the next 90 days of your advisory and brokerage costs.
Even though Betterment is highly recommended, it is not the only low-cost robo-advisor out there. It competes with other well-known robo-advisors and providers of low-cost automated investing such as Wealthfront, Personal Capital, and M1 Finance.
However, Betterment does provide some genuine benefits over the alternatives. A company that has been operating for over a decade might inspire confidence in risk-averse investors because of the greater likelihood that it will continue to operate.
It has an excellent banking niche, great for both everyday banking and long-term financial planning. Also, it partially makes up for the absence of human advisers by providing customizable financial guidance packages for an extra price. What are your thoughts on Betterment? Your expectations for a robo-advisor relationship should inform your decision. Absolutely give it some thought.