Betterment vs. Wealthfront: Which is Best for You? (2024)

FAQs

Betterment vs. Wealthfront: Which is Best for You? ›

Whether you go with Betterment or Wealthfront depends a lot on your individual needs. If you need a human advisor and have the money, Betterment may be your answer. Still, you may figure that Wealthfront's tax-loss harvesting is worth much more than you're paying, reducing your all-in cost.

Betterment and Wealthfront both charge 0.25% for digital portfolio management. But Wealthfront also offers digital financial planning tools, while Betterment offers access to financial advisors for an upgraded fee. Arielle O'Shea leads the investing and taxes team at NerdWallet.

Betterment has two choices for your cash management and ATM fee reimbursem*nts while Wealthfront has lending in addition to a solid checking account. So if you want borrowing options, Wealthfront has an edge, but if you are just looking for cash management, Betterment may make more sense.

The answer is an unequivocal yes. When you manage your investments through Betterment, all the assets and securities in your portfolio are strictly under your ownership. Additionally, your personal investment money and Betterment's company's funds remain separate for the entirety of your membership.

Not very customizable. Like almost every robo-advisor, you don't get to pick individual stocks through Wealthfront. Beyond your risk tolerance, there isn't much you can customize unless you invest at least $100,000. At that point, Wealthfront lets you specify companies in which you don't want to invest.

Yes, the Wealthfront Cash Account is FDIC insured up to $5 million through partner banks. Deposits to your Wealthfront Cash Account are covered through the FDIC-insured deposit sweep program through 10 partner banks.

It's exposed for 100% on the Stock Market. In the last 30 Years, the Betterment Robo Advisor 100 Portfolio obtained a 8.32% compound annual return, with a 15.72% standard deviation.

Unlike many of its competitors, Betterment doesn't require a minimum account balance, making it a good stock broker for beginners.

What happens to my money if Betterment goes public, is acquired, or closes? Betterment Securities is a member of the Securities Investor Protection Corporation (SIPC). At a high level, you can think of SIPC as providing protection for funds held in a brokerage account in the event that the brokerage fails.

Why am I losing money with Betterment? ›

Can you lose money with Betterment? Yes, as with any investment, your investments with Betterment can lose money. If the market drops, your investment could lose value. Unlike checking or savings account deposits, investments are not FDIC insured, and there is no bank guarantee.

Betterment offers a free online checking account with no hidden fees, a cash back rewards program and free cellphone insurance. It's easy to get started, but you're limited to a maximum of two checking accounts and one debit card.

If your goal is short-term, we'll recommend a more conservative portfolio with lower expected returns with less volatility, and if your goal is longer term, we'll likely recommend a more aggressive portfolio with higher expected long-term returns with higher volatility.

We'll walk you through how to withdraw from a taxable account or an IRA. You can withdraw your money from Betterment at any time, without additional fees. We do not charge any trading fees or assess penalties for requested withdrawals or account closures. It's your money and is always accessible to you.

Is it safe to keep more than $500,000 in a brokerage account? It is safe in the sense that there are measures in place to help investors recoup their investments before the SIPC steps in. And, indeed, the SIPC will not get involved until the liquidation process starts.

Betterment is a solid robo-advisor choice for people who want to get serious about investing for something big, like a home down payment, college fund or their own retirement. Betterment's algorithms match your risk tolerance and specific goals to diversified portfolios of low-cost exchange traded funds (ETFs).

What would happen to my account if Wealthfront were to be acquired, go public or cease doing business? Your Wealthfront account is in your own name. This would not change were Wealthfront to be acquired or go public and you would be free to add or withdraw funds or securities at any time.

Wealthfront is our top choice overall for robo-advisors as well as best for goal planning. Wealthfront's sophisticated digital financial planning tool answers scores of planning questions and is accessible to anyone.

Vanguard is best for most types of investors, as it offers access to stocks, ETFs, options, mutual funds, and much more. If you're a hands-off investor strictly in search of robo-advice, Wealthfront is the better choice.

Wealthfront Cash charges no monthly maintenance fee or ATM fees, and you'll earn an APY of 4.55%. You only need $1 to start, and you don't need to open a robo-advisor investment account to use Wealthfront Cash.

Do you get taxed on Wealthfront? ›

For cash accounts that generate more than $10 of interest or received $600 or more in awards, we'll post a tax form 1099. For any IRAs (Traditional, Roth, or SEP) with any distributions/withdrawals, we'll post a 1099-R.

With Wealthfront, you get low-cost access to a diverse investment lineup, excellent planning tools and a variety of tax-saving strategies. The company also offers access to individual stocks for DIY investors.

Vanguard has a slightly lower cost (although we wouldn't call either of them expensive). Betterment has several features that Vanguard doesn't, and these can be valuable to some investors. For example, Betterment offers tax-loss harvesting capability. This can translate into major tax savings for high-balance accounts.

Betterment at a glance. $0 ($10 to start investing). 0.25% annual fee on balances over $20,000 or if you set up recurring monthly deposits totaling $250 or more. Otherwise, $4 per month.

A good return on investment is generally considered to be about 7% per year, based on the average historic return of the S&P 500 index, and adjusting for inflation.

Of the two, Betterment is a better option for serious investors who want to maximize their returns because the platform provides more flexibility and easier goal tracking. Acorns is a better option if you're beginning or just want a way to put your spare change to use.

There's a reason that Betterment is the largest stand-alone robo-advisor with over $34 billion in assets under management. 2 The firm offers excellent low-fee investment management for new investors right through to high-net-worth clients and provides all of its users with comprehensive financial planning.

You will receive a Form 5498, which will be downloadable in your account by May 31st, 2023, if you had made annual or rollover contributions into your Betterment IRA. Direct transfers into your IRA will not be reported, per IRS requirements. You do not need to send the 5498 to the IRS—we will report it for you.

When you deposit money with Betterment, your money is transferred to Betterment Securities, a FINRA member broker-dealer, with instructions to buy ETFs based on your desired asset allocation between stocks and bonds (Betterment's two investment baskets).

What company owns Betterment? ›

You can lose more funds than you deposited in your margin account. A decline in the value of securities that are purchased on margin may require you to provide Wealthfront with additional funds to avoid the forced sale of those securities or other securities or assets in your margin account(s).

Don't sell your investments, and don't worry about trying to time the market. Simply hold onto your stocks and ride out the storm. The reason this strategy works is that you don't technically lose any money unless you sell. Your portfolio might lose value, but losing value is different than losing money.

Betterment is a robo-advisor and Robinhood is a stock trading platform at its core, so the fees they charge investors aren't exactly for the same services. With that said, both are notorious for their low fee structures.

nbkc bank utilizes a deposit network service, which means that at any given time, all, none, or a portion of the funds in your Betterment Checking accounts may be placed into and held beneficially in your name at other depository institutions which are insured by the Federal Deposit Insurance Corporation (FDIC).

Our checking services are provided by nbkc bank. If you already have funds at nbkc bank or another nbkc bank partner separately from what you hold through Betterment Checking, you will be eligible for up to $250,000 per depositor, per FDIC-insured bank, per ownership category.

*The annual percentage yield ("APY") on the deposit balances in Betterment Cash Reserve ("Cash Reserve") is 4.50% and represents the weighted average of the APY on deposit balances at the banks participating in Cash Reserve (the "Program Banks") and is current as of May 8, 2023.

The returns factor is something difficult to predict since markets can be volatile, but Betterment average returns can be increased by 2.66% if tax strategies are leveraged. If it can consistently deliver on these results, then the Betterment return rate can ultimately outperform S&P 500.

Betterment offers tax-loss harvesting for users with taxable accounts. Fidelity Go doesn't offer tax-loss harvesting but does provide tax-advantaged funds (i.e. municipal bonds) to reduce your tax burden over time. Betterment is not a licensed tax advisor. Tax Loss Harvesting+ (TLH+) is not suitable for all investors.

Do you pay taxes on Betterment? ›

With Betterment, you can earn both ordinary and qualified dividends. Ordinary dividends are taxed at your ordinary-income tax rate. Qualified dividends are certain dividends from US companies that qualify to be taxed at the long-term capital gains rate. You also have to meet a minimum holding period.

This APY is variable and subject to change daily. Deposit balances are not allocated equally among the participating Program Banks. A minimum deposit of $10 is required, but there is no minimum balance required to be maintained.

All customers will be defaulted to 10% federal withholding, but can select 0% or any other value between 10% and 100%. Betterment is not a tax advisor, and the information provided here should not be construed as tax advice. It should only be used for informational purposes.

What brokerage firms do billionaires use? Many very wealthy individuals use the top brokerage firms, such as Fidelity, Schwab, Vanguard, and TD Ameritrade, among others. They invest in private equity and hedge funds.

Some investors have several brokerage accounts to keep their retirement funds and active trading accounts separate, while others prefer to keep their niche accounts with companies that specialize in them. Still others see benefits in estate planning or simply want to take advantage of multiple sign-up perks.

Ideally, 6 to 8 funds are good enough to build your MF portfolio. As the size of the portfolio increases, you may invest in a maximum of 10 funds to reduce the risk of being overdependent on any particular fund or fund house.

The two share similar features: automated investment offerings, human advisor access, IRA accounts, and socially responsible investment options. Both offer low fees, but Betterment manages your investment portfolio for you, while Vanguard gives you the option to trade on your own or invest in a managed portfolio.

Once you deposit, we automatically invest in the market. No holding accounts or manual steps. Plus, our algorithms continually monitor and manage your portfolio at a fraction of the cost of a traditional advisor.

You can transfer part or all of an outside account that holds securities (including an IRA) to Wealthfront.

What would happen to my account if Wealthfront were to be acquired, go public or cease doing business? Your Wealthfront account is in your own name. This would not change were Wealthfront to be acquired or go public and you would be free to add or withdraw funds or securities at any time.

Are Wealthfront fees high? ›

Commissions and Fees

The Wealthfront investment account charges a 0.25% AUM wrap fee for all accounts, deducted monthly. This is in line with many robo-advisors and significantly lower than the management fees charged by traditional financial advisors.

While Wealthfront clients vary in age between 19 and 93, over 55% of our clients are under 35. Over 85% are below 50.

If you want to take a hands-off approach to investing and are interested in amassing a portfolio full of ETFs that are chosen for you, Wealthfront has you covered. If you want to invest in individual stocks, trade options, or buy cryptocurrencies, you'll need to use Robinhood instead.

Through Wealthfront, UBS acquires a sizable customer base within the millennial and Gen Z demographic. It also gets the digital tech and an omnichannel experience needed to reach out to them.

It's exposed for 100% on the Stock Market. In the last 30 Years, the Betterment Robo Advisor 100 Portfolio obtained a 8.32% compound annual return, with a 15.72% standard deviation.

Betterment made an estimated $100M in 2021, an increase of 30% over 2020. Betterment makes most of its revenue from the portfolio management fees it charges as a percentage of total assets under management (AUM).

Betterment Premium at a glance

Betterment Premium charges a 0.40% annual fee and requires a minimum $100,000 balance in exchange for unlimited phone access to a team of certified financial planners. You can also get advice on investments held outside of Betterment from your team of CFPs. $100,000. 0.40%.