On February 8, 2022, Betterment announced it is acquiring crypto manager Makara. As a result of the acquisition, Betterment now gives retail investors and advisors the ability to invest in diversified crypto portfolios alongside their existing investments.
Betterment and Charles Schwab Intelligent Portfolios are recognized companies in the digital investment management space. Betterment is known for its no-minimum account balance, opening the door for new clients to enter the investing world. Schwab’s Intelligent Portfolios offers a competitive digital investment advisor with no management fees for the fee-conscious investor, but account minimums do apply. At first glance, Betterment and Schwab Intelligent Portfolios seem quite similar, but a closer examination turns up some essential distinctions that can help in deciding which one is a better fit for you.
On November 25, 2019, Charles Schwab announced a buyout of TD Ameritrade’s online brokerage. The transaction itself is expected to close in the second half of 2020, and in the meantime, the two firms will operate autonomously. Schwab expects the merger of its platforms and services to take place within three years of the close of the deal.
- Account Minimum: $0
- Fees: 0.25% (annual) for digital plan, 0.40% (annual) for the premium plan
- Multi-goal planning options are available to all investors, regardless of account type.
- External accounts can be linked and synchronized to your Betterment dashboard for a full financial picture.
- Live, human customer service available 5 days a week to answer questions.
- Low fees, no account minimum, and more account features makes Betterment an ideal choice for beginner investors.
- Minimum Account: $5,000 ($25,000 for Premium)
- Fees: $0, expense ratios range from 0.03%-0.18%, with an average of 0.11%. ($300 setup plus $30 per month for Premium)
- Investors are able to customize their portfolios in a variety of ways by selecting specific investing goals including retirement, college, vacations, building long-term wealth, and creating a sustainable income stream.
- A variety of account types are available to investors, including traditional individual retirement accounts (IRAs), Roth IRAs, simplified employee pension plans (SEP IRAs), SIMPLE IRAs, revocable living trusts, and general brokerage accounts.
- Investors have the option to choose Schwab’s own low-cost funds that are recommended by the automated platform or choose ETFs from other providers.
- Potential and current clients can call and talk to an investment professional or choose to ask questions via online chat– both available 24/7.
Both Betterment and Charles Schwab Intelligent Portfolios have similar experiences regarding account setup. With both companies, the investor can easily open an account online by entering in personal information and answering a series of questions about risk tolerance, time horizon, financial goals, and more. Based on the investor’s answers, a portfolio is put together to meet those goals. Schwab Intelligent Portfolios and Betterment both require the account to be funded before being able to fully view specific portfolio recommendations.
The major differentiating factor between the two digital investment managers is the account minimum required to open the account. Betterment’s $0 account minimum makes it easy for new investors to get started with limited funds. Schwab Intelligent Portfolios, however, requires a $5,000 minimum investment to open an account ($25,000 for a premium account), which puts it out of reach for some.
While both digital investment advisors have very similar processes, we give Betterment the edge in this category because of its $0 account minimum.
Betterment and Schwab Intelligent Portfolios have both put resources into making goal planning easy for investors. Both robo-advisors have similar planning tools that allow investors to create and track their progress towards financial goals, such as:
- Buying a home
- Building long-term wealth
On the whole, however, Betterment’s tools for goal planning are more nuanced and advanced than those at Schwab Intelligent Portfolios. One key point is that Betterment allows you to link external accounts and get a full view of your entire financial situation. This data is also taken into consideration for goal projections and nudges you receive to increase your chances of reaching those goals. External account syncing is not currently available when using Schwab Intelligent Portfolios. When it comes to goal planning, Betterment has a clear edge.
Schwab Intelligent Portfolios and Betterment both offer a wide variety of commonly used accounts types–from general investing to retirement and estate planning. As far as investing account types go, the two companies are evenly matched.
Betterment account types:
- Individual taxable accounts
- Joint taxable accounts
- Traditional individual retirement accounts (IRAs)
- Roth IRA
- SEP IRA (for the self-employed and small businesses)
- Rollover IRA
- Trust accounts
- High-interest savings accounts
Schwab Intelligent Portfolios account types:
- Taxable brokerage accounts: individual, joint with rights of survivorship, tenants in common, community property, custodial
- Traditional IRA
- Roth IRA
- SEP IRA
- SIMPLE IRA
- Revocable Living Trust
Betterment offers investors banking services, however, it must be set up in a separate account from the automated investing account. Banking services include a no-fee checking and a Visa cash-back debit card that offer national and international ATM fee reimbursement and charge no overdraft fees. Transfers to and withdrawals from Betterment are straightforward and fund within one to two days. Automated deposits are easy to set up and can be structured to fund specific goals in order of priority. Withdrawals from your account don't incur any fees or penalties, and they are similarly easy to make. There are also no management fees for money held in Betterment cash accounts.
Betterment doesn’t offer margin, lending, individual stock trading, or cryptocurrency at this time. Betterment has recently acquired Makara, though, and plans on adding crypto investing options in the near future.
Charles Schwab Intelligent Portfolios does offer banking services, but they are not within the automated investing account. It is easy to set up an additional Schwab account to gain access to checking or debit cards. It is also easy to transfer money into your account from an external account. Deposits can be made as individual transactions, or you can choose to set up automatic deposits on a recurring basis.
Currently, Schwab Intelligent Portfolios doesn’t offer margin, lending, individual stock trading, or cryptocurrency investing options.
Both companies do offer banking options outside of the automated investing account and have made it easy for investors to deposit or withdraw from their accounts. We give a slight edge to Betterment in this category though, due to the recent acquisition of Makara and the crypto investing options that this will open up to clients.
Betterment offers a fee-free, high-yield savings account with funds deposited across several banks. This account is suitable for shorter-term cash needs. Betterment will also message you if your cash balance exceeds your target, so you can transfer cash to higher-yielding assets and keep your money working for you.
With Schwab Intelligent Portfolios, you receive interest from cash in your account through a sweep into an FDIC-insured Schwab bank account. One important factor regarding the cash management with Schwab Intelligent Portfolios is that the investor is required to hold between 6% and 30% in Cash Allocation to the Sweep Program, which is a relatively high percentage compared to the competition. Holding too much cash in a portfolio can also lead to performance drag.
Overall, we give the edge to Betterment when it comes to cash management.
Betterment and Schwab Intelligent Portfolios look similar at the onset when it comes to investing options. As with most digital investment managers, these two companies offer a variety of both proprietary and non-proprietary ETFs in an array of asset classes–from cash to commodities to bonds to emerging or developed market stocks. However, a closer examination shows a few key differences. Betterment has the advantage in portfolio construction for the investor in two areas: environmental, social, and governance (ESG) criteria and crypto (coming to Betterment soon).
Currently, Schwab Intelligent Portfolios does not offer any ESG options. However, you do have the option to exclude up to three of the ETFs if you do not want them as part of your portfolio.
|Betterment||Charles Schwab Intelligent Portfolios|
|Fixed Income||Yes, only in ETFs||Yes, only in ETFs|
|REITs||Yes, available through Core portfolios customization option||Yes, only in ETFs|
|Socially Responsible or ESG Options||Yes||No|
|Crypto||No (coming in the near future)||No|
Betterment also has more portfolio customization options than Schwab Intelligent Portfolios. While Schwab Intelligent Portfolios allows you to exclude some recommended ETFs and adjust your risk profile, Betterment offers a Flexible Portfolios option that allows you to fine tune all the allocations within a portfolio across the asset classes in addition to the usual adjustments of risk tolerance levels.
Both Betterment and Charles Schwab Intelligent Portfolios provide daily account monitoring. Betterment automatically rebalances your account when the portfolio drifts 3% from the target allocation. Schwab Intelligent Portfolios, on the other hand, does not have a set figure when it comes to rebalancing. The company’s philosophy is that the portfolio should be rebalanced periodically to keep the asset allocation consistent with the client’s risk profile. So during times of greater market fluctuation, your portfolio will be rebalanced more often.
While some investors may appreciate the flexibility that Intelligent Portfolios offers with the rebalancing, Betterment’s set target for rebalancing takes the guesswork out of what will happen with your portfolio and when. Betterment has an additional edge in that it allows you to view your portfolio alongside external retirement, banking, and brokerage accounts conveniently in one place and makes portfolio management recommendations based on the entire picture. For this reason, Betterment has the edge in the portfolio management category.
Tax-loss harvesting is the practice of selling a particular investment that has experienced a loss, which is then replaced by a similar one. The idea is to minimize the tax burden for the investor and maintain an ideal asset allocation within the portfolio.
Betterment offers tax-loss harvesting to all investors with taxable accounts. The tax-loss harvesting is automatic and does not cost any additional fees. Schwab Intelligent Portfolios also offers tax loss harvesting, but only to clients with a minimum account balance of $50,000. We give Betterment the edge over Schwab Intelligent Portfolios because Betterment offers tax-advantaged investing to all accounts regardless of balance size.
Key Portfolio Management Features
|Betterment||Charles Schwab Intelligent Portfolios|
|Automatic Rebalancing||Daily account monitoring. Rebalanced when portfolio drifts 3% from target allocation||Daily account monitoring. Rebalanced periodically to keep the portfolio allocation consistent with the client’s risk profile.|
|Reporting Features||Dashboard features tools to see account performance and progress toward goals. Emails are sent periodically.||Dashboard features tools to see account performance and progress toward goals. Emails are sent periodically.|
|Tax-Loss Harvesting||Yes||Yes, only for accounts with a minimum $50,000 balance.|
|External Account Syncing/Consolidation||Yes - Clients can link retirement, banking and brokerage accounts to view the full financial picture.||No|
Schwab Intelligent Portfolios and Betterment are both up to industry standards when it comes to security. Both firms are members of the Securities Investor Protection Corporation (SIPC) with coverage in place for missing funds, which covers up to $500K total value or $250K cash in your account. Charles Schwab is a large, traditional brokerage as well and carries overall excess SIPC coverage through Lloyd’s of London. It is worth noting that none of this coverage protects you from market losses. Instead, it is coverage if the brokerage itself goes under and is rarely activated. Aside from insurance, your data at either firm is protected with strong encryption, biometric entry, and two-factor authentication.
Betterment’s desktop user experience is clean with a comprehensive dashboard and easy access to accounts, goals, performance, and fund transfers. The ability to connect outside accounts enables users to monitor all of their finances from the Betterment platform.
Schwab Intelligent Portfolios is set up entirely online and the website is very user friendly. Account navigation is constructed to provide easy access to the information that investors need, including current account balance, history, transactions, goals, and more.
Betterment and Schwab both have mobile apps that offer the same functionality as the desktop experience so accessing your account on-the-go is easy and convenient. It has been reported that some users on the Betterment app have experienced difficulty with linking accounts and fund transfers. Schwab app users have noticed a difference in profile updates compared to the desktop login.
Access to customer service is where Charles Schwab Intelligent Portfolios is a standout within the industry. With Schwab, you can:
- Talk to a Schwab investment professional 24/7 via phone
- Access 24/7 online chat for prospective and current clients offered as a pop-up chat box on the website
- Schedule an in-person consultation at any of Charles Schwab’s local branch offices across the country
Betterment’s customer service is scaled-back by comparison. It includes weekday phone and email. Premium members can schedule meetings with certified financial planners and Digital members have access to low-fee targeted financial planning packages.
|Betterment||Charles Schwab Intelligent Portfolios|
|Phone contact available||Yes, weekdays only||Yes, 24/7|
|Pre-funding phone consultation with certified advisor||Yes, available for an additional fee for Digital members. Included for Premium members.||Yes, customer service is available via phone 24/7 at any time during the process.|
|Online chat available||Yes, both existing or prospective clients can ask questions in the online chat 24/7. Pre-scripted answers are given that closely relate to your question.||Yes, for existing and prospective clients. Existing clients log in, but prospective clients can access chat by entering in contact info for follow up.|
|Website FAQ section||Yes, adequate quality||Yes, labeled “Common Questions”|
Charles Schwab Intelligent Portfolios is one of the most competitive in the industry offering $0 account management fees to all investors in the basic digital account. Once an investor has a minimum of $25,000 in their account, they may choose the Premium plan, which is a $300 one-time set up fee and then $30 per month thereafter. Expense ratios for ETFs offered in those accounts are within the standard range of the industry, coming in at an average of 0.11%.
Betterment offers a low management fee of 0.25% on assets under management for the Digital plan. Premium plan investors pay 0.40% on their account balance but must have a minimum of $100,000 under management. Expense ratios for account investments average out to be around 0.09%.
There are a few different scenarios where these fee structures diverge in a head-to-head comparison.
- Investors who have a minimum of $5,000 to invest would pay less in fees with Schwab in a basic account because Schwab has $0 management fees.
- When investors have a minimum of $100,000 and are seeking a premium plan, Betterment is the best option when it comes to fees. However, once that account grows above $165,000, an investor would be better off with Schwab’s fee structure due to the flat monthly fee. On an ongoing basis, once the investor has paid the one-time set up fee of $300, fees for the year would be $660 per year with a Betterment Premium account and only $360 per year for a Schwab Intelligent Portfolios Premium account. As the account balance grows, the fee with Betterment will grow but will remain only $360 with Schwab.
Even though there are a few scenarios where Betterment is the only option (investors with less than $5,000) or the lower option, Schwab Intelligent Portfolios provides investors with a $0 management fee option in basic accounts or low flat-fees for premium accounts.
|Category||Betterment||Charles Schwab Intelligent Portfolios|
|Management fees for $5,000 account||Digital - $12.50||$0|
|Management fees for $25,000 account||Digital - $62.50||$0 ($30/mo for Premium plus $300 setup fee)|
|Management fees for $100,000 account||Premium - $400.00||$0 ($30/mo for Premium plus $300 setup fee)|
|Expense ratios||0.09% average||0.04% to 0.18%, with an average of 0.11%.|
The biggest differentiating factors between Betterment and Charles Schwab Intelligent Portfolios are account minimum balance requirements, goal planning, and fee structures. Betterment has no account minimum to get started and opens the door of investing opportunity to brand-new investors or those who just don’t have a large amount to invest. However, once an investor has $5,000, the fee structure is better at Schwab for a basic account. Betterment offsets this fee disadvantage by offering more to users in terms of goal planning support and portfolio analysis that integrates all your external financial accounts.
With these two digital investment advisors, it comes down to what you are looking for in addition to having an automated portfolio. If you are solely prioritizing low fees, then it is hard to beat Schwab Intelligent Portfolios as long as you can clear the account minimum. If you are looking for excellent goal planning, more customizable portfolios, tax advantaged investing, and a low account minimum, however, then Betterment more than earns its modest fee.
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With the individual investor in mind, we’ve designed a comprehensive ranking methodology to find the best overall robo-advisors and the best robo-advisors across nine key categories. Each advisor is then scored across multiple variables to rate performance in every applicable category. The score for the overall award is a weighted average of the categories.
Betterment. "Hassle-Free, No-Fee Checking."
Charles Schwab. "The Charles Schwab Corporation to Acquire TD Ameritrade."
Charles Schwab. "Schwab Intelligent Portfolios Premium."
Betterment. "What accounts can I open with Betterment?"