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Betterment has huge name recognition in the robo-advising space. If you want a company which is modern, and easy to use, this might be the one for you.
- There is no minimum investment.
- You pay a management fee 0.25% with any balance up to $100,000
- They offer tax-loss harvesting
- If you have over $100,000, you can work with a CFP
Most robo-advisors don’t have much of a human element, but Betterment does. Usually robo-advisors remove the human element in order to keep the costs low. But if you have enough money, Betterment has a premium service which is perfect.
Low maintenance investors who appreciate a modern website and/or investors starting out, and don’t have much money.
Direct indexing, which can minimize taxes on taxable accounts isn’t offered.
Betterment Digital: 0.25% management fee, with $0 minimum balance
Betterment Premium: 0.40% management fee, with $100,000 minimum balance
Betterment is focused on minimizing fees. It doesn’t charge trade fees, transfer fees, or rebalancing fees. It’s annual fee depends on the level of service you want, and the minimum balance you have.
The fees you owe are taken out of your account. You don’t need to mail a check, or make an online payment. If you don’t have a balance, there is no fee.
You can also cancel your account at any time. If you cancel, the fees are prorated.
Betterment’s Investing Strategy
The company emphasizes maximum diversification across a broad asset class. It’s portfolio focuses entirely on ETFs. They are low cost, and have a high liquidity. It tries to choose the lowest-fee ETFs that have the best results.
Your portfolio is based on what risk level and financial goals you indicate during the onboarding process. For example you can choose: safety net, build wealth, or retirement.
If you’re less risk tolerant, the company adds more bond ETFs, that include short term treasuries, municipal bonds, emerging market bonds, etc.
If you are open to more risk, the portfolio will consist of stock ETF’s that include emerging markets, mid-cap value stocks, and more. Each portfolio has a different allocation of ETF types.
Betterment offers Tax Loss Harvesting
This is a VERY cool feature. Essentially what Betterment does, is it looks for losses that can be harvested in your portfolio everyday in order to minimize your tax liabilities. The goal is to sell a security that resulted in a potential loss for you, in order to re-purchase a similar security to the one that experienced a loss, thereby keeping your portfolio in balance and not creating additional tax liabilities for you.
This is a high yield cash account which is part of Betterment’s cash management suite. This helps customers earn a rate up to 1.78% APY. There are no withdrawal limits on how many times you can move money from your account.
Every day, the tool analyzes your checking account to see if there’s excess money which can be earning money for you. Betterment will transfer the extra cash into your Cash Reserve.
Ultimately, if you’re looking for a top financial advisor, this might be the one for you!