Plenty of robo-advisors have come and gone over the past several years. But if you’re looking for two of the original players who are still innovating and evolving, Wealthfront and Betterment are among the best.
While they each offer unique features, services, and interfaces, they share a lot in common. And for anyone who is interested in having more control over their investing by removing the financial advisor “middle man,” either platform is an option. The question is, which one is better for you?
Unlike some of the other robo-advisor upstarts in the industry, you’ll never have to worry about the credibility of Wealthfront or Betterment. Both of these DIY investing platforms have been in the industry for over a decade, making them two of the largest independent robo-advisors in the industry. You could also argue that they’re the best-known.
Both platforms offer leading automated investing solutions and an oversized menu of investment choices. And unlike other platforms that are limited to just stock investing or only specific account types, you can do everything with Wealthfront and Betterment. They’re basically “one-stop shops” for managing your portfolio and investments.
The best way to analyze Wealthfront vs. Betterment is by studying how they stack up in a head-to-head comparison. Here’s a handy table to help you quickly compare and contrast.
|Minimum account balance to open||$0 minimum|
|Tax loss harvesting||✅||✅|
|Human Advisor Option||❌||✅|
|Customer support||Email & Phone||Email & Phone|
|Mobile app||Android & iOS||Android & iOS|
Now that you have a basic understanding of how Wealthfront and Betterment compare, let’s take a more thorough look at specific features, as well as some of the pros and cons of each robo-advisor platform.
Wealthfront was launched all the way back in 2008 during the financial crisis. And over the past decade and a half, it’s cemented itself as one of the leaders of the robo-advisor revolution. It’s widely selected as the best robo-advisor for financial planning, though it’s not necessarily the easiest to use.
When it comes to the benefits of using Wealthfront, look no further than its tax-efficient trading strategies and wide range of product offerings. In addition to offering all of the typical Roth IRA, Traditional IRA, SEP IRA, and various 401(k) options, Wealthfront also allows users to set up 529 education investing accounts and invest in cryptocurrencies.
Another benefit of Wealthfront is its modest yield bank accounts that require no fees or expenses. And for investors that do choose to use a human advisor within the platform, advisor fees are quite low.
While more experienced investors get excited about all of the charts, graphs, and individual features within the Wealthfront platform, newer and less-experienced investors can easily become overwhelmed by the bells and whistles.
Another strike against Wealthfront is the fact that they offer no fractional share trading (which has become a pretty standard feature among other robo-advisor platforms). This means you must have enough cash to buy whole shares of stocks, which could lead you to hold more cash than you want before investing.
Like Wealthfront, Betterment has been around for over a decade. This platform offers many of the same features and functionality as Wealthfront, but also has its own unique setup and options that set it apart.
Betterment is slightly less intimidating than Wealthfront, yet is hardly lacking in the functionality department. You can choose from different portfolios based on your own specific target goals (like investing in real estate or retirement). Betterment also offers a human advisor option, which Wealthfront does not.
Betterment isn’t the cheapest robo-advisor on the planet. If you want professional advice from a real-life advisor, you’re going to pay relatively high fees (compared to other DIY platforms). There are also no cryptocurrency investment options, which is something other platforms are integrating into their systems.
Wealthfront is ideal for investors who want to take a hands-off approach and make as few financial decisions as they possibly can. It’s also a good option for people who like to geek out on charts and graphs. It’s sophisticated yet hands-off.
Like other robo-advisors, Wealthfront tends to recommend tax-efficient, low-cost exchange-traded funds (ETFs) and other basic index funds that align with your specific risk tolerance and financial goals. And with automated allocation features, you can tell Wealthfront to automatically take certain percentages of your paycheck to cover things like college savings, bills, and investment goals.
However, because Wealthfront requires a minimum $500 contribution to begin investing, this might not be the best option for anyone who is totally new and wants to get started with a much smaller amount. You’ll also pay a 0.25 percent management fee.
Betterment also has a 0.25 percent management fee for its basic account (though it increases to 0.40 percent for the next level). If you’re looking for a simple platform that allows you to identify target goals and create specific portfolios for reaching these investment objectives, Betterment is a great option.
When it’s all said and done, you’ll have to decide whether it makes more sense to go with Wealthfront vs. Betterment. As you can clearly see, there’s a lot of crossover between the two. However, with several distinct differences, pros, and cons, it’s important that you zoom out and look at the big picture.
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