Betterment is an online financial advisor that provides portfolio-based investment options for people looking to simplify investing. Founded in 2008 and officially launched in 2010, Betterment made waves in the online investing industry by focusing on algorithmic portfolio investing rather than on the labor-intensive (and expensive) human management that was the standard at the time. With a focus on ETF-based portfolios, Betterment works to bring their clients automatic diversification and tax-efficiency.
Betterment’s founders believe that technology can help democratize investing. By building algorithms that tailor portfolios based on users’ risk tolerance, finances, and goals, Betterment aims to help all investors access intelligent investing resources at an affordable price.
As one of the largest robo-advisor brokerages, Betterment has more than $15 billion under management, and more than 400,000 users. While the average user is in their 30s and has just over $40k invested, Betterment caters to all investors with no account minimums, low fees, and additional services for those with larger balances. Whether you want a hands-off option built to suit your goals or need to have some one-on-one time with a certified financial advisor, Betterment delivers.
Automatic diversification, rebalancing, and dividend reinvestment
Portfolios customized by risk tolerance and goal
Very competitive fees
No DIY investment tools
Minimal educational resources
No 24/7 support or online chat
Betterment is an industry leader, so it should come as no surprise that they place a heavy emphasis on trust and transparency. Pricing and other crucial info are easily found on the website, either through navigation or a quick search. You can also easily find information on Betterment’s investing philosophy, methodology, and past performance. Whatever your questions about the Betterment product, you can find the answer with just a few clicks.
Betterment LLC is, of course, a registered SEC investment advisor (RIA), with Betterment Securities serving as the SEC-registered broker/dealer. Betterment is also a member of FINRA and the SIPC. This means that all investments are regulated at the federal level and your investment accounts are insured for up to $500,000 per account type.
User accounts are secured with optional two-factor authentication and the website is encrypted and authenticated with strong protocols, ciphers, and key exchanges.
Betterment’s desktop platform is easy to use and highly intuitive. Because Betterment focuses on pre-built portfolio investing, it doesn’t offer a lot of DIY investing tools or resources. You won’t find interactive charts or company financials. What you will find is ample information about everything from why Betterment portfolios are ETF-based to links to official prospectuses for each fund.
The primary account page allows users to quickly track progress towards each of the goals they have set up. Click on a goal – like Retirement, Buy a Home, or Savings – and you can access portfolio analysis; return and performance breakdowns; and useful details like drift percentage and your chances of reaching your goal based on your current position.
The user experience is smooth and polished, making it easy to set up two-factor authentication, schedule deposits, or change your goals, strategy, or portfolio allocation.
Betterment’s mobile app offers almost all the same functionality as the desktop platform. While there are some notable functions that can only be performed via desktop platform – like activating automatic rebalancing, removing accounts, and making withdrawals – the app is still a great resource for investors who like to keep tabs on their investments round the clock.
Like the desktop platform, the app allows users to quickly check on their progress toward their goals. Users can also easily alter their goal settings and portfolio allocation at any time.
Research and Tools and Insights
While Betterment’s platform is not going to be useful for investors looking to chart stocks or plan market entries and exits, it offers ample information and research material regarding ETFs, algorithm-based portfolio investing, and the specific assets included in their suggested portfolios.
Instead of watchlists and paper trading features, Betterment offers resources aimed at educating users about tax-efficient investing, the benefits of ETFs, and the how and why behind their portfolio suggestions. For those looking to get into the nitty gritty of what makes Betterment a tax-friendly option, the bottom of the homepage provides a link to a white paper on tax-loss harvesting and how Betterment uses this strategy to minimize investors’ tax bills.
Since many users are investing for retirement, Betterment also offers a suite of resources aimed at helping investors identify the best products and strategies for their specific goals, including a calculator that helps users decide between traditional and Roth IRAs.
While traditional research features – like balance sheets and charting options – may be lacking, Betterment more than makes up for their absence with educational resources. The Betterment Resource Center offers articles on tax planning, investment strategy, and market outlook, and there are many FAQs answering users’ how-to questions.
While the Betterment offers numerous education articles, it does not provide education videos or live events, and there is no formal glossary.
Some of Betterment’s most exciting features are built into their standard product. Tax-efficient investing and downside protection fall into this category. Betterment’s focus is not just on returns, but on after-tax returns. Betterment portfolios automatically take advantage of several different tax-savvy strategies to help users keep as much of their returns as possible. The Tax-Coordinated Portfolio option must be activated on the desktop platform and you must have an active Betterment IRA account.
In addition, Betterment offers users the option to ‘donate the most appreciated shares’ of any given investment. For those looking to use charitable giving to increase deductions, Betterment helps users donate assets with the lowest tax basis.
Because Betterment allows the purchase of fractional shares, you’ll never have leftover cash just sitting unused in your account.
Betterment offers two investment options: Digital and Premium. The Digital plan has no account minimum and comes with an annual fee of 0.25% of your total balance. The Premium plan carries an annual fee of 0.40% and is for those with accounts of $100,000 or more who want more personal guidance. Both account types offer a discount of 0.10% for account balances over $2 million.
Both account types offer tax-efficient investing, customized portfolios, automated rebalancing and dividend reinvestment. The Premium plan offers in-depth advice on your investment accounts held outside of Betterment, as well as unlimited access to Certified Financial Planners.
For those who don’t need unlimited access to a CFP, don’t have $100,000 to invest, or simply prefer the lower Digital plan annual fee, Betterment does offer several packages that provide limited access to financial planners.
Regardless of account type, investors with a balance of $100,000 or more can also elect to use Flexible Portfolios, which allow users to customize the weights of each asset class in their portfolio. Flexible Portfolio users cannot, however, add specific ETFs to their portfolio or invest in other types of assets, like individual stocks or bonds.
Betterment does not charge any additional fees for transactions, deposits, withdrawals, rebalancing, account closure, or account maintenance.
Commissions and Fees
All Betterment Portfolios are comprised of ETFs, no other asset types are available.
|Betterment Account Fees|
|Digital Plan||0.25% annual fee. No account minimum|
|Premium Plan||0.40% annual fee. $100,000 account minimum|
|Discount||0.10% discount for account balances over $2 million|
|Fund-Level Fees||Each ETF may charge its own fees, but ETFs in Betterment’s recommended portfolios have average expense ratios of just 0.07% to 0.15%.|
While Betterment does not offer round-the-clock support, staff are available to answer questions 7 days a week, with closures for bank holidays. For off-hours queries, the website’s comprehensive FAQ page and Tax Center offer the answers to many common questions. However, if you need to speak to an actual human, you’ll need to wait till business hours – 9am-6pm M-F, and 11am-6pm Sat-Sun. Email support is available 7 days a week during these hours, while phone support is only available Monday through Friday.
While the Betterment app does allow you to send a message to staff quickly and easily, it is not actually a chat function. Instead, your message is converted into an email and answered in the same time frame as any other email query.
What You Need to Know
Betterment is an ideal fit for those who want to invest in a diversified portfolio but don’t have the knowledge, experience, or time to build and manage it on their own. If you’re looking for a platform that offers a large suite of research and analysis tools, Betterment isn’t the brokerage for you. Active traders and data junkies will find themselves frustrated by the limited number of assets and the hands-free investment approach.
However, new investors or those looking for someone to take the guesswork out of portfolio-building will be right at home. Betterment has a proven track record of providing solid returns for their clients, so investors who are willing to trust the process are the most likely happy customers. While Betterment does allow users to change their settings and tweak allocations to some degree, the product is best suited to those who are comfortable letting the pros (and their algorithms) do the heavy lifting.
Betterment is an excellent solution for those wishing to set and forget their investments. See how they compare against other online brokers we reviewed.
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