dailystarx

News and Magazine

Insider’s experts choose the best products and services to help make smart decisions with your money (here’s how). In some cases, we receive a commission from our our partners, however, our opinions are our own. Terms apply to offers listed on this page.

Betterment vs. Wealthfront: The biggest differences

Compare Betterment and Wealthfront

  • Betterment Investing

  • Wealthfront Investing

Chevron icon It indicates an expandable section or menu, or sometimes previous / next navigation options.

Chevron icon It indicates an expandable section or menu, or sometimes previous / next navigation options.

Editor’s Rating

4.7/5

A five pointed star

A five pointed star

A five pointed star

A five pointed star

A five pointed star

Editor’s Rating

4.2/5

A five pointed star

A five pointed star

A five pointed star

A five pointed star

A five pointed star

0.25% (0.06% to 0.13% for fund fees)

Betterment and Wealthfront are two of the first investment platforms to offer automated investment advice. Created to simplify the investing process, these platforms, sometimes called robo-advisors, use software and computer algorithms to manage your finances and investment portfolio for you. They offer an alternative for investors who may not want to consult financial firms or use active/day-trading brokerages.

While Betterment offers a $0 minimum ($10 to get started) for its standard account and $100,000 minimum for its premium account, Wealthfront imposes a $500 minimum account balance for all of its investment accounts. In addition to the 0.25% management fee, you’ll have to pay an investment fund fee ranging from 0.06% to 0.13% — and Wealthfront doesn’t offer financial planner access like Betterment does. But Wealthfront makes up for this by letting you adjust your ETF allocation if you don’t like the allocation Wealthfront has selected.

Betterment may be a more suitable fit if you prefer lower fees, stronger goal-focused investment strategies, cryptocurrency portfolios, and human advisor access. Wealthfront could be a stronger option for those who want additional features and products such as lines of credit, college savings plans, high-yield cash accounts, portfolio customization, and direct indexing strategies.

Betterment Betterment Investing


Account Minimum

$0 ($10 to start), ($100,000 premium plan)


Fees

0.25%/year for digital plan; 0.40%/ year for premium plan; 1%/year for crypto portfolios

Betterment Betterment Investing


Account Minimum

$0 ($10 to start), ($100,000 premium plan)


Fees

0.25%/year for digital plan; 0.40%/ year for premium plan; 1%/year for crypto portfolios


Account Minimum

$0 ($10 to start), ($100,000 premium plan)


Fees

0.25%/year for digital plan; 0.40%/ year for premium plan; 1%/year for crypto portfolios

Chevron icon It indicates an expandable section or menu, or sometimes previous / next navigation options.

Chevron icon It indicates an expandable section or menu, or sometimes previous / next navigation options.

Chevron icon It indicates an expandable section or menu, or sometimes previous / next navigation options.

Wealthfront Wealthfront Investing


Investment Types

ETFs, index funds, and crypto trusts

Wealthfront Wealthfront Investing


Investment Types

ETFs, index funds, and crypto trusts

Chevron icon It indicates an expandable section or menu, or sometimes previous / next navigation options.

Chevron icon It indicates an expandable section or menu, or sometimes previous / next navigation options.

Chevron icon It indicates an expandable section or menu, or sometimes previous / next navigation options.

Betterment and Wealthfront’s features and account options also vary.

Is Betterment right for you?

Betterment is an independent automated advisor with more than $33 billion in assets under management. It offers automated individual and joint taxable accounts, trust accounts, retirement accounts, and checking and cash reserve accounts. 

What are Betterment’s fees?

Betterment provides two main investing account options: a digital plan and a premium plan. The digital account is the least expensive and carries a 0.25% annual fee. This account invests your money in stock ETFs and bond ETFs, and it offers features such as tax-loss harvesting, automatic rebalancing, fractional shares, goal-based planning, socially responsible investing, and human advisor access.

Tax-loss harvesting lets you write off, or claim, investment losses on your tax return, lowering the amount you owe in taxes. Betterment uses tax-loss harvesting to sell and reinvest any losses into securities that align with your current portfolio.

The digital plan is free to set up, but you’ll need at least $299 for a one-time advisor consultation. However, with the premium plan, you’ll get unlimited access to financial professionals.

The premium account has a $100,000 minimum — and you’ll incur a 0.40% annual fee — but you’ll get access to all of the features of the digital plan plus more. Specifically, you’ll have unlimited access to certified financial planners and in-depth investment advice.

However, Betterment also now offers cryptocurrency portfolios. These have a 1% annual fee, and they let you invest in allocations of up to 25 different cryptocurrencies. In addition, Betterment offers several retirement accounts (traditional IRAs, Roth IRAs, SEP IRAs, and Roth IRA conversions), 401(k)s for businesses, and an investing platform for advisors. Plus, it gives you a 0.75% interest rate on any of your cash balances (Wealthfront only offers 0.35%).

Betterment could be a good fit if you’re looking for specific goal-based investing and retirement strategies. The platform offers five types of taxable goals: retirement savings, retirement income, safety net, major purchase, and general investing. You can also adjust these goals at any time.

This robo-advisor could also be a good option if you’re looking for an investment app with human advisor access. But Betterment may not be the right fit if you’re looking for other specialty accounts like college savings plans.

Is Wealthfront right for you?

Wealthfront offers investing accounts, retirement accounts, portfolio lines of credit, 529 college savings plans, and cash management accounts. Its investing accounts provide tax-loss harvesting, financial planning tools, and access to an array of index fund investments.

And, with larger balances (you’ll need at least $100,000 for US Direct Indexing — formerly known as stock-level tax loss harvesting — and risk parity), you can take advantage of its PassivePlus portfolio features such as US Direct Indexing, risk parity, and smart beta strategies (this feature has a $500,000 minimum).

According to its website, Wealthfront’s US Direct Indexing approach aims to harvest even more losses and lower your tax bill by searching for movements in individual stocks within the US stock index. Risk parity is an asset allocation strategy that strives to enhance your risk-adjusted returns.

Smart beta, on the other hand, works to increase your returns by using portfolio diversification and other specific tactics for selecting securities.

Wealthfront also holds the distinction of being the first automated investment app to offer managed, diversified portfolios with the option of exposure to crypto investments. It offers two crypto trusts: Grayscale Bitcoin Trust (GBTC) and the Grayscale Ethereum Trust (ETHE). You can choose a combined allocation of these assets of up to 10% of your portfolio, and Wealthfront offers them for both its taxable investment accounts and IRAs. Learn more about Wealthfront’s crypto products here.

Is Wealthfront worth the fee?

The platform has a $500 minimum deposit requirement, and investing accounts include a 0.25% advisory fee and fund fee that ranges from 0.06% to 0.13%. And although it doesn’t offer human advisor guidance like Betterment, Wealthfront offers more investment choices.

Its automated features also apply to retirement accounts — including traditional IRAs, Roth IRAs, SEP IRAs, and 401(k) rollovers — and education savings plans.

One distinguishing feature of Wealthfront is that it offers portfolio lines of credit. This allows you access to quick cash by letting you borrow up to 30% of your investment account at your disposal. And you can pay back what you’ve borrowed, with interest, whenever you decide. Wealthfront’s interest rates currently range from 3.15% to 4.40%.

Unlike Betterment, Wealthfront also offers a 529 College Savings plan that lets you set aside money for your child’s education. The account — which can be opened in any state — has fees ranging up to 0.46%. And you can make withdrawals without paying federal taxes.

In addition to its college savings plan, Wealthfront offers a free cash account that carries a 0.85% APY. And any uninvested cash in your account grows at a 0.35% interest rate.

Wealthfront is slightly more expensive than Betterment, but this robo-advisor could be a good choice if you’re interested in using products like education savings plans, portfolio lines of credit, and high-yield cash accounts.

Wealthfront vs. Betterment — Frequently asked questions (FAQ)

Both robo-advisors have similar yet different offerings. While the two platforms share the 0.25% advisory fee, you’ll have to pay extra per year (0.40%) at Betterment if you wan to work one-on-one with a CFP. 

Betterment is best for those in search of an all-around automated investing experience with access to human advisors and a wide range of account options. Wealthfront also offers accounts for all types of hands-off investors, but it’s a better option for individuals who want to add crypto investments or 529 college savings plans to their automated portfolios. It also suits those who want more control over the ETFs in their automated portfolio.

Yes (and this is the case with any investment platform). Though both Betterment and Wealthfront strive to minimize risk and maximize returns by investing your cash in a diversified range of assets, your investments are still susceptible to market swings. But if either robo-advisor were to ever go out of business, each platform offers SIPC insurance of up to $500,000.

Betterment also offers FDIC insurance of up to $1 million ($2 million for joint accounts) for its cash reserve accounts and FDIC insurance of up to $250,000 for its checking accounts.

Cash Reserve is only available to clients of Betterment LLC, which is not a bank, and cash transfers to program banks are conducted through the clients’ brokerage accounts at Betterment Securities. Learn more

Checking accounts and the Betterment Visa Debit Card are provided and issued by nbkc bank, Member FDIC. Checking is made available through Betterment Financial LLC. Neither Betterment Financial LLC, nor any of their affiliates, is a bank. Betterment Financial LLC reimburses ATM fees and the Visa® 1% foreign transaction fee worldwide, everywhere Visa is accepted.

Yes. As mentioned above, Wealthfront offers SIPC insurance of up to $500,000 on investment accounts. The firm also offers FDIC insurance for its cash accounts for up to $1 million. The limit for joint accounts is $2 million.

Featured credit cards from our partners

Regular APR

18.24% – 25.24% Variable

Credit Score

Good to Excellent

Regular APR

18.24% – 25.24% Variable

Credit Score

Good to Excellent

Regular APR

17.24% – 25.99% Variable

Credit Score

Good to Excellent



Source link

Leave a Reply

Your email address will not be published.