Betterment Review 2018 – Betterment Fees, Sign up + Final Analysis
Is Betterment the Robo-Advisor for You? Bonus Feature, Betterment Fees, Sign Up, + Final Review
Welcome to the final segment of this comprehensive Betterment Review. You’ll find out about the Betterment fees, bonus features, and easy sign-up. To recap, here’s what you learn in each of the 3 articles.
Part 1: You got an overview of the Betterment Platform and discovered the underlying philosophy of this robo-advisor. You viewed the ‘goals based’ approach with an introduction to the 3 initial goals; Safety Net, Retirement, and Investing. You dug into the Safety Net and uncovered the underpinnings for this goal.
Part 2: You drill down into the Betterment platform with details about goals 2 and 3; retirement and general investing. You explored the RetirementGuide Calculator tool which demonstrates how much you need to save to meet your retirement spending preferences.
Part 3: Explains the final sign up and Betterment fees along with a final evaluation of the Betterment platform. After this 3 part Betterment review, you have all the information you need to determine whether this robo-advisor is the best choice for your investment dollars.
Betterment Fees and Features
|Overview||Goals-based digital investment manager with access to financial advisors.|
|Minimum Investment Amount||No minimum.|
|Fee Structure||Digital-0.25% AUM up to $2 million.|
Premium-0.40% AUM up to $2 million
No fees above $2 million.
|Top Features||Digital and hybrid investment management options. Digital option offers texting with financial advisors. SRI, income + smart beta portfolios.|
|Free Services||No management fee for assets over $2,000,000. Free portfolio review.|
|Contact & Investing Advice||Phone + email support 7 days per week.|
|Investment Funds||Low fee exchange traded funds from diverse asset classes.|
|Accounts Available||Single + joint taxable brokerage. Roth, traditional, rollover + SEP IRA. Trust.|
|Promotions||Free account management special promotion through April 2018.|
Betterment – Free Account Management Offer
From March 12 through April, 2018, new Betterment investors get free account management. Check out the chart below for details:
Net Deposits After 45 Days
Time Managed Free
12 Months (1 Year)
Betterment Sign up
The sign-up process was seamless and quick. Betterment asked for basic information, explained the bank-level security and instilled confidence with a notice of their 115,000 existing customers who have over 3 billion invested with the firm.
Since Betterment is a Securities and Exchange Commission (SEC) Registered Investment Advisor (RIA), they are required by law to ask about your employment status and the amount of money that you have to invest. This adherence to the law gives further confidence in Betterment’s reputation.
After the initial sign up, the last section links your accounts to the secure Betterment platform. Here’s how the dashboard looks after sign up.
Below is an image of an invested portfolio. On the left side you get more information about rebalancing and the rationale for the fund choices and tax efficiency information. There’s also a button to adjust the asset allocation.
In the middle you have a guide to the percentages invested in each fund. The right columns list the specific fund management fees and account value of each fund.
Betterment has a new feature which further helps grow your investing dollars. The SmartDeposit feature automatically invests any money in your designated bank account, over a pre-specified amount, into your Betterment account. This means, that if you decide to use this feature, instead of keeping additional money in your bank account tempting you to buy more, it will be automatically transferred to grow your funds for your future.
What are the Betterment Fees?
The Betterment fee structure is simple.
With the Betterment Digital plan, the fee is 0.25% (AUM) on all money invested up to $2,000,000 with zero fees above that amount. This plan requires no investment minimum amount.
Betterment Digital Features:
- Personalized financial advice including how much to invest and in what types of funds.
- Low-cost, globally diversified investment portfolios. Your portfolio is designed to maximize your returns at every risk level.
- Automatic rebalancing, back to your preferred percentages invested in each fund.
- Tax-loss harvesting strategies for taxable accounts.
- Holistic view of all of your accounts, even those outside of Betterment.
- Access to licensed financial experts via the smart phone app texting feature with expected response within a day.
Betterment Premium requires a $100,000 minimum investment account and charges 0.40% of AUM. Fees are capped at the $2,000,000 AUM. That means assets above that amount are managed for free.
Betterment Premium Features:
- All benefits of Betterment Digital
- Financial advice on all investments, within and outside of Betterment accounts. That includes managing 401(k)s, real estate, stocks and more.
- Unlimited access to CFP® credentialed financial advisors for all life planning decisions that impact your money; retirement, having a child, getting married and more.
There is an additional layer of fees, which is always charged by an exchange-traded or mutual fund, at Betterment or anywhere else. Your money is invested in up to 13 diversified exchange traded mutual funds and each one has its own rock-bottom management fee ranging from .09% to .17%. This equates to a fund management average of approximately 15 cents for every $100 you invest.
What Happens When You Transfer Money Into the Betterment Platform?
Your work is done, and Betterment does the rest. Your funds are transferred into ‘Betterment Securities’ a regulated investment broker-dealer. The ETFs are bought for your account based upon your previously selected broad asset class categories; stock and bond funds. Betterment takes care of all of the buying and selling for you. The fund choices are well diversified globally. You may change your asset allocation choice at any time.
We particularly like this because, when left to your own devices, it’s easy to get waylaid by fear, greed and other emotions. These behavioral biases can cause you to make poor choices; selling as fund values fall and buying after a run up in price. By investing with Betterment, you have a barrier to keep you from making poor choices during market transitions.
Bonus; M1 Finance VS. Betterment – Which Robo-Advisor is Best For Me?
How Safe is Your Money at Betterment?
Safety means many things. There’s safety from fraud and malfeasance, and then there’s safety from price swings. Since Betterment is a registered investment advisor (RIA), your money is governed by the laws of the Securities and Exchange Commission as well as the Financial Industry Regulatory Authority (FINRA). Your money is as safe as it would be in any other regulated investment account. Additionally, the platform has bank-level encryption service and is as safe as your online bank.
If you’re looking for safety from price swings, that’s a different type of safety. All financial assets will go up and down in price. That’s the price you pay for an opportunity for greater long-term returns. Only bank money market accounts and certificates of deposits lack up and down price swings. But those types of investments don’t offer much long-term growth potential.
Pros, Cons and Final Betterment Summary
Advantages of Betterment
One of the things we like are the Betterment fees. They are among the lowest of all of the robo-advisors, with low advisory and fund management fees.
To further support the Betterment fee structure, there is extensive research demonstrating that lower fees lead to greater returns because more of your money is going into the investment markets and less is taken out in administration costs.
The Betterment strategy takes the guesswork out of investing. It is based on the Nobel Prize winning modern portfolio theory which maximizes your returns, for any risk level. In other words, after you choose your asset allocation, you get the best returns for the lowest volatility.
There are no account minimums, which makes Betterment perfect for the investing beginner. But even experienced investors with large portfolios will benefit from the researched-based investing method along with the low fees.
The RetirementGuide Calculator takes most of the guesswork out of retirement planning and ensures confidence that you’ll have the money you need for the retirement you want.
Betterment optimizes the bond mix for tax-deferred and taxable accounts. In simple language, this means, they work to reduce the taxes you pay on investment income and capital gains, allowing you to keep more of your investment returns. The automated tax-loss harvesting further minimizes taxes and increases overall returns. Betterment claims their tax loss harvesting strategy beats other advisors by about 1 percent.
The SmartDeposit is a painless way to invest more for your future, and it’s likely you won’t even miss the money going into your account.
The access to financial advisors is an affordable way to get human financial advice for a reasonable fee.
Betterments new smart beta and socially responsible funds make this robo-advisor even more attractive.
Finally, the platform offers access to a wide range of accounts including Traditional IRA, Roth IRA, Rollover IRA, SEP IRA, Trusts, Non-profit, Individual and Joint accounts.
If you happen to be a financial planner, Betterment for Advisors is an ideal solution to streamline your back office and set up an automated investment platform for your clients.
Disadvantages of Betterment
For investors looking to buy individual stocks, this isn’t the platform for you. Additionally, at present Betterment doesn’t offer real estate investment trusts (REITs) or other sector funds. They claim their investments are sufficiently diversified.
As previously mentioned, having your safety net goals in stock and bond investments can be risky. If you need to withdraw funds at an inopportune time, you may trigger capital gains or losses. In general, short-term emergency cash should be in cash assets such as money market funds.
Finally, if you already have an existing IRA or brokerage account, you need to liquidate the holdings before transferring the cash into Betterment. According to Betterment, although you may incur tax consequences from a non-retirement account, the benefits of investing with Betterment should make up for those losses.
Final Betterment Summary
The sound portfolio theory, low fees, and good fund choices make this almost the perfect investment platform. The addition of financial advisory access for a reasonable fee, smart beta and SRI portfolios is great. Although other online Betterment reviews suggest this platform might be best for lower net worth investors, we disagree. Any investor seeking low-fee, well-researched investment management should check out Betterment. If you have existing assets in a taxable brokerage account, make sure to investigate the tax implications of switching to Betterment.
One Betterment drawback is its asset allocation assumptions, they might slant towards the aggressive side. We suggest that you look for an online risk tolerance quiz to help you decide the percent invested in stock versus bond funds.
That said, Betterment’s ease of use, no minimum, sound investment choices, tax loss harvesting, goal based objectives make this a good choice for an investor who isn’t interested in managing their own investments. A main advantage of Betterment – and robo-advisors in general – is that digital investment platforms give the investor built in discipline so that fear or greed won’t cause you to buy high and sell low.
Make sure to read the entire Betterment Review Series:
Part 1: Explored the Betterment philosophy, went through the initial introduction screen that describes the 3 initial goals; Safety Net, Retirement, and Investing.
Part 2: You drill down further into the platform with details about goals 2 and 3; retirement and general investing. You’ll explore the RetirementGuide Calculator tool which teaches you how much you’ll need to save in order to meet your retirement spending preferences.
After reading this 3 part Betterment review you’ll have all the information you need to determine whether this robo-advisor is an appropriate choice for your investment dollars.
Disclosure: Please note that this article may contain affiliate links which means that – at zero cost to you – I might earn a commission if you sign up or buy through the affiliate link. That said, I never recommend anything I don’t believe is valuable.
Updated; March 14, 2018