Betterment Review 2019: Should You Use the OG Robo-Advising Tool?

Betterment, the OG robo-advisor, has a long list of features and account types for any type of investor. And in this Betterment review, you’re going to learn why investing with Betterment might be the right move for your money in 2019 and beyond.

What is Betterment?

Started in 2008, Betterment is the first widely available robo-advisor. This model keeps your fees down while helping you invest your money in a portfolio that aligns with where your finances are now and where you want them to be. And, Betterment has tools to ensure that you’re always pointed in the right direction.

Betterment does this by asking you for some personal information, then they use an algorithm to build a unique portfolio of ETFs for each investor. As your financial situation changes, your portfolio allocation will change… this keeps you on track.

Many online brokerages are offering robo-advisory services now because of how well it works for investors who want to strategically grow their wealth while not paying an arm and a leg for an advisor.

Betterment offers options for personal and retirement accounts, and they’ve also added checking and savings account options.

How Betterment investing works

Betterment starts advising you as soon as you fill out a short questionnaire that asks about your age, pretax income, marital status, and goals. You’re telling them why you want to invest, and that can be for reasons like retirement, wealth building, savings, major purchases, child’s education, etc.

Betterment uses all of that information to determine what goes into your investment account – this is part of their robo-advisor model. This information is what informs your recommended allocation of stock vs. bond ETFs.

Here are two examples of how Betterment might invest your money based on your unique financial situation…

• A 45-year-old making $100,000/year and opening a retirement account would have a mix of 90% stocks and 10% bonds.
• A 32-year-old making $45,000/year and investing to build an emergency fund would have a mix of 40% stocks and 60% bonds.

Betterment will show you a more detailed breakdown of which types of stocks and bonds your money will go towards, like short-term treasury bonds, large and small cap stocks, international emerging market stocks, and so on. Overall, there are about 12 different asset classes for a variety of goals and levels of risk tolerance.

Investment accounts available through Betterment

Betterment investing offers a nice variety of account types for nearly any situation. There are:

• Individual and joint personal investment accounts
• Betterment Roth IRAs
• Traditional IRAs
• SEP IRAs
• 401(k) and 403(b) rollovers
• Trusts

How you fund your Betterment account

Once you sign up for Betterment, you will select a bank account to be your funding source. You can do recurring contributions, individual contributions, and you can even choose to rollover existing retirement funds.

Betterment then uses your funds to buy fractional or micro shares of ETFs. This means that you never have uninvested funds.

Sign up for Betterment today.

What Betterment offers

Your funds are invested in ETFs

ETFs are a basket of assets that track a market. This makes them inherently diverse, and because they aren’t professionally managed mutual funds, you pay much lower fees. This makes for a diverse and low-cost investment.

No minimum deposits

If the cost of investing is holding you back from starting, Betterment breaks down that barrier by offering a $0 minimum starting balance. Being able to do this is one of the benefits of Betterment investing your money in micro shares of ETFs… no amount is too small to start with.

Automatic rebalancing

Betterment’s algorithms are scanning your accounts daily to make sure that your investments are always lined up with your asset allocation. So, anytime money goes in or out of your account – dividends, contributions, withdrawals – Betterment will automatically rebalance your account for you. Even if one of your assets drifts over or under by just a little bit, Betterment rebalances.

This is definitely one of the perks of using a robo-advisor. You don’t need to constantly watch which markets you’re invested in – Betterment is monitoring all of this for you, on a daily basis. You get a little peace of mind knowing that Betterment is keeping up with the asset allocation you need for your specific situation and goals.

Betterment’s RetireGuide

I run into a lot of people with more than one investment account… many of us have more than one. You might have a 401(k) and/or an existing IRA and are investing with Betterment to build your wealth. To help you keep track of everything, Betterment gives you the option of connecting your outside investment accounts to its RetireGuide.

Once your accounts are connected, Betterment looks at all of your investments and tells you how on track you are for retirement. If you’re not, it makes suggestions. And, it always stays synced and up-to-date with all of your accounts.

Other features of Betterment’s RetireGuide are:

• What you’re paying in taxes is one of 20 different pieces of information that Betterment uses to build and maintain your retirement strategy.
• You can check in to see how your asset allocation compares to others of the same age or income range.
• You can see the pros and cons of your strategy over the course of one and ten years.
• While you can’t make any changes to your non-Betterment accounts, you can make up to one change per day to the allocation of your Betterment account (if you’re paying for the Premium service).

Since we’re talking about retirement planning, I use Personal Capital to help me stay on top of my investment accounts because it has a bunch of robust tools that help me plan for the future. I can check my net worth, do a cash flow analysis, see the performance of my portfolio, manage my fees, and more. And, Personal Capital is free to use.

Learn more at my Personal Capital review for 2019. If you sign up through my exclusive M$M Personal Capital link, we’ll both get $20 when you join.

Even more portfolio options

For brokerages to stay relevant, competitive, and useful to a wide variety of investors, they need to offer more than one option. Betterment originally only offered portfolios based on your risk tolerance, and not everyone wants to play that game. Here are three new options for Betterment investing:

• Socially Responsible Investment (SRI) portfolio. This focuses your investments on companies who are working for the greater good.
• Goldman Sachs Smart Beta portfolio. This portfolio has 101 variations that focus on four factors to minimize your risk while also offering a higher return potential. The four factors are good value, strong momentum, high quality, and low volatility.
• BlackRock Target Income portfolio. For retired investors (or those close to retirement) looking for a steady stream of income, this portfolio is bonds only.

Tax-loss harvesting

Tax-loss harvesting is strategically selling off investments at a loss to offset the gains you make when you sell investments that have gained in value. This can be tricky to do on your own, and if you aren’t careful, you’ll lose money in tax penalties. Part of Betterment’s robo-advisor model is that it works hard to minimize those penalties by buying and selling assets for you at the best possible time.

Flexible portfolios

If you have at least $100,000 invested with Betterment, you can opt for a more flexible portfolio that gives you more control over how your money is invested. You get to choose which assets classes you’re invested in and the percentage of each.

This option is only available with Betterment’s Premium accounts, and I’ll explain the cost of this type of account a little further down in my Betterment review.

Charitable giving

Betterment makes it easy to donate shares to charities of your choice, so when you donate shares, you aren’t paying capital gains taxes.

Financial advice packages

If you are going through any major life changes and want to make sure your investment strategy aligns with these events, Betterment offers you the option of getting practical advice from a real person. This is a one time fee for major life events like having a baby, buying a house, switching jobs, planning for retirement, etc.

Here are Betterment’s financial advice packages and the cost of each:

• Getting Started $149
• College Planning $199
• Financial Checkup $199
• Marriage Planning $199
• Retirement Planning $299

Two-Way Sweep

If you have a Betterment savings account (more on that further down in my Betterment review), Betterment will analyze what’s in your linked checking account and move excess cash from checking to savings. Betterment’s cash analysis tool looks for what it deems unused cash and helps you save it rather than spending it.

Betterment sends you a notification before sweeping money into savings, and you can always move money back from savings into checking if you need to. You can even set a target amount in your checking account, and Betterment won’t touch what’s up to that limit.

Betterment fees

Betterment has straightforward pricing on two different levels of service for investment accounts – Betterment Digital and Betterment Premium.

Betterment Digital is 0.25% annually and no account minimum. You’ll have access to Betterment’s online tools and resources, and once you hit $2 million in your account, these fees drop to 0.15%.

Betterment Premium is 0.40% annually and there is a $100,000 account minimum. This plan comes with unlimited access to Betterment’s Certified Financial Planners. These advisors are fiduciaries and are there for advice on accounts held inside and outside of Betterment. And if your balance hits $2 million, Premium fees drop to 0.30%.

Betterment savings and checking

In addition to investment accounts, Betterment now offers checking and high yield savings account called Everyday. The Betterment savings account option is up and functional and you can earn up to 2.44% APY.

Everyday Checking is coming later in 2019, and it’s going to offer some pretty sweet perks, like:

• Zero maintenance fees
• Reimbursed ATM fees worldwide
• No overdraft charges
• No minimum balances

How Betterment compares to other robo-advisors

If you’re researching different brokerages, how Betterment directly compares to other online brokerages is worth knowing. So, I’m going to tell how it stacks up to two of the most popular options…

Acorns vs. Betterment

• Acorns funds your investment account with round-ups, multipliers, and Found Money.
• Betterment gives you a wider range of investments.
• Both brokerages offer the same types of investment accounts, plus checking and savings.
• Acorns focuses more on micro investing
• Because of the fee structures, Acorns is more expensive for low balances while Betterment is slightly higher for larger balances.
• Betterment gives you the option to get advice from real advisors.

Learn more about Acorns in my Acorns Review 2019: Turn Spare Change Into Investments.

Betterment vs. Wealthfront

• Wealthfront has a few more account options, including 529 college savings plans.
• Betterment doesn’t have account minimums, but Wealthfront has a $500 minimum.
• They offer different types of investments – Wealthfront offers REITs but doesn’t offer bonds as Betterment does.
• Both robo advisors offer tax-loss harvesting.
• Unless you choose Betterment Premium, both have the same 0.25% fee.

Betterment review 2019 – the final word

As the first robo-advisor on the market, Betterment has continued to make updates and changes that will appeal to investors at any stage of their financial life. The fees are relatively low, there is now more flexibility in how you invest, and they offer services for high net worth individuals.

Really, it’s no wonder that Betterment has always been a top pick robo-advisor.

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