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Betterment makes it easy to invest your savings in a diversified portfolio of stock and bond ETFs. As a leading robo-advisor, they offer all the bells and whistles you might expect, including tax-advantaged rebalancing, tax loss harvesting, financial goal setting tools via an intuitive online interface for low annual fees.

The service available at Betterment are:

• Betterment Digital
• Betterment Premium

Human advice accompanies the higher tier of service whereas the core service, Betterment Digital, is a purely automated investing solution.

So, what are the Betterment minimum account sizes for each tier of service?

Betterment Minimum Account Sizes

For the basic service, Betterment Digital, no minimum account size is stipulated. You can take advantage of all the bells and whistles offered by Betterment without worrying about meeting a minimum threshold.

The higher tier service, Betterment Premium, combines an automated investing solution with human advice. However, the higher touch nature of this service costs more to provide and so the account minimum is higher. The minimum account sizes for Betterment Premium is $100,000.

Service Level	Betterment Minimum	Annual Fees
Betterment Digital	$0	0.25%
Betterment Premium	$100,000	0.40%

Betterment Digital: Automated, digital portfolio management plus tax loss harvesting and tax-coordinated portfolio.

Betterment Premium: All the services of Betterment Digital plus unlimited access to a team of licensed financial experts and CFP professionals, who actively monitor your accounts and provide financial advice during the year.

A good introduction to Betterment and its digital money management solution is presented by Bloomberg here:

Betterment Spotlight

Betterment Fees

Beyond the annual fees on managed assets, you will also have to pay expense ratios on funds held in account portfolios.

It is standard practice for digital money managers and traditional financial advisors to pass on the charges imposed by funds, including ETFs, to clients. At Betterment, the investment expense ratios range from 0.09% to 0.17%, which are highly competitive in the industry.

By choosing passively managed ETFs as opposed to actively managed mutual funds, which generally have higher operating costs, Betterment saves clients money.

Betterment strives to keep costs low for clients not just via low expense ratios on ETFs and low management fees but also by looking to lower your taxes using tax loss harvesting, tax coordinated portfolios, TaxMin lot selling, and tax efficient ETFs.

>> Related: Capital Gains Tax (Short-term and Long-term)

Tax Loss Harvesting Betterment

Tax loss harvesting is the process of selling a security that is losing money to offset the gains on another security that would otherwise lead to higher tax liabilities.

The idea is when a security is sold at a loss, another correlated one is bought, so clients don’t lose out if prices rise, yet they still get to enjoy the benefits of lower tax bills.

This is a good primer video on the method of tax loss harvesting that Betterment provides in all its service tiers.

Betterment research claims that the process of tax loss harvesting can add tax alpha of up to 0.77% on average annually, which means the management fees charged by Betterment can potentially be fully covered.

>> Related: What You Need To Know About Betterment Securities

Betterment Tax Coordinated Portfolios

Tax loss harvesting is a way to boost after tax returns but it only applies to taxable accounts. For retirement accounts, such as an IRA or 401(k), tax loss harvesting doesn’t help because these qualified accounts already enjoy a tax-advantaged status. That’s where tax coordinated portfolios come into play.

Betterment tax coordinated portfolios optimizes the strategy of asset allocation by placing assets that will be highly taxed into qualified retirement accounts that enjoy tax breaks and putting lower-taxed assets into taxable accounts.

Betterment claims from historical studies that employing tax coordinated portfolios to optimize asset allocation can improve returns by an average 0.48% annually, resulting in a potential additional gain of up to 15% over 30 years.

>> Related: What Is A Betterment Tax Coordinated Portfolio?

Betterment TaxMin Lot Selling

Betterment uses a method called TaxMin Lot Selling to improve the tax impact (when compared to FIFO) of most transactions.

When securities are sold, Betterment algorithms choose which lots to sell by following a set of rules which they call TaxMin.

The way it works is that Betterment algorithms examine the date of purchase and the cost basis of each lot, realizes losses before gains, and sells lots in a specific order:

1. Short-term losses
2. Long-term losses
3. Long-term gains
4. Short-term gains

Before moving from one step to the next, all transactions are completed for a given category with higher cost basis lots getting sold first.

Because smaller gains accompany higher cost basis holdings, a lower tax burden is felt by clients. For losses, the higher the basis, the larger the loss – which is helpful because it can offset gains.

Take the following example that Betterment provides to highlight how TaxMin Lot Selling works. Let’s say you owned the lots shown below for a single security, and assume just 1 share in each lot.

The purchase prices are listed so we’re going to fast forward to a time in the future when you want to sell one share.

If the price of the security were $105, you would pay long term capital gains tax of $10 using FIFO. But with TaxMin Lot Selling, you would realize a short term loss of $16 instead.

If you were to sell two shares, FIFO would result in a $5 long term gain while TaxMin Lot Selling would result in a $31 short term loss.

So, while you do still pay taxes on your gains, the losses help to lower your tax bill.

Betterment Tax Efficient ETFs

Many casual investors experience a tax surprise at the end of the year when investing in mutual funds, which are obligated to distribute capital gains to investors by year end – irrespective of when the mutual fund was purchased. These gains are not the same as capital gains, which shareholders realize when selling shares of the mutual fund.

Theoretically, you could buy shares of a mutual fund in December and suffer from a tax distribution the next day.

Unlike mutual funds, ETFs have similar tax efficiency advantages as index funds that do not generate internal capital gains from churning.

Plus, ETF shares trade throughout the day – as opposed to mutual funds which exchange hands once per day at a Net Asset Value – which shields investors from accumulated capital gains within the fund.

>> Related: How To Invest Money Wisely

Betterment Investing

Investing with Betterment includes more features than low-fee, tax-efficient, automated investing service offerings, such as:

FRACTIONAL INVESTING

When you invest your money with a traditional financial advisor, or even if you choose to invest autonomously via a self-directed account, such as tastyworks you will generally have some cash sitting idle in your account because you are only permitted to buy individual shares.

But Betterment makes fractional share investing is possible, so 100% of your money may be invested to avoid a cash drag on your portfolio’s performance.

Imagine you had $10 of cash uninvested in your Betterment Digital account, you could purchase 0.2 shares of a $50 ETF, which would otherwise be unavailable for purchase in a self-directed brokerage account.

SMART DEPOSIT

Betterment lets you sweep excess cash above a certain specified amount from your bank account into your Betterment accounts.

By regularly investing surplus savings, you get to build a larger nest-egg over time. Or as Warren Buffett’s sidekick, Charlie Munger, famously put it:

“By periodically investing in an index fund, for example, the know-nothing investor can actually outperform most investment professionals. Paradoxically, when ‘dumb’ money acknowledges its limitations, it ceases to be dumb”
– Charlie Munger

>> Related: 21 Legendary Investing Quotes

TOP NOTCH CUSTOMER SERVICE

Customer support is available 7 days a week by phone, email and live chat. We found employees to be knowledgeable, helpful and patient in answering a host of queries.

INTUITIVE INTERFACE

If you have been around the block in the investing world, you have probably come across your fair share of unintuitive, hard-to-navigate online interfaces.

At Betterment, you will find just the opposite. The experience is delightful because the interface is highly intuitive, simple to use and navigate, and lets you control and update accounts quickly and easily.

RETIREMENT ADVICE: RetireGuide

Betterment offers a service called RetireGuide to construct a diversified portfolio designed to meet your retirement needs. Your personal retirement goals are examined and compared to your income, savings, location, and projected retirement spending.

With RetireGuide, you can easily view your progress towards your retirement goals and receive nudges on how to realize your financial goals by saving or investing more.

To learn more about Betterment, including what accounts types are available and the pros and cons of Betterment vs other robo advisors, check out our Betterment review.

We would love to hear from you. What tips do you have to invest smarter? Share your feedback below.

>> Discover The Best Robo Advisors

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>> Which Robo Advisor Should You Choose: Betterment or Vanguard?

Betterment makes it easy to invest automatically in a diversified portfolio of low-fee index funds. It is also simple to allocate savings to various ‘buckets’ that target financial goals. Whether saving for a new home, a new car, or a vacation, Betterment makes the process of tracking your goals intuitive and straightforward.

Behind the intuitive interface, Betterment is made up of two entities: Betterment LLC and Betterment Securities.

Betterment LLC is an SEC registered investment advisor. When you access your Betterment account, the advice and investment platform you see is powered by Betterment LLC.

Is Betterment A Broker-Dealer?

Betterment Securities is a broker-dealer that is the custodian of your assets and executes trades on your behalf.

Some robo-advisors use renowned financial institutions, such as Charles Schwab and Fidelity, as custodians for client assets.

Many online investment management firms are classified as introducing firms, meaning funds are passed to another firm, which acts as custodian, and so the capital requirements on the introducing firm are minimal.

By contrast, Betterment is a FINRA member broker-dealer and acts as its own custodian.

This means that Betterment must comply with strict capital requirements and is subject to stringent regulatory oversight.

Clients of introducing firms may work both with the firm and the custodian whereas Betterment clients only interact with Betterment.

Is My Money Safe At Betterment?

Assets held at Betterment are protected by SIPC (Securities Investors Protection Corporation) up to $500,000.

In practice, a client with assets held at Betterment Securities may end up in a better financial situation than they might expect if Betterment were to end up in insolvency.

For example, a client with $1,000,000 wouldn’t necessarily be made whole $500,000 by SIPC and lose the other $500,000.

In its operating history, SIPC has had to distribute assets rarely and, when claims have arisen, most assets distributed have emanated from the insolvent broker-dealer’s estate.

So, if $500,000 were recovered from the insolvent broker-dealer’s estate and SIPC contributed an additional $500,000, then the client would be not experience any loss whatsoever.

And what’s even better is if you have a few accounts at Betterment, they all qualify for SIPC protection of up to $500,000.

Can I Trust Betterment With My Money?

Betterment focuses on doing one thing well: managing your money. And because Betterment Securities is a custodian, its security is greater than some other rival online robo-advisors.

You may have heard of some firms engaging in proprietary trading or loaning out customer assets. These practices fall under the category called: commingling funds.

At Betterment, funds are never commingled, so client assets are placed in segregated accounts which are separated from Betterment operating capital.

Betterment Spotlight

Is Betterment Independently Reviewed?

It may give you even more peace of mind to know that Betterment is reviewed by FINRA and the SEC regularly to make sure capital requirements are met and customer records are correctly maintained.

Plus, Betterment’s independent public accountants examine the firm’s financial health, security of clients’ assets held, and operating procedures.

During each of the three annual audits, the records held by Betterment must match the records of Betterment’s independent clearing firm during each review.

Does Betterment Make Transaction Mistakes?

If you have been around the block for a while in the investing world, you may have come across a situation where perhaps a trade was not filled, or a fill price was incorrect, or some other execution issue cropped up.

A nice feature at Betterment is built-in verification to catch any issues that might crop up. The way it works is that reconciliation takes place first between customers’ transaction amounts and cash transfers and ACH transaction amounts, then with trade amounts, and subsequently with positions and fills.

By checking and cross-checking, Betterment spots irregularities quickly which its operations team can then resolve.

Because Betterment LLC and Betterment Securities fall under the same umbrella, you don’t risk the same reporting (in)accuracy issues that may crop up if you were a client at an introducing firm whereby a third party, who acts as custodian for your funds, manages reporting.

Why Betterment?

Although Betterment is best known for providing a low-cost, automated portfolio management solution, clients receive other less apparent benefits when peeking behind the veil, such as:

• Record keeping is conducted by Betterment as opposed to a third-party;
• A large capital cushion is maintained;
• Independent reviews are conducted by regulators and public accountants;
• Customer assets are not commingled; and
• Fiduciary and ethical standards are prioritized.

OPEN AN ACCOUNT

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Betterment vs Wealthfront is the proverbial clash of the robo-advisor titans. Both companies emerged in 2008 to provide technology-powered financial management with minimum human involvement at lower fees than those charged by traditional human advisors. Years later, Betterment and Wealthfront continue to lead the robo-advisor industry and have acquired billions of dollars each in managed assets. They have enjoyed so much success that major financial powerhouses, such as Schwab and Fidelity, have launched their own competing robo-advisor services.

Both Betterment and Wealthfront have remained true to their origins in providing low-fee automated portfolio management services but they have diverged a bit in other areas, namely tax and human advice. Wealthfront offers perhaps the best tax-optimized service in the robo-advisor industry while Betterment has added human advice to its service offerings.

When comparing Wealthfront vs Betterment, the devil is in the details, and the answer of which is best depends somewhat on the factors that matter most to you.

Wealthfront vs Betterment

Betterment and Wealthfront are very evenly matched across many key features. Both have low account minimums, offer free portfolio rebalancing, a wide range of account types, and automatic tax-loss harvesting. Each robo-advisor manages billions of dollars in client assets and charges a management fee of 0.25% for basic service levels.

Wealthfront shines when it comes to tax-optimized portfolios and the range of asset classes provided to create diversified portfolios while Betterment has the edge when it comes to providing access to human advisors and financial goal setting.

Betterment Fees
vs Wealthfront Fees

High net worth individuals receive a break on fees above $2,000,000 of managed assets at Betterment. No Wealthfront fees are charged to manage the first $10,000 but thereafter a flat-fee of 0.25% is charged to clients.

When investors compare robo-advisor fees, the focus tends to be on management fees, which are important, but they don’t tell the full story of costs. Another important fee to keep an eye on is the expense ratio, the annual fee that all ETFs and funds charge to their shareholders.

Thankfully for customers, Betterment and Wealthfront lean towards exchange-traded funds that have lower fees than actively managed mutual funds. Because expense ratios are low at both robo-advisors, management fees are the most important consideration when evaluating total fees.

Robo-Advisor	$5,000	$10,000	$50,000	$100,000	Open Account
REVIEW 1 2 3 4 5	0.0%	0.0%	0.25%	0.25%	Open an Account
REVIEW 1 2 3 4 5	0.25%	0.25%	0.25%	0.25%	Open an Account

Up to $10,000, Wealthfront manages your money at no cost and charges 0.25% thereafter. If you are just getting started investing or not keen to take the plunge with a larger investment amount, Wealthfront has more appeal. Betterment offers no equivalent fee break, so clients will be charged 0.25% for its basic service, Betterment Digital, from the first dollar invested. The fee break on the first $10,000 at Wealthfront means clients save $25 annually with Wealthfront compared to Betterment, so while it’s nice to keep the extra cash in your own pocket, it’s not a make-or-break reason to choose one advisor over the other.

Higher net worth clients receive a fee break at Betterment on amounts over $2,000,000. Above that threshold, Betterment charges no fees but fees are still charged on invested amounts up to that level. By charging no fees above $2,000,000 of managed assets, a high net worth client enjoys meaningful fee savings. For example, fees are almost 50% higher at Wealthfront compared to Betterment on a $3,000,000 portfolio.

Robo-Advisor	$10,000	$100,000	$1,000,000	$3,000,000	Open Account
MANAGEMENT FEES 1 2 3 4 5	$0	$225	$2,475	$7,475	Open an Account
MANAGEMENT FEES 1 2 3 4 5	$25	$250	$2,500	$5,000	Open an Account

Betterment Fees or Wealthfront Fees: Which Robo-Advisor Wins? High net worth investors will find Betterment more appealing because Betterment fees are waived on amounts over $2,000.000. Wealthfront is more attractive to investors depositing up to $10,000 because management fees are waived. Between $10,000 and $2,000,000, Wealthfront has slightly lower fees on account of waiving fees on the first $10,000 but it is pretty much a coin toss.

Human Financial Advisors

Wealthfront vs Betterment

Clients seeking a personal touch in their investing experience should look to Betterment, which provides a higher tier of service, Betterment Premium. The account minimum is $100,000 to avail of both of this service. Betterment Premium customers enjoy unlimited phone and email access to advisors. Wealthfront does not make available a team of human advisors.

When it comes to matters relating to the investment of your nest-egg, it is often nice to have the option to speak with a real person from time to time. On this feature, Betterment shines when compared to Wealthfront, which does not make financial advisors accessible to clients.

Betterment Premium is a step up from its purely automated investment management service, Betterment Digital. Clients of the Betterment Premium service are eligible for unlimited email and phone access to CFP professionals. Betterment Premium is only available to clients who meet the minimum account balance requirement of $100,000. And the personal touch comes at a slightly higher annual cost of 0.40% of managed assets.

Wealthfront Vs Betterment: Which is Better for Human Financial Advisors? Betterment is the only choice for clients who want access to human advice. Wealthfront does not offer a live advisors service.

Retirement Planning
& Financial Goals

Wealthfront vs Betterment

Betterment lets clients sweep unused cash into investment accounts to meet specific financial goals using a feature called Smart Deposit. It also offers a tool called RetireGuide to help with your retirement planning and financial goal setting by calculating the gap between your savings and retirement lifestyle needs. Wealthfront also offers a retirement planning tool called Path that calculates how much in savings you need to meet your retirement goals, and automatically adjusts the financial advice you receive.

Whether saving for retirement, tuition expenses, a home or a car, financial goals keep you focused on how much you need to save and help keep you on track. Betterment helps you to create financial goals right from the start when you sign up and answer some questions. Betterment will recommend financial goals for you and you can choose to add your own financial goals. For example, you may wish to create accounts that focus on retirement planning, saving for a new home or buying a car.

To help you meet your financial goals, Betterment makes a free tool available called Smart Deposit. You decide how much money you need to pay your bills and, above a certain threshold, excess cash is invested into the Betterment account you choose.

Another nice retirement planning feature that Betterment offers is called RetireGuide. This tool lets you see the shortfall or surplus savings needed to meet your retirement goals. You can easily link to outside financial accounts and RetireGuide does the calculations for you.

Wealthfront also offers a financial planning tool called Path. Path helps you to identify your projected net worth in retirement, whether you can live your current lifestyle in retirement and how much you should be saving today to meet your financial goals.

The way Path works is it looks at your transaction history and calculates a rolling 12-month average of how much you have been spending and saving. If you end up saving less because you are spending more on tuition costs for your kids, for example, Path identifies your spending pattern and automatically adjusts the financial advice it gives you.

Retirement Planning & Financial Goals: Should You Choose Wealthfront Or Betterment? Both Wealthfront and Betterment offer excellent financial tools to help your retirement planning and set financial goals. Betterment has a slight edge by automatically investing unused funds via its optional Smart Deposit feature.

Tax Loss Harvesting

Betterment vs Wealthfront

Wealthfront and Betterment include automatic tax loss harvesting as part of their core service offerings. However, Wealthfront provides the superior tax-optimized investing service through its Direct Indexing feature that it claims can amplify after-tax annual returns by as much as 2.03%.

You don’t have to worry about optimizing for taxes when investing in an IRA or 401(k) because earnings grow tax-deferred until distributions are made in retirement years. But if you buy and sell at the wrong time in a taxable account, you may end up paying higher taxes needlessly. Both Betterment and Wealthfront offer automatic tax-loss harvesting services, but Wealthfront shines a little brighter thanks to its tax-optimized direct indexing service.

Direct Indexing makes it easier to harvest tax losses because individual securities are held which mirror an index fund. If an index fund was held by a client it wouldn’t be possible to sell individual holdings within the fund to harvest tax losses. But through Direct Indexing, the diversification benefits of holding a collection of securities that mirror a fund are enjoyed and still tax loss harvesting opportunities can be cultivated to boost returns by as much as 2.03% annually according to Wealthfront. The feature is free on accounts at Wealthfront over $100,000.

Wealthfront vs Betterment: Tax Loss Harvesting? Betterment and Wealthfront include tax loss harvesting as part of their core services, but Wealthfront has the edge in providing tax-optimized portfolio management to taxable accounts through its Direct Indexing feature.

Account Types

Betterment vs Wealthfront

Wealthfront and Betterment both support an extensive range of taxable and retirement account types, including Trusts, IRAs, rollover IRAs, SEP IRAs, and Roth IRAs.

Wealthfront and Betterment offer an extensive range of account types, both taxable and retirement. Whether you are looking to set up an individual or joint non-retirement account or a Trust, both robo-advisors cater to your needs. Both support IRA, Roth IRA, rollover IRA, and SEP IRA accounts. Wealthfront has the slight edge in supporting 529 Plans which Betterment does not support.

Account Type
Individual Non-retirement	YES	YES
Joint Non-retirement	YES	YES
Roth IRA	YES	YES
Traditional IRA	YES	YES
Rollover IRA	YES	YES
Trusts	YES	YES
Custodial Accounts	YES	YES
SEP IRA	YES	YES
529 Plans	NO	YES
401(k)	NO (but, will advise)	NO (rollovers supported)

Asset Classes

Betterment vs Wealthfront

Wealthfront can support portfolio diversification across a slightly broader range of asset classes than Betterment offers.

The investment method underpinning portfolio construction at Betterment and Wealthfront is Modern Portfolio Theory, which is rooted in Nobel-prize winning financial research from Dr. Harry Markowitz.

The research shows that investors can build portfolios to optimize expected returns based on levels of risk. Invested monies are allocated across various asset classes to create diversified portfolios. Both Betterment and Wealthfront feature numerous asset classes but Wealthfront has a slightly broader range.

Betterment features US and foreign stocks, emerging markets, and TIPS as well as US, corporate, municipal, emerging market and international bonds. Wealthfront offers all these asset classes plus natural resources, real estate and dividend stocks.

Both invest client monies in exchange-traded funds, though Wealthfront will additionally mirror index funds through its Direct Indexing service to create more tax-efficient portfolios.

 

Asset Class Type
US stocks	YES	YES
Foreign stocks	YES	YES
Dividend stocks	NO	YES
US bonds	YES	YES
Corporate bonds	YES	YES
Municipal bonds	YES	YES
Emerging market bonds	YES	YES
Real estate	NO	YES
Natural resources	NO	YES
Emerging markets	YES	YES
TIPS	YES	YES

Overall Winner

Betterment vs Wealthfront

Management fees and expense ratios are almost identical at Betterment and Wealthfront. Wealthfront has the edge in building tax-optimized portfolios while Betterment is superior when it comes to human advice. Both feature good retirement planning tools, though Betterment goes a step further in offering goal setting features.

Wealthfront Wins	Betterment Wins
✅ Portfolio Management Fees: Wealthfront management fees are lower for clients who are investing smaller amounts. Fees on the first $10,000 managed are waived. Above $10,000 and up to $2,000,000 Wealthfront fees are slightly lower.	✅ Portfolio Management Fees: Higher net worth clients should look to Betterment, especially for amounts over $2,000,000, at which point Betterment fees quickly become a lot more competitive than those at Wealthfront.
✅ Tax Loss Harvesting: Both Wealthfront and Betterment offer tax-loss harvesting though Wealthfront provides clients with over $100,000 free access to Direct Indexing, which is designed to mirror the performance of an index fund but allows for greater tax-loss harvesting opportunities to boost after-tax returns.	✅ Human Advisors: Betterment offers clients access to human advisors as part of its higher tier service, Betterment Premium. Wealthfront does not include a human advice service.
✅ Retirement Planning: Wealthfront offers a tool called Path, which automatically adjusts the advice you receive based on your spending and savings  habits to better help you meet your retirement planning objectives.	✅ Goal Setting: Behavioral investing is a core tenet at Betterment and this philosophy shines through in its financial goals setting tools – you have the option to sweep unused cash into accounts dedicated to specific financial goals, such as saving to buy a new home or a car.
✅ Asset Classes: Wealthfront offers a broader range of asset classes than Betterment. Real estate, natural resources and dividend stocks are featured in addition to those provided by Betterment.	✅ Retirement Planning: Betterment provides RetireGuide, a tool that links to outside accounts and calculates how your savings levels match your financial goals to make sure you’re on track.
✅ Expense Ratios: Wealthfront expense ratios average 0.12%	✅ Expense Ratios: Betterment expense ratios range both higher and lower than Wealthfront’s from 0.09% to 0.17%
✅ Account Types: Wealthfront and Betterment both feature an extensive range of non-retirement and retirement account types as well as Trusts, though Wealthfront gets the extra brownie point for catering to 529 Plans.	✅ Fractional Shares: Betterment supports fractional shares which ensures all your cash is allocated to investing and none is left idle. Wealthfront does not include this feature.

Which Robo-Advisor Is Best For You?

Wealthfront or Betterment

Betterment and Wealthfront stand virtually toe-to-toe across the board. Differences in management fees and expense ratios are minimal. Both support automatic portfolio rebalancing and tax-loss harvesting. And both robo-advisors cater to retirement planning needs.

Wealthfront has a slightly wider range of asset classes to allow for broader diversification while Betterment supports fractional shares to ensure cash is not left to sit idle.

To pick between them depends largely on what matters most to you. If you wish to optimize for after-tax returns, Wealthfront gets the nod. If you want the comfort of human advice, Betterment is the preferred choice.

Open a Betterment AccountOpen a Wealthfront Account

Famed investor Warren Buffett has frequently advocated that most investors should not strive to beat the market but instead should select an index fund, ignore the day-to-day fluctuations of the market and over the long-term they will likely enjoy better portfolio returns than those generated by actively managed funds.

The reason he advises in favor of this investment method is that few investment managers can beat the market over the long-term. One way to follow his guidance is to manage your nest-egg in a brokerage account. Another option if you don’t wish to be so hands-on is to select a robo-advisor, who can automatically invest your portfolio on your behalf, but how do you pick the best robo-advisor for you?

Compare Robo-Advisor Fees

Robo-advisors charge lower fees on average than traditional financial advisors. Among the most competitive robo-advisors on fees are WiseBanyan and Schwab Intelligent Portfolios who charge no management fees for basic automated investment management service offerings.

Robo-advisors are virtually synonymous with low-fee automated portfolio management. Compared to a traditional financial advisor, who will charge a fee on managed assets of over 1% on average, management fees charged by robo-advisors are generally a lot lower.

WiseBanyan has set the standard for low fees by charging no management fees for its basic service. It will however charge fees for additional services, such as tax-loss harvesting.

Schwab has a robo-advisor service called Schwab Intelligent Portfolios that also offers a compelling zero-management fee structure. Schwab is unusual among robo-advisors in its capability to offer a no-fee portfolio management service because it makes money from the expense ratios of its funds which make up client portfolios.

After Schwab Intelligent Portfolios, which has over $10 billion in managed assets, Betterment has accumulated the next largest amount of assets and charges just 0.25% for its basic service, Betterment Digital. Higher tier service levels at Betterment which provides access to human advice for 0.40%.

Like Betterment, Wealthfront and SoFi, a more recent robo-advisor entrant, both charge 0.25% in management fees. Wealthfront was founded by Andy Rachleff and he and his team have ensured that the investment management service provided by Wealthfront remains aligned with the original idea of pure automation while SoFi is a hybrid service that combines technology-powered investment management with client access to live advisors.

At the higher end of the fee spectrum is Personal Capital, which charges management fees of anywhere between 0.49% and 0.89% depending on the amount of assets invested. Personal Capital charges the higher fee level because every client is assigned to a dedicated financial advisor, so it’s more of a white-glove robo-advisor service.

Compare Automated Vs. Hybrid Robo-Advisors

Investors who want the best of both worlds: advanced technology and human connectivity can select among hybrid robo-advisors who provide access to human financial advisors along with automated portfolio management.

Beyond fees, robo-advisors compete on value-added services, such as automatic rebalancing, tax-loss harvesting, and connecting clients to live financial advisors.

Hybrid robo-advisors will connect clients to either dedicated financial advisors or teams of live advisors in addition to providing automated investment management services. Investors who want a more personal touch or the option to speak with a financial expert should consider Betterment, Personal Capital, SoFi and Vanguard Personal Advisory Services, all of whom provide access to human financial experts.

Vanguard, Personal Capital and Betterment (Plus and Premium) have high account balance minimums compared to SoFi.

Robo-Advisor	Account Balance Minimum
Vanguard	$50,000
Personal Capital	$100,000
Betterment Premium	$100,000
SoFi	$0

Compare Investment Methods

Investors looking to protect principal during downturns as opposed to remaining fully invested should consider Hedgeable, a robo-advisor that looks to mitigate risk during market corrections.

Most robo-advisors leverage nobel-prize winning academic research called Modern Portfolio Theory to create balanced portfolios. This research is based on the idea that risk-averse investors can build portfolios to maximize expected returns for a given level of risk. The idea is that the risk of holding a diversified portfolio will be lower than that of a concentrated portfolio.

By applying Modern Portfolio Theory, an investor with a portfolio that includes multiple asset classes, such as fixed income, equities, and commodities, will be exposed to less risk than an investor holding a portfolio of stocks alone.

Not every robo-advisor embraces Modern Portfolio Theory exclusively in its investment methodology. Hedgeable looks to go a step further to better protect clients during market downturns via a feature it calls Downside Risk Protection. The idea is to overlay each account with proprietary risk management to help minimize large losses that can hurt portfolio growth.

An added benefit Hedgeable offers clients is access to invest in bitcoin, start-ups and make socially responsible investments to gain exposure to categories, such as Low Carbon Emissions and Alternative Energy.

Compare Account Types

Investors with straightforward financial situations will be well served by most robo-advisor firms while those with more complex financial circumstances will be best served by established robo-advisors, such as Betterment and Personal Capital, who cater to a broad range of account types.

Most robo-advisors offer a broad range of account types, catering to taxable and retirement accounts. Virtually all offer individual taxable and IRA accounts but few cater to 529 Plans – though some, like Vanguard, will advise on 529 Plans even when they won’t manage them.

Investors with complex financial circumstances who need multiple accounts, such as IRA, taxable, and Trust accounts will find established robo-advisors, such as Betterment and Personal Capital, offer a broad range of account types.

Clients who want their 401(k) analyzed and managed should start their search at Blooom, which specializes in 401(k) management.

When you are choosing between opening a taxable or retirement account, consider first maxing out your contributions to retirement accounts, such as your 401(k) or IRA, with pre-tax dollars and thereafter contributing after-tax dollars in a Roth IRA or taxable account.

Compare Investment Costs

At a quick glance, Fidelity Go seems like it has higher fees than some other robo-advisors but upon closer examination its overall fees quoted include the cost of investment expenses, a charge usually passed on to clients.

When comparing financial advisors, most investors focus on management fees first. But beneath the service is another fee worthy of serious consideration, the expense ratio. Most traditional financial advisors and robo-advisors pass along the expense ratio cost to clients. These costs are charged at the fund level and are not broken out as a separate charge to clients, so they can easily be missed.

While most robo-advisors pass along the cost of investment expenses, one robo-advisor stands out by including these in the overall fee quoted: Fidelity Go. The management fee Fidelity Go charges is 0.35% on retirement accounts, including investment expenses. For taxable accounts, the fee inclusive of investment expenses is 0.45% of managed assets.

Other robo-advisors look to keep these fees as low as possible by investing in passively managed exchange-traded funds versus mutual funds, which are actively managed. Small differences in expense ratios of just 0.5% annually can translate to hundreds of thousands of dollars of opportunity cost over a 30 year time horizon, so it’s well worth paying close attention to these underlying costs.

Compare Account Balance Minimums

Account balance minimums range from $0 to $100,000 at robo-advisors, and generally vary based on the level of service offered from automated to dedicated financial advisors.

The minimum account balance required to open an account varies from $0 to as high as $100,000 depending on which robo-advisor you choose and the level of service you choose.

Fully automated portfolio management services from Betterment, WiseBanyan and Schwab have no minimum account balance requirements. At the higher end of the spectrum, Personal Capital requires at least $100,000 to open an account and Rebalance IRA stipulates a $100,000 minimum.

Robo-Advisor	Account Minimum	Open Account
REVIEW 1 2 3 4 5	$0	Open an Account
REVIEW 1 2 3 4 5	$0	Open an Account
REVIEW 1 2 3 4 5	$0	Open an Account
REVIEW 1 2 3 4 5	$5	Open an Account
REVIEW 1 2 3 4 5	$500	Open an Account
REVIEW 1 2 3 4 5	$500	Open an Account
REVIEW 1 2 3 4 5	$5,000	Open an Account
REVIEW 1 2 3 4 5	$10,000	Open an Account
REVIEW 1 2 3 4 5	$100,000	Open an Account
REVIEW 1 2 3 4 5	$50,000	Open an Account
REVIEW 1 2 3 4 5	$100,000	Open an Account
Betterment Premium REVIEW 1 2 3 4 5	$100,000	Open an Account

Choose The Right Robo-Advisor For You

Select the robo-advisor that best meets your needs based on the criteria that are most important to you, whether fees, selection of account types, investment costs, access to experts or account balance minimums.

Some robo-advisors, such as WiseBanyan, compete heavily on fees while others, such as Personal Capital, focus on a white-glove service with dedicated financial advisors. Depending on how much capital you may have available, account balance minimums may exclude certain robo-advisors from consideration.

Regardless of which robo-advisor you select, ask them some additional questions for peace of mind, such as where your money will be held and with which custodian as well as who has discretionary authority over your account.

After comparing different robo-advisors against the factors that are most important to you, you will have greater peace of mind that your hard-earned nest-egg is in the right hands to meet your investment goals.

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