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Betterment vs. Wealthfront: The Biggest Differences
While Betterment offers a $0 minimum ($10 to get started) for its standard account and a $100,000 minimum for its premium account, Wealthfront imposes a $500 minimum account balance for all of its automated investment accounts.
In addition to Wealthfront's 0.25% management fee, you'll have to pay an investment fund fee ranging from 0.06% to 0.13% — and Wealthfront doesn't offer financial planner access like Betterment does. But Wealthfront makes up for this by letting you adjust your ETF allocation if you don't like the allocation Wealthfront has selected.
Betterment may be a more suitable fit if you prefer lower fees, stronger goal-focused investment strategies, cryptocurrency portfolios, and human advisor access. Wealthfront could be a stronger option for those who want additional features and products such as lines of credit, college savings plans, high-yield cash accounts, portfolio customization, and direct indexing strategies.
Is Betterment Right for You?
Who Betterment is Best For
Betterment could be a good fit if you're looking for specific goal-based investing and retirement strategies. The platform offers five types of taxable goals: retirement savings, retirement income, safety net, major purchase, and general investing. You can also adjust these goals at any time.
This robo-advisor could also be a good option if you're looking for one of the best investment apps with human advisor access. But Betterment may not be the right fit if you're looking for other specialty accounts like college savings plans.
Ways to Invest With Betterment
Betterment provides two main investing account options: a digital plan and a premium plan. The digital account is the least expensive and carries a 0.25% annual fee. This account invests your money in stock ETFs and bond ETFs, and it offers features such as tax-loss harvesting, automatic rebalancing, fractional shares, goal-based planning, socially responsible investing, and human advisor access.
Tax-loss harvesting lets you write off investment losses on your tax return, lowering the amount you owe in taxes. Betterment uses tax-loss harvesting to sell and reinvest any losses into securities that align with your current portfolio.
The premium account has a $100,000 minimum — and you'll incur a 0.40% annual fee — but you'll get access to all of the features of the digital plan plus more. Specifically, you'll have unlimited access to certified financial planners and in-depth investment advice.
However, Betterment also now offers cryptocurrency portfolios. These have a 1% annual fee, and they let you invest in allocations of different cryptocurrencies. In addition, Betterment offers several retirement accounts (traditional IRAs, Roth IRAs, SEP IRAs, and Roth IRA conversions), 401(k)s for businesses, and an investing platform for advisors. Plus, it pays up to
If you want to open an IRA with this brokerage, Betterment lets you create retirement goals and monitor your progress as you invest more and more.
The robo-advisor also applies tax-loss harvesting to maximize your returns, and its Roth conversion option makes it easy to move funds between multiple IRAs both through the web and mobile platforms. Plus, the premium plan gives you unlimited access to a certified financial planner (CFP). You'll have to pay extra to access this service if you've got the digital plan.
Is Wealthfront right for you?
Wealthfront holds the distinction of being the first automated investment app to offer managed, diversified portfolios with the option of exposure to crypto investments.
Who Wealthfront is Best For
Wealthfront is slightly more expensive than Betterment, but this robo-advisor could be a good choice if you're interested in using products like education savings plans, portfolio lines of credit, or the
Ways to Invest With Wealthfront
Wealthfront offers investing accounts, retirement accounts, portfolio lines of credit, 529 college savings plans, and cash management accounts. Its investing accounts provide tax-loss harvesting, financial planning tools, and access to an array of index fund investments.
It has a $500 minimum deposit requirement for automated investing, and investing accounts include a 0.25% advisory fee and fund fee that ranges from 0.06% to 0.13%. And although it doesn't offer human advisor guidance like Betterment, Wealthfront offers more investment choices.
Wealthfront's automated features also apply to retirement accounts — including traditional IRAs, Roth IRAs, SEP IRAs, and 401(k) rollovers — and education savings plans.
According to its website, Wealthfront's US Direct Indexing approach aims to harvest even more losses and lower your tax bill by searching for movements in individual stocks within the US stock index. Risk parity is an asset allocation strategy that strives to enhance your risk-adjusted returns.
Wealthfront offers two crypto trusts: Grayscale Bitcoin Trust (GBTC) and the Grayscale Ethereum Trust (ETHE). You can choose a combined allocation of these assets of up to 10% of your portfolio, and Wealthfront offers them for both its taxable investment accounts and IRAs. Learn more about Wealthfront's crypto products here.
Unlike Betterment, Wealthfront also offers a 529 College Savings plan that lets you set aside money for your child's education. The account can be opened in any state. And you can make withdrawals without paying federal taxes. In addition to its college savings plan, Wealthfront offers a free cash account that carries a 5.00% APY.
Wealthfront doesn't offer ongoing human advisor consultations, but it does have a product specialist team of certified public accountants (CPAs), certified financial planners (CFPs), and chartered financial analysts (CFAs). You can contact them if you ever have any questions about the platform.
Which is Better: Betterment or Wealthfront?
When it comes to IRAs, Betterment best suits those who want to combine financial advisor guidance with automated portfolio management. Betterment is also best for those in search of an all-around automated investing experience with access to human advisors and a wide range of account options.
However, Wealthfront is the better choice if you're looking for a wider variety of investment types (e.g., Betterment offers ETFs and cryptocurrencies, but Wealthfront offers ETFs, index funds, and crypto trusts). Wealthfront also offers accounts for all types of hands-off investors, but it's a better option for individuals who want to add crypto investments or 529 college savings plans to their automated portfolios. It also suits those who want more control over the ETFs in their automated portfolio. It could also be a good move if you want more control over your portfolio's holdings.
Can I Lose Money with Betterment or Wealthfront?
Though both Betterment and Wealthfront strive to minimize risk and maximize returns by investing your cash in a diversified range of assets, your investments are still susceptible to market swings. But if either robo-advisor were to ever go out of business, each platform offers SIPC insurance of up to $500,000.
Betterment also offers FDIC insurance of up to $2 million ($4 million for joint accounts) for its cash reserve accounts and FDIC insurance of up to $250,000 for its checking accounts. Cash Reserve is only available to clients of Betterment LLC, which is not a bank, and cash transfers to program banks are conducted through the clients' brokerage accounts at Betterment Securities.
Wealthfront's cash accounts are FDIC insured up to $8 million for an individual cash account ($16 million for joint accounts).
There's always a level of risk involved when investing your money. Robo-advisors are generally low-risk investments, but investing is never completely risk-free. Make sure you understand the risks before beginning trading with either Betterment or Wealthfront.
Betterment and Wealthfront: IRA Eligibility Requirements
Wealthfront and Betterment are both good IRA options.
- Traditional IRA: You can set up this account if you're at least 18 years of age with taxable income. Traditional IRAs allow you to contribute up to $7,000 per year (or $8,000 if you're over the age of 50) in pre-tax dollars. You'll be responsible for taxes only when you start making withdrawals at age 591/2 .
- Roth IRA: The minimum age requirement is the same for Roth IRAs. However, unlike traditional IRAs, Roth IRAs are funded with after-tax contributions. Plus, you can only make contributions if you meet the income thresholds set by the IRS. Single filers can only contribute the full amount ($7,000 or $8,000) for 2024. In 2023, folks can contribute up to $6,500 (or $7,500 if aged 50 or older).
- SEP IRAs: Both robo-advisors accept automated SEP IRAs. Strictly for self-employed individuals and small business owners, these accounts let you contribute up to $69,000 in 2024 and $66,000 in 2023.