Betterment vs. Wealthfront vs. Vanguard – Which Robo-Advisor is Best For You?
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What is the most important feature to consider when choosing a robo-advisor? For some people, low minimum investments or low fees may be the deciding factor. For others, the option for socially responsible investments can make the decision for them.
Another popular feature for robo-advisors is access to human financial planners. Whether you’re looking for a hands-on, actively managed account or simply the ability to reach out to Certified Financial Planners (CFPs) when you need them, the three robo-advisors we’ll review today – Betterment, Wealthfront, and Vanguard – will have something for you.
- Betterment vs. Wealthfront vs. Vanguard – Which Robo-Advisor is Best For You?
- Features at a Glance
- Betterment vs. Wealthfront vs. Vanguard – Overview
- Betterment vs. Wealthfront vs. Vanguard – Top Features
- Betterment vs. Wealthfront vs. Vanguard – Quick Take
- Betterment vs. Wealthfront vs. Vanguard – Deep Dive
- Betterment vs. Wealthfront vs. Vanguard – Which is Best? The Takeaway
- More Comparison Articles
In this Betterment vs. Wealthfront vs. Vanguard review, you’ll learn the answer to all your questions:
- Which robo-advisor is the most affordable?
- Which robo-advisor is best for beginners?
- Which robo-advisor is best for wealthy investors?
- How do I choose between Betterment vs. Wealthfront vs. Vanguard?
Features at a Glance
Betterment vs. Wealthfront vs. Vanguard – Overview
What is Betterment?
Betterment is a goals-based robo-advisor that combines digital investment management with human financial planning services. Though they’re a great option for new investors due to their $0 minimum investment amount, Betterment also appeals to wealthier investors because of their financial advisor access and tiered account management fees that charge lower fees to clients with over $2 million in their accounts.
Betterment is one of the pioneering robo-advisors, launched in 2010. The decade-old company has consistently demonstrated its commitment to affordable, quality investment advice since its inception. It is the largest independent robo-advisor in terms of assets under management, and is in third place overall with $22 billion AUM as of March 2020.
What is Wealthfront?
Wealthfront is an all-digital automated investment management robo-advisor. Wealthfront is a good investment option for varied investors but holds particular appeal to new, digitally savvy, investors due to their low minimum investment requirements and low fees.
Wealthfront’s PATH, online, all-digital financial advisor strives to compete with human planners. If you’re seeking a live human to text or chat with, you’re better off with Betterment.
Like Betterment, Wealthfront is also an early robo-advisor and holds $21 billion AUM as of March 2020, bringing it to a respectable fourth place overall and second highest independent robo-advisor in terms of AUM. Like many other robo-advisors, Wealthfront has expanded its offerings to include a cash account, which makes it a more attractive one-stop-shop option for electronic investors.
What is Vanguard?
Vanguard may be best known as a powerhouse investment company, but it also has two robo-advisor offerings: Vanguard Personal Advisor Services and Vanguard Digital Advisor. These two distinct services give clients the ability to choose their level of human support. Both robo-advisor options come with higher minimum investment requirements than Betterment and Wealthfront, which makes Vanguard a better option for wealthier investors.
Vanguard takes the top spot in terms of robo-advisor AUM, with $161 billion AUM in their robo-advisor accounts alone. As a company, Vanguard has over $6.2 trillion in assets globally and works with over 30 million investors across 170 countries.
Robo-Advisor Selection Wizard – 4 Question Quiz to Help you Choose a Robo-Advisor
Betterment vs. Wealthfront vs. Vanguard – Top Features
Betterment Top Features
- Smart Beta and Socially Responsible investment strategies
- Texting with financial advisors at all levels
- Individualized, a la carte financial planning packages
- Digital and hybrid management options
- Betterment checking and cash reserve
Wealthfront Top Features
- Cash account available
- Daily tax-loss harvesting
- Loans available
- 529 Plan account
- PATH all-digital financial planner
Vanguard Top Features
- Video or face-to-face conversations with a dedicated financial advisor with Personal Advisor Services package
- Retirement planning features
- Digital Advisor allows clients to link other accounts from different companies to help with more accurate forecasting
- Belongs to the Vanguard family with vast financial services
Betterment vs. Wealthfront vs. Vanguard – Quick Take
If you want access to human financial planners, you will benefit from Betterment or Vanguard Personal Advisor Services.
- Betterment gives clients the ability to text with financial planners at all account levels, making them one of the most affordable robo-advisors with human financial planners on the market. With Betterment Premium, you will have unlimited access to human CFPs.
- Vanguard offers an option for wealthier investors: accounts valued over $500,000 receive attention from a dedicated financial advisor, while other accounts have access to a team of financial planners.
Investment Minimums for human financial advisor access:
- Betterment Premium – $100,000
- Betterment Digital – No minimum – Can text with financial advisors or purchase a la carte financial planning packages
- Vanguard Personal Advisor Services – $50,000
Winner – for human financial advisor access pick Betterment or Vanguard.
If you want a robo-advisor with a low initial investment, you will benefit from Betterment Digital and Wealthfront.
- Betterment Digital is one of a few $0 minimum investment robo-advisors on the market. You’ll need $100,000 to invest in Betterment Premium, but Digital still offers many of the features that make Betterment an attractive option for investors.
- Wealthfront also has a relatively low minimum investment, although low investment minimum robo-advisors on the market that beat its $500 minimum.
Winner – for no investment minimum pick Betterment.
If you’re looking for Socially Responsible Investing (SRI) or Smart Beta portfolios, you’ll need to look toward Betterment. Betterment is the only robo-advisor on this list to offer Smart Beta portfolios through Goldman Sachs. They’re also the only one of these three robos to offer clients a chance to make impact investing portfolios.
Winner – for SRI or Smart Beta portfolios pick Betterment.
If you’re a wealthier investor, you’ll love Vanguard. Vanguard has higher minimum investment amounts — $3,000 for their Digital Advisor option and $50,000 for their Personal Advisor Services packages. However, they drastically reduce their account management fees as client account values grow. For their wealthiest clients – those with a minimum of $25 million invested – Vanguard charges only 0.05% AUM and provides clients a dedicated financial planner.
Betterment also offers a reduced rate on account management fees for clients with accounts valued over $2 million. However, Vanguard’s rate reduction is much more pronounced as accounts grow.
Wealthfront also offers investors with over $100,000 a single stock diverification plan where individual stocks replace ETFs, thereby reducing fees. Wealthfront also offers a risk parity fund which strives to reduce risk while maintaining returns.
Winner-Vanguard or Betterment with financial advisor access. Vanguard for the lower minimum of $50,000 and lower investment management fees.
One-Stop Investment Portal
If you want a one-stop-shop robo-advisor, you could benefit from all three of these robo-advisors.
- Wealthfront is quickly becoming a solid go-to option. They have begun to add products such as loans and a high-yield cash account that make it easy to keep all your financial products managed under one company.
- Vanguard is also a great option for investors who want to keep all their finances under one roof.
- Betterment offers checking accounts in addition to their investment products.
Winner-No clear winner here. Wealthfront, Betterment and Vanguard Advisors each offer comprehensive financial and investment services.
Betterment vs. Wealthfront vs. Vanguard – Deep Dive
Fees and Minimums
Betterment Fees and Minimums
Betterment offers two account types: Digital and Premium.
- Digital accounts have no minimum investment amount. Fees start at 0.25% AUM and drop to 0.15% AUM once accounts grow to over $2 million.
- Premium accounts have a minimum investment of $100,000. Fees start at 0.40% AUM for accounts valued up to $2 million or 0.30% AUM for accounts over that amount.
Wealthfront Fees and Minimums
Wealthfront offers only one robo-advisor plan. The robo requires a $500 minimum investment and charges a flat rate of 0.25% AUM for asset management.
Vanguard Fees and Minimums
Vanguard has two robo-advisor services: Digital Advisor and Personal Advisor Services.
Digital Advisor has a minimum investment of $3,000 and a flat fee of 0.15% AUM.
Personal Advisor Services has a minimum investment of $50,000. The fees on these accounts work on a tied system:
- 30% AUM on accounts up to $5 million
- 20% AUM on accounts between $5-10 million
- 10% AUM on accounts between $10-25 million
- 05% AUM on accounts over $25 million
Human Financial Planners
Betterment is one of the only robo-advisors to allow clients to text with human financial planners at any account level. Normally, this would be a premium service at a premium cost.
As the name would suggest, Vanguard offers human financial planners with their Personal Advisor Services option. This hybrid robo uses robo-advisor algorithms to help you assemble your portfolio while financial advisors help you to establish and maintain that portfolio. Investors with over $500,000 under management will be assigned a dedicated financial advisor, which those with lower assets will have access to a shared team of advisors.
If access to advice by human financial planners is important to you then choose either Betterment Premium or Vanguard Personal Advisor Services. Wealthfront and Vanguard Digital Advisor are not good options. Digital Advisor is Vanguard’s way of keeping account management costs low by eliminating the human aspect of investing, while Wealthfront has relied on digital investment strategies since the beginning.
This feature only applies to taxable investment accounts, not retirement accounts.
When your portfolio may be subject to capital gains taxes due to growth, some robo-advisors use tax-loss harvesting to reduce those taxes. Tax-loss harvesting works by selling off investments at a loss to offset investment gains and reduce the income you need to pay taxes on.
All three robo-advisors offer tax-loss harvesting in some form. Betterment even claims their tax-loss strategy can increase investor returns by 0.77% each year!
Wealthfront stands out in the robo-advising world because they offer daily tax-loss harvesting on accounts. They claim this generates more savings over other robo-advisors who do less frequent checks.
Vanguard offers tax-loss harvesting, but only on a case-by-case basis. This might be a distinct advantage, since human oversight into the tax-loss harvesting process can help make tax time less of a headache.
Betterment Stock Investments
|U.S. Total Stock Market||VTI, SCHB, ITOT|
|U. S. Large-Cap Value||IVTV. SCHV, IVE|
|U.S. Mid-Cap Value||VOE, IWS, IJJ|
|U. S. Small-Cap Value||VBR, IWN, IJS|
|International -Developed Market||VEA, SCHF, IEFA|
|International - Emerging Market||VWO, IEMG, SCHE|
Betterment Bond Investments
|U.S. High Quality Bnds||AGG, BND|
|U.S. Municipal Bonds||MUB, TFI|
|U.S. Inflation-Protected Bonds||VTIP|
|U.S. High-YIeld Corporate Bonds||HYLB, JNK, HYG|
|U.S. Short-Term Treasury Bonds||SHV|
|US Short-Term Investment-Grade Bonds||NEAR|
|International Developed Market Bonds||BNDX|
|International Emerging Market Bonds||EMB, VWOB, PCY|
|Investment Fund Category||Index Fund Ticker Symbol|
|US Total Stock Market||VTI and SCHB|
|Foreign Stock - Developed Market||VEA and SCHF|
|Foreign Stock - Emerging Market||VWO and IEMG|
|Dividend Appreciation Stock||VIG and SCHD|
|US Treasury Inflation Protected Bond (TIPs)||SCHP and VTIP|
|US Government Bond||BND and BIV|
|Municipal Bond||VTEB and TFI|
|US Corporate Bond||LQD|
|Foreign-Emerging Market Bond||EMB|
|Real Estate||VNQ and SCHH|
|Natural Resources (Energy)||XLE and VDE|
|Investment Fund Category||Index Fund Ticker Symbol|
|US Total Stock Market||VTIAX|
|Total Bond Market Index Fund||VBTLX|
|Total International Bond Index Fund||VTABX|
|Intermediate-Term Investment Grade Fund||VFIDX|
|Short-term Investment Grade Fund||VFSUX|
|Intermediate-Term Tax-Exempt Fund (taxable accts only)||VWIUX|
These three robo-advisors all provide the basic account types, including various IRA, trusts, and taxable accounts. In this case, Wealthfront stands out as being the only robo-advisor of the three to provide 529 College Savings Accounts.
Betterment Account Types
- Individual taxable accounts
- Traditional, Roth, SEP, and rollover IRAs
Wealthfront Account Types
- Personal and joint investment accounts
- Traditional, Roth, SEP, and transfer IRAs
- 401(k) rollovers
- 529 College Savings Accounts
Vanguard Account Types
- Individual and joint investment accounts
- Traditional, Roth, SEP, Simple, and rollover IRAs
We’d choose Betterment because it has a zero minimum investment amount and all investors can text with financial advisors. Also, there are a la carte financial planning packages available for more in dept guidance.
The most important factor in choosing a robo-advisor is how it matches up with your needs. Both are good robo-advisors. This article will help you define whether Betterment, Vanguard or Wealthfront is best for you.
Again, we like both robo-advisors. If you prefer access to human financial advisors, pick Betterment. If you’re comfortable with an all-digital platform and might need the lending feature, then pick Wealthfront.
With low management fees, we think Vanguard Personal Advisors are worth investigating. Plus, Vanguard is a highly regarded and reputable financial firm.
What are the similarities between Betterment, Wealthfront, and Vanguard?
- Tax-loss Harvesting – Each robo-advisor offers tax-loss harvesting, though they differ on how frequently they do so; Wealthfront relies on daily tax-loss harvesting as part of their strategy, whereas Vanguard does tax-loss harvesting on a case-by-case basis.
- Accounts – All three robo-advisors offer the standard IRAs and taxable account options.
- Fees – Account management fees for Betterment, Wealthfront, and Vanguard are all comparable.
- Investments – Each offers diverse investment options from a healthy mix of stocks and bonds.
What are the differences between Betterment, Wealthfront, and Vanguard?
- Financial Planners – Only Betterment and Vanguard Personal Advisor services offer access to human financial planners.
- 529 Account – Only Wealthfront offers 529 College Savings Accounts.
- Minimum Investment Amount – The minimum balance requirements are wildly divergent, from Betterment’s Digital to Vanguard Digitals $3,000 minimum to Vanguard’s $50,000 minimum investment requirement for Personal Advisor Services and Betterment Premium’s $100,000 minimum.
- Fees – Vanguard rewards wealthier with the lowest management fees with 0.30% of AUM up to $5 million and declining to 0.05% AUM for accounts valued over $25 million.
- Investing Style – SRI and Smart Beta portfolios are only available through Betterment.
Betterment vs. Wealthfront vs. Vanguard – Which is Best? The Takeaway
All three of these robo-advisors offer incredible value for their reasonable account management fees.
In terms of value, each has diverse investment options, multiple account types available, and a history of providing exceptional support in terms of account management.
However, investors should take careful note of the differences between the robo-advisors. The level of support by human financial professions differs, and only Betterment offers more unique investment options like SRI and Smart Beta portfolio strategies. Which robo you choose will depend on your needs as an investor and your values.
Realize that Betterment and Wealthfront are robo-advisors first, with access to banking and lending (Wealthfront) services.
While Vanguard is a full-service financial firm with a robo-advisor.
The best robo-advisor for you is the one that suites your specific needs.
Take a look around each website and decide which one is the best robo-advisor for you.
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- M1 Finance vs. Vanguard Personal Advisor Services
Read the full Betterment Review
Read the full Wealthfront Review
Read the full Vanguard Review
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