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New and Notable Updates
On February 8, 2022, Betterment announced that 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.
Wealthsimple and Betterment are very closely matched robo-advisors that are great options for investors. Both Wealthsimple and Betterment have features that appeal to less experienced investors, with plenty of planning tools and zero opening balance requirements. We’ll look at some of the key differences in terms of goal-setting support, portfolio options, and fees, to help determine which robo-advisor is the best fit for your investment dollars.
- Account minimum: $0
- Fees: 0.50% of assets under management (0.40% at $100,000)
- Ideal for younger investors looking for excellent educational resources and a nudge or two to save even more
- Good for investors looking to bundle financial functions as Wealthsimple also offers a savings account with competitive interest rates
- Wealthsimple is only available in Canada
- Account Minimum: $0, $10 minimum to start investing
- Fees: 0.25% (annual) for investing plan accounts with at least $20,000 or at least $250 per month in recurring account deposits. Otherwise, the fee is $4/month. An additional 0.15% (annual) fee on accounts with at least $100,000 in assets provides account holders with unlimited access to certified financial planners. This additional fee is applied to assets in the investment and cryptocurrency accounts, but not cash accounts. For accounts with at least $2 million, there is a fee discount of 0.10%.
- Perfect for investors looking for a simple platform with strong goal-setting and tracking tools
- Ideal for those who want to see the portfolio contents prior to funding an account
- An option for people looking to access human financial planners, albeit for a higher annual management fee or a one-time fee.
- Betterment is only available in the U.S.
Both Wealthsimple and Betterment have solid goal-setting capabilities.
During account setup, Wealthsimple clients can select goals during account setup that include homeownership, retirement, education, long-term growth, and income. A single account can include multiple goals, offering greater sophistication and diversification if needed. You can review transactions and relative performance statistics, subdivided by goals, on account management pages.
Betterment offers the ability to work with five main types of investing goals: retirement savings, retirement income, safety net, general investing, and major purchase. The platform has very easy-to-follow steps for setting a goal, and each one can be monitored separately. It displays asset allocation for each goal in a ring with equities in shades of green and fixed income in shades of blue. If you’re falling behind on meeting a goal you’ve set, Betterment will encourage you to put more aside. This can be a helpful prompt, particularly for young investors who may not yet feel the urgency to save for their longer-term goals.
At Wealthsimple, users with less than $100,000 in assets have access to a slider tool that projects how much they’ll have in savings at retirement age, based on their current savings rate. The site also highlights how much more you would have in retirement if you boost your savings by proposed amounts. Wealthsimple Black customers—those with $100,000 or more in assets—have access to one-on-one counseling with financial advisors over the phone.
Betterment collects a variety of information about your retirement—what your dream retirement looks like, how much you have saved, and what you’ve got in external accounts. This last one is important as many investors have multiple retirement accounts and getting a consolidated picture can be challenging. Betterment takes all this data and then projects your retirement income and provides a plan to get there. Betterment will prompt you when it’s advisable to save more or to move money around to save on fees. As you near retirement, the platform will recommend changes you can make to optimize your savings. For retirement questions, basic Investing account members can pay $299 to $399 for a one-time consultation with a certified financial planner, while Premium customers have unlimited access to CFP professionals.
Wealthsimple and Betterment both offer the typical accounts that investors look for in a robo-advisor. Wealthsimple also offers Uniform Gifts to Minors (UGMA) and Uniform Transfers to Minors Acts (UTMA) accounts. If you are looking specifically for these types of custodial accounts, then Wealthsimple has the edge.
Wealthsimple account types:
- Taxable accounts (individual, joint and trust)
- Traditional IRA accounts
- Roth IRA accounts
- SEP IRA accounts (for the self-employed and small businesses)
- IRA transfers
- 401(k) rollovers
- High-interest cash accounts
- UTMA and UGMA accounts
Betterment account types:
- Taxable accounts (individual, joint, trust)
- Traditional IRA accounts
- Roth IRA accounts
- SEP IRAs (for self-employed customers or small business owners with no employees)
- IRA transfers
- 401(k) rollovers
- High-interest cash 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.
Features and Accessibility
The only features that matter are the ones you will use, but Wealthsimple and Betterment both have some compelling ones. With Wealthsimple the Roundup feature with linked credit and debit accounts is a clever and painless way to increase your investments without really trying. Betterment, for its part, uses the syncing up of your external accounts to offer better guidance to you on your goals. Both robo-advisors offer their clients savings accounts with decent interest rates.
- Transfer cost reimbursement: Wealthsimple pays transfer costs on new accounts funded with at least $5,000. Just fill out a survey to request your reimbursement after the transfer is complete.
- Wealthsimple Save: Wealthsimple offers a low-risk investment cash savings account subject to the 0.25% management fee. Funds are invested in a low-risk ETF portfolio.
- Roundup: After linking credit and debit accounts, clients can activate Wealthsimple’s “Roundup” feature, which rounds charges up to the next whole dollar and deposits the “spare change” in the customer’s account.
- Educational resources: Wealthsimple’s website features a comprehensive Investing 101 glossary, a broad-brush investment FAQ, and an excellent monthly magazine/blog with dozens of “how-to” articles. That said, it can be difficult to locate subjects of interest as there’s no search function.
- Premium access to CFP professionals: If you bring a balance of at least $100,000 to the table, you can opt into Betterment’s Premium plan, which charges a higher annual fee (0.40%) and offers unlimited access to a team of CFPs for guidance.
- Educational resources: Betterment’s Resource Center includes dozens of informative and well-written articles about retirement planning and how to minimize your tax burden, plus a few videos to help you figure out how to use the platform. Betterment has also created a number of articles to help investors understand the portfolio compositions and how the company approaches negative market events like Brexit.
- Sync up external accounts: Basic account users can sync external accounts to individual goals, so you can see, for example, how your 401(k) is helping your retirement savings. Premium members have access to in-depth advice on outside investments.
When it comes to fees, there is a significant gap between Wealthsimple and the basic tier of Betterment.
Wealthsimple charges a 0.50% fee—among the highest in our robo-advisor group—which includes all investment advice, portfolio management, and trade costs. The fee drops to 0.40% for accounts at or above $100,000. The Wealthsimple Cash program is free. The average ETF management fees run about 0.2%.
Betterment offers two different fee options: investing customers pay 0.25% of their portfolio annually or $4 per month for accounts under $20K, with the option to pay $299 to $399 per call to access a certified financial planner. Premium customers pay 0.40% annually with unlimited access to CFPs. The ETFs that make up most of the portfolios have average expense ratios of .09% (as of March 28, 2022).
Betterment and Wealthsimple have taken similar approaches to minimum deposits and the barrier they may pose to investors with limited capital.
- Wealthsimple: $0
- Betterment: $10
Wealthsimple offers a simple start-up process. Clients must answer a series of questions about financial goals, time horizon, risk tolerance, past investment experience, and investment knowledge, plus bank information for bank verification. The platform promises that your account will be functional within five business days, and creates—based on your input—a suggested portfolio and ETF list. Portfolios are divided into three generic categories. Clients can change proposed allocations, but the platform may push back if alterations conflict with prior responses. You can fund your account via one-time payments or recurring deposits.
Betterment boasts one of the easiest accounts to set up. Just input your age, retirement status and answer a few questions about your income and investment goals. There are none of the standard risk-related questions. Instead, Betterment presents you with an asset allocation suggestion and its associated risk, which you can adjust by changing the percentage of equity versus fixed income held in the portfolio. Betterment’s suggested portfolios are fully transparent prior to funding, including access to fund prospectuses. You’re also prompted to connect external accounts—such as bank and brokerage holdings—to your Betterment account, both to provide a complete picture of your assets and to make cash transfers into a Betterment investment portfolio easier.
Wealthsimple portfolios are built of ETFs only, although the fine print mentions that Canadian customers may also receive mutual funds. The platform lists just 10 ETFs, divided into different asset categories. Each portfolio may include 6 to 7 instruments, suggesting that most customization is done through percentage changes rather than ETF selection.
Betterment’s portfolios are constructed from ETFs from iShares and Vanguard. Betterment offers five portfolio types:
- A standard Betterment portfolio consisting of globally diversified stock and bond ETFs
- A Socially Responsible Investing (SRI) portfolio that reduces exposure to companies deemed to have a negative social impact
- A Goldman Sachs Smart Beta portfolio that attempts to outperform the market
- An income-focused all-bond portfolio made up of BlackRock ETFs
- A Flexible Portfolio constructed from the same individual asset classes as the standard portfolio but weighted according to the user’s preferences
Overall, Betterment and Wealthsimple both invest client funds in ETFs.
Clients at Wealthsimple can choose a socially conscious portfolio that excludes non-qualified ETFs, and a screenshot of that portfolio contains just five “green” funds. (Others may be undisclosed.) The company also offers a Halal account that complies with Islamic law, buying pre-screened stocks but no ETFs or fixed income products. Fractional rebalances occur after deposits, withdrawals, and other asset-level changes. Clients can’t request rebalancing or make changes to ETFs, but client profile changes trigger a portfolio rebalancing when risk scores change.
Betterment accounts are evaluated regularly and rebalanced if they’ve shifted from their goal allocation. Betterment clients can switch strategies after a portfolio is funded, and the platform will alert you if there are tax implications prior to making a change. Each goal can be invested in a different strategy, so funds for longer-term goals like saving for retirement can be allocated to one of the higher risk portfolios while shorter-term goals, such as funding a down payment on a house, can be allocated to the lower-risk ones.
While Betterment offers a fund geared toward socially responsible investors, the advisor’s focus on ETFs makes it difficult to achieve a fully SRI mix. Outside of the ETFs invested in large-cap firms and an emerging market ESG fund, very little of the portfolio is invested in firms that meet “socially responsible” criteria.
There are a variety of ways to efficiently invest money to avoid excessive taxes. Tax-loss harvesting is the selling of securities at a loss to offset a capital gains tax liability and it is the most common way for robo-advisors to address the tax issue.
At Wealthsimple, tax loss harvesting is automatic for Wealthsimple Black customers—who have net deposits of $100,000 or more in their accounts.
However, all Betterment clients are eligible for tax-loss harvesting on all taxable in-house accounts, regardless of the balance. You must opt into the service in your account settings, and then it will be applied to all of your portfolios within your Betterment account.
Betterment is not a licensed tax advisor. Tax Loss Harvesting+ (TLH+) is not suitable for all investors. Read more at https://www.betterment.com/legal/tax-loss-harvesting and consider your personal circumstances before deciding whether to utilize Betterment’s TLH+ feature. Investing involves risk. Performance not guaranteed.
Both Betterment and Wealthsimple have sufficient security and are nearly identical in this respect. Their websites are encrypted and two-factor authentication is available. Both firms hold client funds with Apex Clearing Corporation, providing access to Securities Investor Protection Corporation (SIPC) insurance and excess insurance. Standard SIPC coverage insures against losses due to failed brokerages for up to $500,000.
Betterment has the edge on Wealthsimple when it comes to customer service.
At Wealthsimple, there is no contact link or information on the main website, but an FAQ provides a phone number and email address. Customer service is available from 9 a.m. to 6 p.m. (Eastern) Monday through Thursday or from 9 a.m. to 5:30 p.m. on Fridays. Calls during business hours reached a customer rep within one minute. Robo-advisor office addresses are listed on the About page without phone numbers.
At Betterment, customer service is available by email and phone from 9 a.m. to 8 p.m. Eastern time, Monday to Friday. As mentioned, you can get help from financial planners at any time with a Premium account, but you’ll pay a fee of $299 to $399 to consult with an advisor if you have a basic Investing account.
Betterment is one of the top robo-advisors in our rankings, but Wealthsimple scores closely in almost every category. Both services pack their portfolios with ETFs, offer tax-loss harvesting, and give their clients the option of a cash management account with a competitive interest rate. To be fair, Betterment outperforms Wealthsimple in these areas, but it is not a huge gap. Moreover, Wealthsimple does offer UTMA and UGMA custodial accounts, which may be appealing to investors with college-bound offspring.
In one key category, however, Betterment enjoys a significant edge. Betterment’s management fee for a basic account is half the cost of Wealthsimple’s fee, and that will decide it for most investors. A better robo-advisor with a lower fee is a hard combo to beat. So Betterment is definitely the best choice for most American investors, but there is a twist in this match-up if you live elsewhere. Betterment doesn’t offer accounts outside the U.S. and that is true of many other robo-advisors. So, while Betterment beats Wealthsimple handily on American soil, Wealthsimple wins by default in Canada and the United Kingdom.
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