Betterment Review

Advantages and disadvantages of Betterment. What are the good and bad things/features of the brokerage company? What are the benefits?


Rating:  Betterment Rating

Betterment Cons (Complaints)

  • Fixed investment portfolio
  • Required higher fees and balances to access expert help and management

Betterment Pros

  • Low, fixed management fees with no transaction fees
  • Easy, passive, hands-off investing
  • Fractional shares
  • Automatic rebalancing and free tax-loss harvesting and tax-coordinated dividends
  • Plan upgrades available

Investments

Betterment provides clients with a carefully selected and diversified portfolio of stock and bond exchange-traded funds (ETFs). Their selection methodology is intended to optimize for higher returns by investing in ETFs that are both low cost and tax-efficient. Betterment’s current portfolio is diversified entirely by Vanguard and iShare ETFs.

Unlike M1 Finance, its closest competitor, Betterment allows fractional shares to be purchased, which allows the portfolio to remain more precisely balanced. The company also charges $0 in commissions!

For every type of Betterment account, whether it’s an IRA or a taxable account, the ETFs in the investment portfolio remain the same. Betterment clients are only able change their overall stock-bond allocation. The portfolio is frequently rebalanced as the funds drift, but the individual funds do not change.

Taxable Account Specs

When opening a taxable account at Betterment, the client is prompted to give a name to their goal such as “Safety Net” or “Build Wealth.” Some personal information and a goal are required to create the account. An opening deposit can be made, but is not necessary. The client is recommended a specific stock and bond allocation according to their goals, but he or she is free to adjust the allocation at any time.

Betterment offers a free, optional service for its taxable accounts called Tax-Loss Harvesting, which can help to lessen or offset losses of a particular security by selling off the stock and purchasing a similar stock keep the same portfolio balance. Tax-coordinated dividends are yet another optional service offered by Betterment.

Pricing & Fees

Betterment made adjustments to their pricing model. Betterment Digital, the basic plan, requires no minimum balance and charges the client annually at 0.25%. (Previously, Betterment offered yearly management fee ranging from 0.15% to 0.25% depending upon the total balance.) Betterment Plus requires a minimum balance of $100,000 and charges 0.40% per year.

Betterment Premium, the highest plan, requires a minimum balance of $250,000 and charges the client 0.50% per year. The fees for each plan are only applied to the first $2 million. Money in excess of $2 million are managed at a 0.0% fee.

While the fixed rate of 0.25% per year is comparable to other automated robo-advisors, some may also charge the client for transaction fees. Furthermore, an actively-managed taxable account will ​always ​ require transaction fees that are usually much heftier than the management fees at Betterment or a comparable robo-advisor. Betterment, again, maintains a flat rate of 0.25% per year with absolutely ​zero ​ additional cost.

Service & Support

Betterment is able to take their complex features and offerings, and explain them in a coherent and understandable way. This clarity not only pertains to their support center and frequently asked questions (FAQs), but also to the rest of their website, which includes videos and articles that provide useful information about Betterment’s services and general financial planning.

Website & App

The web design and format at Betterment.com is very organized, sleek, and modern. Access to information is quite easy for a potential or current Betterment client. The information is detailed enough to adequately inform the investor, while also being simple enough for easy comprehension. While the website is very beneficial for accessing and managing a Betterment portfolio, their app may be even more valuable for the client who mainly accesses their account by phone. On both the site and the app, Betterment makes it as easy as possible to make allocation changes to an account. By clicking and dragging a marker to the left or right, clients can fine-tune the exact percentage of stocks and bonds that they want. After clicking the “Save” button, the new allocation will be realized as soon as that day. Just one example of Betterment’s easy to use online-management.

Betterment Pros and Cons Summary

Final word Like other robo-advisors, Betterment offers its investment products at an extremely low price. Their carefully selected portfolio and automated portfolio management are meant to provide the investor with the best results for their unique financial goals. This saves the investor from having to spend time, attention, and research that could yield comparable results, but could just as easily cause the investor to miss out on thousands, if not millions, of dollars. Betterment is a very safe bet, especially for the investor who prefers putting very little effort into managing their financial investments.

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Betterment reviewed by TopRatedFirms.com Rating: 4