Acorns vs. Betterment: Which One is the Better Roboadvisor?

Searching for an easy, unintimidating way to get started with investing, but don’t want to use a financial advisor? Need a user-friendly, digital interface that empowers you to make smart investing decisions – even if you don’t have any experience? 

Robo-advisors are the latest development in the investing and wealth management space. And out of all the many options, Acorns and Betterment are two of the best. Read on to find out how they compare.

The Lowdown on Robo-Advisors

As the name suggests, robo-advisors are basically automated investing services that use computer algorithms and sophisticated software to build, manage, and oversee individual investment portfolios. These platforms, which have both mobile applications and browser-based login portals, offer a variety of services ranging from tax optimization to automatic rebalancing.

Despite the name, robo-advisors also have human advisors available to answer questions. The availability and extent to which these advisors can give advice are dependent on an individual’s membership plan. Many of the free or basic plans offer no direct access, while premium plans may feature 24/7 chat or even direct access via phone.

Aside from the ease of use and access, it’s the low costs that draw many people to robo-advisors. Whereas the average human financial advisor charges roughly one percent for assets under management ($1,000 for every $100,000), robo-advisors generally charge somewhere between 0.25 percent and 0.50 percent ($250 to $500 for every $100,000 in managed assets).

Fees & Minimums: Acorns vs. Betterment

Let’s start with the biggest concern most robo-advisor users have: fees and minimums. After all, this is the primary reason why people choose robo-advisors over human advisors. 

The good news is that neither Acorns or Betterment have account minimums to open. That means you can get started without investing a single dollar. However, it should be noted that Acorns won’t let you actually invest your money until you have a balance of $5. (But, seriously, if you don’t have $5 to fund your account, you’re probably not ready to invest.)

While minimums are a non-issue, both platforms do charge fees that vary depending on the type of account and the amount. For Betterment, it’s pretty simple: 0.25% annual fee on your account balance up to $100,000. Any funds above this threshold charge a fee of 0.40%. However, once you get above $100,000, you also get access to human advisors.

With Acorns, it’s a little different. They charge flat monthly fees based on the type of account. If you have Acorns Core, it’s $1 per month for an investing account with spending roundups. For Acorns Core + Acorns Later, it’s $3 monthly for an investing account with spending roundups and an IRA for retirement savings. With Acorns Core + Acorns Later + Acorns Spend, it’s $5 for all of the previously mentioned features plus a checking account and debit card. Once your portfolio balance reaches seven figures, you have to speak with customer support for next steps.

If you have a smaller account balance – say less than $5,000 – Betterment is probably a better deal. But as your account balance increases, Acorns flat monthly fee basically equates to a much lower percentage. For example, let’s say you have $400,000 in a Betterment account. You’ll pay roughly $1,600 a year in management fees. But with Acorns, you’d pay just $12.

Features: Acorns vs. Betterment

Both Acorns and Betterment offer pretty similar features in user-friendly app-based interfaces that can be accessed from any device. Acorns is primarily designed for total newbies. Thus it includes simple features like “roundup,” which automatically rounds spending up to the nearest dollar and invests this money into your accounts on a daily basis. 

While Betterment is still user-friendly, it also caters to slightly more sophisticated investors who are focused on growing larger portfolios. They allow you to set income targets in retirement and other longer-term goals.

Both robo-advisors offer automatic rebalancing (which means the algorithm automatically adjusts your accounts to ensure you’re never too heavily invested in a single fund). They also each have fractional share investing, which allows you to invest in a percentage of a stock without needing to buy one whole share.

Performance: Acorns vs. Betterment

From an overall performance perspective, both products are designed quite well for their intended purposes. Each can be used via mobile or desktop. They both have top notch security and tailor their investment advice to each individual user based on questionnaires, age, risk tolerance, and other information. 

Initial setup for both Acorns and Betterment takes less than five minutes. Unlike full-service brokerages like Fidelity or Schwab, the main dashboards are simple and intuitive. There are only a few different screens and options, which makes it easy to navigate and get started.

While there are no major complaints regarding either platform’s performance, it’s clear that Acorns is designed to be totally hands-off, while Betterment offers a few more toggles and features that users can depend on (if they desire). 

Acorns vs. Betterment: Which One is Better?

When it’s all said and done, who should use Acorns? And who should use Betterment? Unfortunately, I can’t give you a perfect answer. The best thing I can say is, it depends.

If you’re a brand new investor with no pre-existing knowledge and you simply want to get started in a low-cost, hands-off way, go with Acorns. (This option is especially well-suited for teenagers and young adults.) You can literally invest pennies at a time using the roundup feature. This allows you to invest without even thinking about it.

If you’re more focused on building wealth for retirement and/or reaching other long-term goals, I’d probably recommend Betterment. They offer some more advanced services and give you the option of taking a hybrid approach with human advisors once your account reaches a certain level.

At the end of the day, robo-advisors are an excellent choice. And whether you go with Acorns, Betterment, or one of the other options on the market, you won’t be sorry. With low fees and intuitive interfaces, these tools make investing easy and fun!

If you liked this comparison, you may also enjoy:

• Wealthfront vs. Betterment
• SoFi vs. Betterment