The robo-advisor industry is still evolving rapidly, and this can make it difficult to know which service to choose. When it comes to choosing between Betterment and E*TRADE Core Portfolios, you have a robo-advisor that was a pioneer versus an online discount brokerage that is stretching out into another area of digital finance. We’ll look at the key differences between the two to help you decide which one is the better choice to manage your investment dollars.
- Account Minimum: $0
- Fees: 0.25% (annual) for digital plan, 0.40% (annual) for the premium plan
- Perfect for people looking for simplicity and ease of use
- Great for those who would like maximum transparency into the assets they are invested in
- Aimed towards those looking to set and plan for financial goals such as purchasing a home
- Premium plan is great for people who would like access to a real financial advisor
- Account Minimum: $500
- Fee: 0.30%
- Aimed at investors who want an easy way to get their cash working in the markets
- Easy for those who were customers of the standard E*TRADE platform to create a Core Portfolios account
- Great for investors with limited funds to start
Morgan Stanley announced its intent to acquire E*TRADE in Feb. 2020. As that takeover progresses, we will keep you informed of changes to E*TRADE's offerings.
Betterment was among the top robo-advisors in terms of goal planning and tracking, so it is no surprise that it has the edge in this category. Betterment has very easy-to-follow steps for setting a goal, and each one can be monitored separately. Your asset allocation is displayed in a ring with equities in shades of green and fixed income in shades of blue. If you’re falling behind on meeting a particular goal you’ve set, you’re encouraged to correct that by the platform–usually by putting more aside or adjusting the goal parameters.
E*TRADE’s robo-advisory service is not driven by goal planning. You create a single pot of money to fund all of your goals. According to E*TRADE officers, their clients felt that having a variety of separate goals just muddied the waters and made the experience more confusing. However, clients have access to all of E*TRADE’s research and education offerings, which include some planning tools, but these functions are not built into the Core Portfolios experience. The reporting on your progress towards the single goal you have defined is well-designed, but you’re not given suggestions for shoring up the account if you’re falling behind. If you have other E*TRADE accounts, you can see how your overall holdings at the firm are performing, but you can’t import assets from other financial accounts for a complete picture.
Betterment also has the edge over E*TRADE Core Portfolios when it comes to retirement planning.
Betterment prompts you to connect external accounts, such as bank and brokerage holdings, to your account both to provide a complete picture of your assets and to make cash transfers into your investment portfolio easier. Each goal you’ve set can be invested in a different strategy, so your retirement goal can have higher risk than a shorter-term goal, such as funding a down payment on a house. As mentioned, Betterment has built guidance into the platform, so the system will try to keep you saving and working towards a retirement portfolio that matches your stated goals.
E*TRADE clients can use all of the broker's research and education offerings, which include retirement calculators. So there is support for retirement planning, but it is peripheral to the robo-advisor’s core experience.
E*TRADE Core Portfolios and Betterment are very evenly matched when it comes account types. However, E*TRADE Core Portfolios does offer Uniform Gifts to Minors Act (UGMA) and Uniform Transfer to Minors Act (UTMA) accounts while Betterment doesn’t support custodial accounts.
Betterment account types:
- Individual taxable accounts
- Joint taxable accounts
- Traditional IRA accounts
- Roth IRA accounts
- Trust accounts
- High-interest cash accounts
E*TRADE account types:
- Individual taxable accounts
- Joint taxable accounts
- Traditional IRA accounts
- Roth IRA accounts
Features and Accessibility
Betterment and E*TRADE Core Portfolios are varied when it comes to features and accessibility. Both robo-advisories offer some access to human advisors, but Betterment puts a price on that. E*TRADE Core Portfolios has a stronger socially responsible investing option that may be key to some investors. Of course, one of Betterment’s strongest features is the in-platform analysis of external accounts, which is core to its strength in goal planning for new clients. Choosing a winner here depends heavily on what you actually need or intend to use.
- Free financial planning tools: The prospective client can get a free and comprehensive analysis of all their current investments prior to funding an account.
- Portfolio and goal flexibility: A mature platform provides coaching and other goal-planning resources while the account interface supports impressive portfolio flexibility.
- Premium plan: The client can speak with a financial advisor at any time for free on the premium plan, which charges a 0.40% management fee rather than the standard 0.25% fee.
E*TRADE Core Portfolios:
- SRI and Smart Beta: Clients can select socially responsible or smart beta investments.
- Secured loans: You can borrow against the balance in your account with available funds of over $50,000, although interest rates are relatively high.
- Easy-to-read dashboard: The digital dashboard on E*TRADE’s website or mobile app offers a clear view of portfolio performance and allocation.
- Personal help: Financial consultants are available by phone or at one of E*TRADE’s branch offices.
- Low level of transparency: You cannot see your exact portfolio until the account is funded, nor can you make any adjustments to the ETFs held.
Betterment’s basic package has the edge over E*TRADE Core Portfolios, but Betterment’s Premium plan is higher for the human touch you can get more cheaply with E*TRADE.
Betterment’s Digital plan assesses an annual fee of 0.25% with a $0 minimum balance. The Premium plan carries a 0.40% annual fee and a $100,000 minimum balance. The Digital plan includes personalized advice (through the platform), automatic rebalancing, and tax-saving strategies, while the Premium plan also offers advice on assets held outside Betterment, as well as guidance on life events such as getting married, having a child, or retiring. There are no additional trading fees, but underlying ETFs will generally be low-cost with modest expense ratios. This is a hidden cost that all robo-advisors using non-proprietary ETFs share, but it is quite small in most cases.
E*TRADE Core Portfolios charges 0.30% of assets under management, assessed quarterly based on the average daily balance, deducted from available cash. The portfolios are designed to hold approximately 1% cash, mainly to cover these fees. E*TRADE charges no additional trading fees, but again, the underlying ETFs will have expense ratios that don’t show up in that headline management fee.
Betterment has the edge on minimum deposits with its $0 approach. E*TRADE Core Portfolios requires a quite reasonable $500, but that is a larger commitment up-front than $0. The ability to get started with whatever you have on hand could potentially help Betterment attract more beginners for whom $500 is a large chunk of change.
- Betterment's minimum deposit: $0
- E*TRADE's minimum deposit: $500
Betterment offers five portfolio types based upon classic Modern Portfolio Theory (MPT) principles and/or specific investment themes:
- Standard portfolio of globally diversified stock and bond ETFs
- A socially responsible portfolio comprised of holdings that score well on environmental and social impact (Note: investments may not meet standard requirements for this theme)
- Goldman Sachs Smart Beta portfolio that seeks to outperform the market
- Income focused all-bond portfolio made up of BlackRock ETFs
- “Flexible Portfolio” constructed from the standard portfolio’s asset classes but weighted according to user preferences
Betterment accounts are rebalanced dynamically when they deviate from their intended goal allocations. Portfolios get more conservative as the target date approaches, with the goal of locking-in gains and avoiding major losses. Clients will appreciate this automated reallocation because most investors don’t have the time or dedication to implement these techniques on their own.
E*TRADE’s portfolios contain ETFs from iShares, Vanguard, and JP Morgan. Socially responsible portfolios include ETFs from iShares. Smart beta portfolios are designed to outperform index fund investing, and carry higher management fees. E*TRADE Core Portfolio accounts are rebalanced semi-annually, or whenever the portfolio shifts too far from its target asset allocation. The portfolio management display focuses on asset allocation and performance metrics. The target allocation for cash is 4%, which is quite a bit higher than most other managed accounts. When you make a withdrawal, the algorithm takes out available cash first, and then sells off other investments to maintain the prescribed asset allocation. You’ll be shown a screen that indicates your potential tax bill after the sale, which is an unusual touch.
Betterment has a big edge in terms of tax-efficient investing in that it offer tax-loss harvesting for all taxable accounts. E*TRADE Core Portfolios does not utilize tax-loss harvesting on accounts.
Betterment and E*TRADE Core Portfolios are both sufficient in terms of security.
There is no excess SIPC insurance carried by Betterment, but trades are cleared through Apex Clearing, which has risk management tools in place. Betterment clients are not placing risky trades, and there is no margin lending offered, so it’s unlikely that there would be a need for additional SIPC coverage. Still, if your account has more than $500,000 in it, or more than $250,000 in cash, you might consider moving the excess to a firm with additional insurance.
E*TRADE's website and mobile apps carry a high level of encryption. Securities in accounts are insured by SIPC for up to $500,000, with excess SIPC insurance by London Insurance with an aggregate limit of $600,000,000.
Betterment and E*TRADE Core Portfolios both scored among the top in terms of customer service in our reviews.
Betterment's customer service is available from 9 a.m. to 6 p.m. Eastern time, Monday through Friday. You can get help from financial planners at any time with a Premium account, but you’ll pay a fee of $199-299 to consult a planner if you have a basic account. There is no online chat capability.
There is online chat available 24/7 on E*TRADE’s website and on mobile. Although the telephone representatives we spoke to were knowledgeable and helpful, it took an average of almost seven minutes on hold before a human was available. You can talk to a financial advisor on the phone, or walk into a brick-and-mortar location for help. Telephone service hours are weekdays from 8:30 a.m. to 8:30 p.m. Eastern time. The online FAQs are somewhat incomplete and would be easier to read if the questions were organized by topic.
Betterment and E*TRADE Core Portfolios are more evenly matched than you might expect. In fact, E*TRADE Core Portfolios does actually have a cost advantage if you want an automatically managed portfolio and access to a human advisor. However, with Betterment’s superior goal planning and tracking, automatic tax-loss harvesting, and slight edge on fees for a basic account, it is the stronger service for the average investor. This is particularly true for younger investors who may benefit more from guidance and a lower minimum deposit.
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