SoFi Wealth Management vs. Betterment: Which Robo-Advisor Is Better?

sofi vs betterment robo advisors

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Next to Schwab Intelligent Portfolios, Betterment has amassed the largest amount of assets of any robo-advisor, over $9 billion. As a leading robo-advisor, Betterment has all the bells and whistles an investor might want: access to licensed financial experts, tools and calculators to keep track of progress towards retirement goals, a renowned executive team of experts, a demonstrated history of success, and low fees.

Betterment’s enormous success in pioneering the robo-advisor model, which relies on a computer model and a team of investment experts to manage client portfolios, has attracted an ever increasing number of competitors. Perhaps one of the most serious threats to Betterment over time will be  SoFi, a company so disruptive to the lending industry, where it first got its start, that Betterment, Personal Capital, Wealthfront, and other robo-advisors will need to pay close attention to its expansion into wealth management.

Betterment has been known to keep the barrier to investing low, making the stock market accessible to everyone by keeping account minimums low, and fees substantially less than what traditional advisors charge. SoFi has entered the fray with a value proposition also worthy of serious consideration: low fees, low minimums, commission-free advisors, and a loyal community that is the envy of any financial institution.

But which wealth management solution is best for you: Betterment or SoFi?

SoFi Wealth Management Vs. Betterment

sofi brokerage trading system investing
betterment

We compared fees, account minimums and types, services offered, tools and features offered by both SoFi and Betterment to see which fares best. Both companies offer customers compelling value propositions, with fee levels far lower than those charged by traditional financial advisors.

Where both companies shine is their customer-centric business models. The benefit of low fees means savings are passed on to customers which otherwise would accrue to advisors.

SoFi has created a loyal community of customers in its lending business that few financial institutions can match. Time will tell if it can energize its wealth management clients with similar loyalty.

Management Fees

SoFi Wealth Management Vs. Betterment

Robo-Advisor Management Fee Account Minimum Rating Best for Open Account
sofi brokerage trading system investingFull Review 0.25% $500 Low Cost & Live Advisors
betterment

Full Review

0.25% – 0.40% Starting at $0 Low Fees

When Betterment launched in 2008, it pioneered the model of low advisory fees. For 0.25%, Betterment delivers a purely automated portfolio management solution. For this same fee level, SoFi also offers clients a technology-powered investment offering, and makes live advisors accessible.

If you are looking for a human touch, both companies make financial experts accessible though the hurdle is slightly higher at Betterment. For a fee of 0.40%, Betterment offers clients unlimited calls with their team of financial professionals via its highest tier service, Betterment Premium.

SoFi provides its automated portfolio management service and access to financial experts for a fee of 0.25%, making it slightly more attractive when comparing the level of service offered for the same fees.

SoFi also makes a compelling case to borrowers on its lending platform by providing them free wealth management. And all SoFi clients receive free wealth management up to the first $10,000.

Who Is Better on Fees? Both SoFi and Betterment charge fees as low as 0.25% and Betterment fees range as high as 0.40% for its top tier service level. When comparing fee costs alone, it’s a tie for smaller account sizes. SoFi squeezes out the victory when it comes to fees charged on higher account balances.

A nice SoFi benefit is that all clients receive free wealth management up to the first $10,000 and all SoFi borrowers enjoy free wealth management.

Account Balance Minimums

SoFi Wealth Management Vs. Betterment

SoFi requires a balance of $500 to open an account unless a $100 monthly deposit is made, in which case the $500 requirement is waived. Betterment has no minimum for its basic service, Betterment Digital, and a $100,000 account balance minimum for Betterment Premium.

Across the robo-advisor industry, account balance minimums vary from zero to $100,000. At the upper end of the spectrum are Vanguard and Rebalance IRA, who impose $50,000 and $100,000 minimums respectively. On the lower end are industry leaders, such as Wealthfront, which has a $500 minimum, and Betterment, which has no minimum for its basic service, Betterment Digital.

SoFi matches Wealthfront with a required minimum account balance of $500, but it will waive this threshold for clients willing to commit to a $100 monthly deposit to its wealth management platform.

On the face of it, Betterment seems to be the better choice with the lower minimum. And it is if the option to connect with a financial expert is not important to you. But prospective Betterment clients who do wish to connect with human financial experts – as opposed to sticking with the purely automated algorithmic portfolio management solution available through Betterment Digital – should pay heed to the higher account minimum for higher tier services. Betterment imposes a $100,000 minimum balance for clients who want to sign up to Betterment Premium.

For clients content with a purely automated investment management solution, Betterment gets more brownie points. For prospective clients who want the best of both worlds and have less than $100,000 available to invest, automated portfolio management combined with human oversight and accessibility, SoFi is the preferred choice.

Who is Better on Account Balance Minimums? Betterment’s basic service has no minimum and Betterment gets the victory when it comes to a purely automated solution. For clients who want the comfort of knowing a human advisor is overseeing their portfolio, SoFi is the better choice because its minimum of $500 compares favorably to the higher minimum of $100,000 for Betterment Premium.

Hybrid Robo Service

SoFi Wealth Management Vs. Betterment

SoFi combines automated portfolio management and human financial advisors as part of its basic service. Betterment’s basic service is purely algorithmic and computer-powered, but it does offer a hybrid service to clients able to meet a minimum $100,000 account balance, and an even higher level of service, Betterment Premium, for clients who commit at least $100,000.

When robo-advisors first appeared, portfolio management services were predominantly algorithmic; they were highly automated solutions intended on disrupting traditional financial advisors by leveraging technology to allow for much lower fee levels. Personal Capital was one of the few robo-advisors to embrace live advisors from the get-go by assigning to each client a dedicated financial advisor.

As the robo-advisor industry has matured, the trend towards a hybrid service which combines algorithmic portfolio management with human financial advisors, has increased. Betterment began serving clients by offering only an automated portfolio management service, called Betterment Digital. Now Betterment also provides a higher level of service through its higher tier offering, Betterment Premium, though the $100,000 account balance minimums is a high hurdle to meet.

SoFi made its name as a customer-focused company that built a loyal community by providing perks to its customers. For example, in SoFi’s lending division, it helps borrowers who lose jobs find new ones. That customer-centric model has been applied to its wealth management division too, and SoFi’s basic service includes access to human financial advisors. Even more attractive is that SoFi has a no-commission policy for advisors, so they are not incentivized to up-sell clients on products and services but instead have aligned interests with clients.

Who Provides The Better Hybrid Robo Service? SoFi and Betterment are tied in this category: both offer hybrid robo advisory services. For prospective clients with fewer assets, SoFi has the edge over Betterment because its basic service level connects clients to live advisors whereas only higher tier offerings at Betterment include human oversight.

Account Types

SoFi Wealth Management Vs. Betterment

Betterment has a broader selection of account types; it offers Trusts, Rollover IRAs, and joint non-retirement accounts in addition to the account types offered by SoFi, which include individual non-retirement accounts, Roth IRAs, traditional IRAs, and SEP IRAs.

For married couples and investors who have transferred assets to a trust, Betterment edges out SoFi. As the more established robo-advisor platform, Betterment caters to a broader range of account types, including joint and individual non-retirement, Roth, traditional, SEP and rollover IRAs, as well as Trusts.

Comparatively fewer account type selections are available at SoFi: individual non-retirement, Roth, traditional and SEP IRAs. So individual investors and those with straightforward financial situations will be well served at SoFi, who we expect will expand the range of account types available over time, but for now Betterment wins this category.

Who is Better on Account Types? Betterment caters to a broader audience of investors, who include married couples and those with Trusts and rollover IRAs. As time goes by, we expect SoFi will catch up but Betterment has the edge currently.

Type sofi brokerage trading system investing betterment
Individual Non-retirement YES YES
Joint Non-retirement NO YES
Roth IRA YES YES
Traditional IRA YES YES
Rollover IRA NO YES
Trusts NO YES
Custodial Accounts NO YES
SEP IRA YES YES
529 Plans NO NO
401(k) NO NO (but will advise)

Tax Loss Harvesting

SoFi Wealth Management Vs. Betterment

Betterment structures tax-coordinated portfolios that feature tax-efficient securities, such as exchange-traded funds, which are generally more efficient than mutual funds. Betterment also offers real-time information which shows estimates of what taxes you owe before you make a portfolio change or withdrawal. This nudge towards encouraging smarter investor behavior can increase after-tax returns, and leaves SoFi playing catch up.

Type betterment sofi brokerage trading system investing
Tax Loss Harvesting YES NO
Free Account Rebalancing YES YES

Tax-efficient investing is a core focus for Betterment, and specifically the goal is to increase after-tax returns. Betterment employs tax-loss harvesting to systematically find embedded capital losses to lower investment taxes and increase after-tax returns. For investors with long-term holdings in multiple accounts, Betterment applies an asset allocation strategy to boost after-tax returns as part of what it calls a Tax-Coordinated Portfolio. Betterment claims that its research calculates an annual benefit of 0.48% on average, which amounts to an estimated extra 15% over a 30 year time horizon.

Betterment also applies what it calls Smart Rebalancing, a process which reduces the need to sell shares to rebalance by using every cash flow and dividend to rebalance your portfolio. Betterment claims its rebalancing process never results in short-term capital gains. SoFi also provides a rebalancing service but it does not offer tax-efficient portfolios yet, resulting in Betterment claiming the victory in this category.

Who is Better on Tax-Loss Harvesting? Betterment pioneered real-time tax information that lets clients see the the potential tax consequences of making portfolio changes and withdrawing funds before taking action, and possibly regretting it later. Along with its trademarked Tax-Coordinated Portfolio and Smart Rebalancing features, Betterment comes out ahead of SoFi handily here.

Overall Winner

SoFi Wealth Management Vs. Betterment

Clients who have smaller nest-eggs and are content with a hands-off service will find Betterment more than meets their needs but for those seeking a white-glove service that includes human oversight at the same cost, SoFi delivers. Anyone with a more complex financial situation, such as those who are married or have Trust accounts, as well as those looking for tools to track progress towards retirement and optimize portfolios for tax-efficiency will find Betterment to be a better fit.

SoFi Wins Betterment Wins
Portfolio Management Fees: Both SoFi and Betterment offer basic portfolio management services for fees of 0.25% of assets under management.
For higher tier service, Betterment charges 0.40%.
Selection of Account Types: Betterment caters to trust holders, married couples and individuals with rollover IRAs, in addition to supporting the account types offered by SoFi, which include individual non-retirement accounts, Roth IRAs, traditional IRAs and SEP IRAs.
Account Balance Minimums: It’s a tie between Betterment and SoFi on account balance minimums. Betterment has no minimum for its basic service offering while SoFi will waive its $500 minimum to those willing to contribute at least $100 monthly. Tax Loss Harvesting: Betterment offers a sophisticated tax-loss harvesting service via what it labels Tax-Coordinated portfolios designed to systematically find embedded capital losses in order to lower investment taxes and boost after-tax returns. SoFi doesn’t yet offer a tax-optimized service.
Free Rebalancing: Both companies offer free portfolio rebalancing that is designed to lower capital gains tax over time, and mitigate the risk of incurring short-term capital gains tax liability. Tools: Betterment has a range of tools, including its RetireGuide calculator which assesses how much you need for retirement based on a series of questions relating to your personal financial circumstances. Betterment also connects to third-party accounts to allow you link 401(k) accounts, analyze fee savings, and recommend portfolio optimizations.
Human Advice: It’s a close tie between Betterment and SoFi when it comes to live advisors but SoFi gets the credit for offering the service without mandating high account minimums as Betterment does. Account Balance Minimums: For its basic service, Betterment Digital, no account minimum is imposed. For higher tier offerings, Betterment Premium, a minimum requirement of $100,000 is imposed.

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

SoFi and Betterment both cater to investors with smaller nest-eggs seeking a hands-off, automated portfolio management solution.

Betterment has the edge on advanced capabilities, such as tax-optimized portfolios, a broader selection of account types to support married couples and those with trusts, as well as investors keen to track progress towards retirement goals. It also caters to higher net worth investors who want access to financial experts via its higher tier offering, Betterment Premium.

Where SoFi earns brownie points is its basic service includes not just technology-powered investment management but also access to commission-free human financial advisors. SoFi’s wealth management offering is an easy choice for SoFi borrowers; it’s free. It’s also free to all users for the first $10,000.

  

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