Betterment vs Vanguard: Which Is Best For You?

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Over the last decade, Betterment has earned a reputation as a leading digital money manger. But Betterment features Vanguard funds in client portfolios, so why not bypass Betterment and go straight to Vanguard?

Since Vanguard has some of lowest cost exchange-traded funds why not simply park your money there? Or choose Vanguard’s own automated management service: Vanguard Personal Advisor Services?

In this Betterment versus Vanguard review, we compare fees, service, returns, performance, and even tax impact so you can pick the best robo-advisor for your needs.

Vanguard vs Betterment


vanguard investments

Betterment offers two service tiers: Digital and Premium.

Betterment Digital is its entry-level offering featuring automated investment management, online advice, and in-app messaging with financial advisors.

Betterment Premium includes all the features of the Digital service and also includes phone access to human advisors.

Vanguard offers more flexibility to investors than Betterment in terms of control. If you want to manage your own investments, you can do so using the Vanguard brokerage platform. Or you can select a hands-off approach, similar to what Betterment offers via Vanguard Personal Advisory Services.

Clients of VPAS also gain access to a team of live advisors but a dedicated financial advisor is only assigned to Vanguard clients who deposit $500,000 or more.

Betterment Fees vs Vanguard Fees

A comparison of Betterment fees versus Vanguard fees requires more than a cursory glance at the charges alone. The real question is what are the fees charged for the services provided?

Online Service

Betterment fees for its online service, called Digital, are 0.25% of assets under management.

Unlike Vanguard, Betterment also includes limited access online to Chartered Financial Professionals (CFP) for this fee.

Digital Money Management + Human Advice

For clients who want to pick up a phone and speak directly with CFP professionals, Betterment Premium fees are 0.40%. Unlimited phone calls and emails are part and parcel of the Premium service tier.

Vanguard Personal Advisor Services includes access to financial advisors too but management fees are lower, coming in at just 0.30%.

So, if you don’t need access to human advisors by phone, Betterment fees are lower. However, if you do want or need that extra support, Vanguard fees are lower.

Expense Ratio Fees

Beyond management fees, expense ratios are a standard cost that almost all money managers pass on to clients.

These costs are charged at the fund level so you won’t necessarily see them listed on a financial statement but they do ultimately come out of your pocket so it’s best to review them before signing up.

Vanguard is famous for its low mutual fund expense ratios while Betterment is virtually tied with it.

At Betterment, expense ratios range from 0.09% to 0.17% while at Vanguard they range from 0.05% to 0.19%.

Robo-Advisor$5,000$10,000$50,000$100,000Open Account
vanguard investments REVIEW

betterment REVIEW


Insight: Vanguard can afford to charge lower management fees than Betterment for service that includes access to human advice because it essentially gets to ‘double-dip’, meaning that it makes money not only from portfolio management fees, but also from expense ratios charged at the fund level – because it uses its own funds in portfolios. This is a luxury Betterment and other robo-advisors do not enjoy.

Account Minimum

Betterment vs Vanguard

The Betterment account minimum for its Digital service is rock bottom – it’s %0! You can sign up and become familiar with how Betterment works without depositing a penny.

However, the minimum account size needed to get access to human advice by phone is $100,000 for the Betterment Premium service tier.

For clients with less than $50,000 available to deposit, Betterment is the only choice because that’s the required minimum deposit to get started with Vanguard.

Robo-advisor$10,000$50,000$100,000$1,000,000Open an Account
betterment DIGITAL

vanguard investments MANAGEMENT FEES


Compare Betterment Vs Vanguard: Fees & Account Minimum: Vanguard imposes a $50,000 minimum hurdle, so investors with less than $50,000 available can only select Betterment.

For investors who can invest $50,000 or more and want access to human advice, Vanguard charges lower fees (0.30%) and has a lower account minimum ($50,000).

If human advice is less important to you and an automated investment management solution suffices, Betterment charges lower fees (0.25%) and has the lower account minimum ($0).

➤ Free Guide: 5 Ways To Automate Your Retirement

Tax Loss Harvesting

Betterment vs Vanguard

Tax loss harvesting can be so effective that earnings from invested tax deductions have the potential to cover management fees. Both Vanguard and Betterment shine in providing tax-loss harvesting in taxable accounts, and allocating assets across taxable and retirement accounts to lower taxes.

What Is Tax Loss Harvesting?

Every day Betterment analyzes your portfolio to see if holdings can be sold to capture a tax-deductible loss.

When a position is sold, another similar one is purchased to ensure all your money is working for you by staying fully invested.

This process of identifying tax deductible losses by selling some positions and buying other similar ones is known as tax loss harvesting.

Betterment Tax Loss Harvesting Example

To optimize your long-term investment returns, it is vital that you have a smart tax strategy.

Here’s a tax loss harvesting example to highlight the potential savings.

Portfolio Size: $250,000.

Timeline: 3 years.

After 3 years, some portfolio holdings will be in the black and some will be in the red. Assume that $25,000 worth of tax-deductible losses have been harvested, a reasonable estimate.

A $25,000 tax deduction might result in $7,500 in income tax savings, which in turn can be invested in the stock market.

Assume your average annual return is 8%, then you will earn $600 per year on the $7,500 invested. So after just 3 years of tax-loss harvesting, you could possibly enjoy average annual earnings of $600.

Betterment Tax Loss Harvesting Savings Vs Fees

Now compare the average annual earnings with the fees charged by Betterment, and you will see how effective tax-loss harvesting is at saving you money.

On a $250,000 portfolio size, annual fees of 0.25% amount to $625, which are only slightly higher than the projected average annual earnings ($600) you enjoy from tax-loss harvesting.

As time goes by, more tax losses accumulate and the potential for earnings to eclipse fees increases, making the value Betterment provides even more compelling.

More >> Betterment Returns After Taxes

Betterment Tax Coordinated Strategy

Tax-loss harvesting is only possible in taxable accounts.

Because earnings grow tax-deferred in retirement accounts, there are no benefits to tax-loss harvesting in an IRA or 401(k).

As a result, Betterment goes a step beyond tax-loss harvesting in taxable accounts to create a tax-coordinated strategy that optimally allocates money across qualified and non-qualified accounts (which effectively means retirement and taxable accounts).

Vanguard Tax Strategy

Vanguard Personal Advisory Services also strategically allocates assets across tax-advantaged and taxable accounts.

However, tax-loss harvesting is conducted for each client individually, as opposed to daily automatically at Betterment.

Vanguard vs Betterment: Tax Loss Harvesting? Both Vanguard and Betterment offer tax-loss harvesting and both allocate assets across retirement and taxable accounts to lower taxes. Betterment has the edge over Vanguard because it automatically harvests tax losses daily as opposed to doing so on a client by client basis.

Human Financial Advisors

Vanguard vs Betterment

The Vanguard robo advisor service is a hybrid robo advisor that combines automated investment management with a team of live advisors. Clients who meet the $50,000 account minimum get access to the hybrid service for a management fee of 0.30%. For $500,000, clients are assigned to a dedicated financial advisor. At Betterment, the minimum is $100,000 and the fee is 0.40%.

Betterment Human Advisors

Like its rival Wealthfront, Betterment began as an online advisor using computer algorithms to manage client portfolios. But unlike its competitor, Betterment has added a human element to its product offerings, recognizing that some clients wish to speak directly to financial experts.

The top tier service, Betterment Premium, includes unlimited phone and email access to CFP professionals.

Vanguard Human Advisors

Vanguard makes a team of live advisors accessible to clients also. The difference is that the core offering at Vanguard includes access to live advisors while the core offering at Betterment is a purely digital solution.

The minimum account hurdle is high at both Betterment and Vanguard to get access to human advice: $50,000 at Vanguard and $100,000 at Betterment.

Vanguard Vs Betterment: Which is Better for Human Financial Advisors? It’s a tie between Vanguard and Betterment when it comes to human advice. Both provide access to a team of financial experts, though Vanguard has the edge in making human advice accessible for a slightly lower account minimum and charging a lower management fee of 0.30%, compared to 0.40% which Betterment charges for equivalent service.


vanguard investments

Retirement Planning & Financial Goals

Vanguard vs Betterment

Betterment provides clients with online tools to help them set financial goals, keep track of progress towards those goals, and make use of idle cash. Vanguard provides comprehensive financial planning services that includes analyzing all financial accounts, even third-party accounts, and relies more on human analysis.

Comprehensive financial planning is part and parcel of Vanguard’s service, which includes direct portfolio management of taxable and retirement accounts, as well as trusts. If you have a 401(k) or a 529 Plan, Vanguard’s advisors will factor those into your overall financial circumstances.

Financial goal setting and retirement planning are integral to the Betterment service. However, Betterment relies on tools more than humans to guide you down the right path. For example, RetireGuide is a tool that Betterment provides to let you see how you are progressing relative to your retirement goals.

Smart Deposit is another valuable feature that sweeps unused cash from a checking account into a Betterment investment account that is focused on a specific financial goal, such as buying a new home or planning a vacation.

Retirement Planning & Financial Goals: Should You Choose Vanguard Or Betterment? If you feel more comfortable with a human advisor providing retirement guidance, Vanguard is the better choice. But if you’re just as happy to rely on financial tools to guide your retirement planning, Betterment is a great choice.

Account Types

Betterment vs Vanguard

Vanguard and Betterment both support many taxable and retirement account types, including Trusts, IRAs, rollover IRAs, SEP IRAs, and Roth IRAs.

Vanguard and Betterment offer a broad range of account types, including:

  • Individual and joint non-retirement
  • Traditional IRA
  • Roth IRA
  • Rollover IRA
  • Trusts

Both will advise upon, though will not manage, 401(k)s.

> Tip: Check out blooom if you need help with your 401k

And Vanguard will advise upon but will not manage 529 Plans, and will also advise upon third-party financial accounts.

Account Type betterment vanguard investments
Individual Non-retirementYESYES
Joint Non-retirementYESYES
Traditional IRAYESYES
Custodial AccountsYESYES
529 PlansNONO (but, will advise)
401(k)NO (but, will advise)NO (but, will advise)

Asset Classes

Betterment vs Vanguard

Vanguard provides almost 200 funds of its own, 50 commission-free exchange-traded funds, and 2,600 no-transaction fee mutual funds.

Betterment builds portfolios from a selection of up to 12 asset classes, but Vanguard enjoys the slam dunk victory in this category because of the much broader selection of asset classes and funds available, including:

Overall Winner

Betterment vs Vanguard

Investable Assets < $50,000 

Investors with under $50,000 available should look to Betterment because Vanguard does not accept accounts under that level.

Investable Assets of $50,000+

Vanguard charges lower management fees but daily tax-loss harvesting at Betterment has the potential to cover the cost of fees over time.

Asset Classes

Vanguard has a broader range of asset classes available to build diversified portfolios while Betterment has higher quality online tools to support financial goals setting and retirement planning.

Human Advice

Vanguard relies on human advisors to offer comprehensive financial planning services, and will review third-party accounts to get a full financial picture.

Vanguard WinsBetterment Wins
Portfolio Management Fees: Vanguard has lower fees for its hybrid robo-advisor service that combines technology-powered portfolio management with a team of human advisors. The charge at Vanguard is 0.30% vs 0.40% for an equivalent service at Betterment.Portfolio Management Fees: Betterment has lower fees for clients who are content with a purely digital service that manages portfolios automatically. Betterment charges 0.25% for its core service, Betterment Digital. Vanguard has no equivalent service.
Human Advisors: Vanguard and Betterment are virtually tied in this category. Vanguard has a slight edge in making a team of advisors accessible for a lower account minimum of $50,000.

However, to be assigned a dedicated financial advisor at Vanguard, the hurdle is much higher: $500,000.

Human Advisors: Betterment and Vanguard robo advisors make available human advice so they’re evenly matched. Betterment Premium has a $100,000 minimum plus unlimited phone and email support.
Asset Classes: Vanguard has almost 200 of its own funds, featuring:

  • 10 Vanguard money market funds
  • 54 Vanguard bond funds
  • 23 Vanguard balanced funds
  • 105 Vanguard stock funds

Plus brokerage clients enjoy access to over 50 commission-free ETFs and 2,600+ no-transaction fee mutual funds.

Tax Loss Harvesting: Daily tax loss harvesting is performed automatically at Betterment, giving it a slight edge in this category. At Vanguard, it is performed quarterly and on a client-by-client basis.
Betterment and Vanguard also offer tax-coordinated strategies that optimize asset allocation across taxable and tax-advantaged accounts.
Retirement Planning: Vanguard advisors offer comprehensive financial planning services: human advisors will examine not only accounts directly managed by Vanguard but also third-party financial accounts.Retirement Planning: RetireGuide by Betterment is a tool that links to outside financial accounts, analyzes your savings and tracks where you are compared to your financial goals to see if a shortfall exists and what amount needs to be invested to make up for it.
Expense Ratios: The range of expense ratio charges at Vanguard is from 0.05% to 0.19%Expense Ratios: Expense ratios range from 0.09% to 0.17% at Betterment.
Account Types: It’s a tie between both robo-advisors on account types supported, which include:

  • Individual and joint non-retirement
  • Traditional IRA
  • Roth IRA
  • Rollover IRA
  • Trusts
Account Types: Like Vanguard, Betterment offers a wide range of account types:

  • Individual and joint non-retirement
  • Traditional IRA
  • Roth IRA
  • Rollover IRA
  • Trusts
Fractional Shares: A very nice feature Betterment offers is fractional share ownership, which means that no cash is left idle, but instead portfolios are fully invested.
Charitable Donations: Betterment charity donations is a feature offered to appeal to philanthropically minded investors.

Which Robo-Advisor Is Best For You: Vanguard or Betterment?

Both Vanguard and Betterment rival each other with low expense ratios, a broad range of account types, tax-loss harvesting and retirement planning.

If you have a smaller nest-egg, Betterment Digital is the only choice available because Vanguard only provides a hybrid robo-advisor service with a high account minimum of $50,000.

For higher net worth investors who have $500,000 or more in investable assets, Vanguard features dedicated financial advisors.

To get access to human advice at Betterment, fees and minimums are higher. However, the tax-loss harvesting service Betterment performs daily has the potential to largely offset those fees over time.

Hands-off investors who don’t need the human element provided by Vanguard will find Betterment to be an excellent choice with numerous features to support retirement planning and financial goal setting.




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