Betterment Review 2024

Paid non-client of Betterment. Views may not be representative; see more reviews at the App Store and Google Play Store. Learn More about this relationship.

Top Rated For

• Best for Beginners
• Best for Cash Management
• Best for Tax-Loss Harvesting
• Best for Crypto Portfolio Selection
  

Our Take

The Betterment platform stands out for its excellent selection of automated portfolios, reasonable fees, and well-designed user journey. Betterment has also been expanding its offerings to crypto and 401(k) and 529 plans (available through Betterment at Work). The robo-advisor's push into serving employers in addition to individuals now includes a new product that allows small business owners to match employees' student loan payments with a 401(k) contribution. This new feature is enabled by the Secure Act 2.0 legislation to help people save for retirement while paying off student loans. We'll dig deeper into Betterment to see how it stacks up in an increasingly competitive robo-advisory field.

Account Overview

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. For Cash Reserve (“CR”), Betterment LLC only receives compensation from our program banks; Betterment LLC and Betterment Securities do not charge fees on your CR balance.

Checking accounts and the Betterment Visa Debit Card provided and issued by nbkc bank, Member FDIC. Checking is made available through Betterment Financial LLC. Neither Betterment Financial LLC nor any of its affiliates is a bank. Betterment Financial LLC reimburses ATM fees and the Visa® 1% foreign transaction fee worldwide, everywhere Visa is accepted.

Account Setup

Similar to all the robo-advisors we’ve reviewed, you can set up a Betterment account entirely online. To get started, simply create a username and password on Betterment’s website. Next, you’ll need to provide the following personal information:

• Name
• Phone number
• Email address
• Mailing address
• Date of birth
• Social Security number (SSN)

 You’ll also need to upload a form of government-issued ID, like your U.S. driver’s license.

The platform will then give you a questionnaire about your goals, time horizon, and investment risk tolerance. Based on your responses, the platform will recommend stock and bond exchange-traded funds (ETFs) that fit your goals. Unfortunately, you can’t see the portfolio recommendation without setting up your account first. However, you can get the recommendation without depositing any money.

Betterment does not have a minimum account balance requirement but does require each deposit to be at least $10. Betterment offers free deposits and withdrawals.

Betterment has also been expanding its services to other investment accounts. You can open a 529 plan (only through an employer) to invest for future college expenses with tax advantages. Betterment also works with employers to offer its portfolios through 401(k) plans.

Goal Planning

As a robo-advisor, Betterment’s job is to create a portfolio that matches your financial goals. You start by picking from a list of common financial goal types that include:

• Major Purchase
• Education
• Retirement
• Retirement Income
• General Investing
• Emergency Fund

You can pick multiple goals with a different portfolio for each one. You then set your time horizon for each goal. The Betterment robo-advisor will suggest an appropriate portfolio allocation. For example, if you select retirement with over 20 years to go, the platform will recommend a portfolio made up of 90%+ of stocks. On the other hand, if you’ve already reached your retirement age, the robo-advisor will recommend a portfolio with a lesser amount in stocks to protect your savings.

The closer you are to your goal, the more conservative the recommended portfolio will be. Betterment also adjusts based on your selected risk tolerance, ranging from very aggressive to very conservative.

The Betterment platform forecasts how likely you are to reach your long-term goals based on your current savings and project investment returns. If you have other investment accounts, you can also link them to the platform to include those in the forecast.

Betterment also lets you set and track goals for crypto investing and saving money in its cash management accounts. Overall, these goal-setting tools make it easy to figure out how to use Betterment effectively.

Account Services

You can access investment, cash management, and checking accounts as a Betterment user. With this combination, you can manage all your money in one place. Next, we’ll discuss what these different accounts offer and whether they are worth it.

Cash Management

Betterment has a few different account offerings within its platform. The investing account is the robo-advisor, but there are also crypto, cash reserve, and checking accounts. Betterment’s cash management account lets you safely store uninvested cash and earn a generous interest rate at its program banks. Customers earn a variable APY* of 5.00%, which is much higher than the competition and right behind Wealthfront's current rate of 5.00% (5.50% when you refer a friend). When you're a new Betterment customer, you also receive an even higher bonus APY of up to 0.75% for three months with a qualifying deposit (terms apply). There’s no minimum account balance requirement, but you must deposit at least $10 when you open the account. There are no fees, and you can make unlimited, free withdrawals.

Betterment also offers a separate checking account with a debit card. You can use this debit card to make purchases and get free withdrawals from any ATM in the world; Betterment reimburses any fees. The debit card also earns cash back when you spend at select retailers like Costco, Adidas, and Aeropostale.

For Cash Reserve (“CR”), Betterment LLC only receives compensation from our program banks; Betterment LLC and Betterment Securities do not charge fees on your CR balance.

Portfolio Construction

Betterment builds its portfolios using stock and bond ETFs. It follows an asset allocation strategy based on modern portfolio theory that analyzes each asset's overall risk versus return contribution to build these portfolios for investors. Betterment uses equity funds for stocks in U.S., international, and emerging markets.

For bonds, Betterment uses a combination of U.S., international, and emerging market bond funds. This is one area where Betterment stood out, as it’s not common for robo-advisors to allow investments in international bonds. Betterment has also created new cryptocurrency portfolios.

As an investor, you pick between a combination of different strategies from Betterment. These are:

• Core: Built for long-term investing and low costs using stocks and bond investments from around the world
• Innovative Technology: Focuses on high-growth tech companies like clean energy, semiconductors, and robots
• Climate Impact: Invests in companies with lower carbon emissions while still offering decent long-term returns
• Social Impact: Provides more of a focus on companies working towards minority empowerment and gender diversity
• Blackrock Target Income: A 100% bond portfolio with different yields to offset stock market volatility
• Goldman Sachs Smart Beta: Looks to outperform the market by upping the risk level
• Value Tilt: A portfolio that looks for companies that are undervalued and tilts towards investing more in them
• Broad Impact: Looks for companies that rank highly in environmental, social, and governance (ESG) criteria, balancing this filter with long-term performance
• Sustainable: Looks for crypto assets like Bitcoin (BTC) and Ethereum (ETH) that prioritize using less energy to validate transactions on large liquid digital assets
• BTC/ETH: Provides direct exposure to the most liquid and well-known coins
• Universe: Invests across the crypto landscape, including decentralized finances and the metaverse

Real estate investment trusts (REITs) are one notable asset missing from Betterment’s robo-advisor portfolios. The company believes that real estate as a sector is already well represented in its equity portfolios. You can, however, access REITs through Betterment’s Flexible portfolio where you customize allocations and assets. The Flexible portfolios still have automatic rebalancing and tax-loss harvesting, but choosing a Flexible portfolio does disable the auto adjustment to the portfolio risk level as your target goal date approaches.

Available Assets 

Portfolio Customization

If you’d like to change your portfolio beyond the recommendations of the standard Betterment portfolios, you can do so through its Flexible portfolio option. You start with a portfolio distribution to match Betterment’s Core portfolio. Then, you adjust what percentage goes into the different investments, such as increasing the percentage in international stocks while decreasing how much you have in U.S. large-cap stocks.

The flexible portfolio also allows you to add asset groups that are not part of the standard robo-advisor portfolios, like commodities, high-yield bonds, and REITs. The Betterment investment review will analyze your customized portfolio to give ratings for your overall risk and portfolio diversification. Betterment also forecasts your future return for both good and bad market conditions.

There is a limit to how much you can customize, as Betterment restricts you to only investing in ETFs. You cannot trade through Betterment and buy individual stocks, bonds, or mutual funds. Betterment also doesn’t offer margin trading. You need to pay for any investments upfront without borrowing.

Portfolio Management

Betterment automatically rebalances your portfolio whenever an asset goes beyond 3% of your target allocation due to portfolio drift or when your account balance is at or past the minimum threshold. Rebalancing is usually done dynamically as deposits come in, but Betterment can sell assets that are overweighted to buy those that are underweighted to get back to your targets. Betterment’s system checks your portfolio once a day for automated adjustment.

Betterment’s system considers taxes for portfolio management. It checks which assets you’ve owned for less than a year that would trigger more expensive short-term capital gains versus long-term capital gain investments. The system prioritizes selling long-term assets for rebalancing to give your short-term investments time for better tax treatment.

If you change your target portfolio allocation, Betterment also rebalances to the new targets. You can turn off the automatic rebalancing so the platform only readjusts when you deposit or withdraw money.

Betterment also uses automatic tax-loss harvesting, seeking opportunities to find taxable losses in your portfolio to offset taxable gains. It aims to replace assets with something similar so you keep in the same position while also receiving the tax benefit.

Betterment is not a licensed tax advisor. Tax Loss Harvesting+ (TLH+) is not suitable for all investors and is subject to certain conditions. Read more at https://www.betterment.com/legal/tax-loss-harvesting and consider your personal circumstances before deciding whether to utilize Betterment’s TLH+ feature. Investing involves risk. Performance not guaranteed.

User Experience

Desktop

The Betterment desktop platform is clear, well-designed, and offers an excellent user experience. In one dashboard, you can see your investment performance, net worth, and balances, including outside accounts you linked to Betterment. You can also schedule deposits and turn features like tax-loss harvesting on or off. You can track your progress towards various goals and adjust your strategies as needed, too. Betterment’s excellent user experience is one of its major strengths.

Mobile

Betterment’s mobile app is available for both iOS and Android. It also gives you the same overview of your accounts, including Betterment ratings on performance, and allows you to schedule future deposits. The mobile app does have some limitations compared to the desktop, however. For example, it doesn’t provide the same level of detail on investments or allow you to access your tax documents. Still, it’s a quality option for checking your account on the go.

Customer Service

• Phone line available Monday to Friday, 9 a.m to 6 p.m. ET
• Email support (active hours same as phone support)
• Virtual chatbot (24/7)
• Extensive FAQs
• Paid access to Certified Financial Planners (CFPs); free for Premium users

Betterment provides phone and email customer service Monday through Friday from 9 a.m. to 6 p.m. ET. It also provides a virtual chatbot that can answer questions 24/7. The lack of customer support on weekends is a drawback compared to major brokers.

If you want to speak with an investment professional, you can buy packages starting at $299 to speak with a Certified Financial Planner (CFP) working for Betterment. You can schedule these calls for free if you have a premium account.

Security

Betterment’s security protocols do an excellent job of protecting your identity and data. They include:

• Website encryption
• Two-factor authentication for logging in
• Biometric authentication for mobile devices
• Limited data access for employees
• Fraud protection procedures
• Protected password storage for third parties

In addition, Betterment provides high limits of insurance for your accounts:

• Cash Reserve accounts are eligible for up to $2 million ($4 million for joint accounts) of FDIC insurance ($250,000 insurance per program bank)
• Checking accounts are FDIC-insured up to $250,000 for individual accounts and $250,000 per depositor for joint accounts
• Investment accounts include $500,000 of SIPC insurance for missing funds, with $250,000 for cash claims
  

Education

Betterment provides an FAQ section, a help center, and an educational library of articles on its website. The educational articles cover investment topics like investment portfolios, retirement planning, and saving money. Betterment has some videos and guides, though most of its resources are articles.  Betterment also provides some online tools like an investment analysis tool and a goal tracker.

While Betterment’s educational resources are reasonable, they are not quite as comprehensive as what’s available from other companies. Betterment’s focus is offering support through the robo-advisor and other investment tools.

Commissions and Fees

Betterment’s fees are transparent and reasonable for a robo-advisor. A basic account is $4 per month. If you have at least $20,000 across all your Betterment accounts, the cost changes to a flat fee of 0.25% of your investment account per year instead. You can also qualify for the annual 0.25% pricing by setting up monthly recurring deposits of $250.

For a premium account that includes access to financial advisors, you must deposit at least $100,000 and will owe an annual fee of 0.40% (0.25% base + 0.15% for premium).

Betterment does not charge commissions for your investment trades. The portfolios themselves will charge an expense ratio, but Betterment works to keep these low. For example, depending on your allocation, its core portfolio charges from 0.05% to 0.16% per year.

If you’d like to speak with a financial advisor without a Premium account, you can pay by session. Depending on the topic, the sessions cost between $299 and $399.

For crypto investing, Betterment charges 1% of your account balance as trading expenses, which can go up to 0.15% of transactions depending on the trade.

The Bottom Line

Betterment has become arguably the most popular robo-advisor for good reason: It offers a wide selection of portfolios, an excellent user experience, high-quality automated portfolio management, and competitive fees. If you want access to human financial advisors, you can access them through Betterment at a competitive rate versus hiring your own. Finally, Betterment continues to expand its offerings with a cash management account, a 529 plan (offered through an employer), cryptocurrency investing, and options for 401(k) workplace retirement plans.

Like any company, Betterment also has some cons. It doesn’t offer customers the ability to trade or buy individual investments, and its educational library also could be more comprehensive. Still, these are minor quibbles for one of the best robo-advisors around. Although it doesn't affect the quality of the robo-advisor, it is interesting to note that Betterment is adding more and more services for companies and employers. As traditional brokerages have gotten into robo-advisors, one of the original robo-advisors is starting to look more like a large, traditional brokerage.

Does Betterment Charge a Monthly Fee?

Betterment charges a $4 monthly fee for its robo-advisor investment account. However, you switch to an annual management fee of 0.25% of your investment account balance if you have a balance with Betterment over $20,000 or set up automatic deposits for $250 per month. Betterment does not charge any fee to use its Cash Reserve or checking account.

How Does Betterment Help You Save Money on Taxes?

Betterment looks for tax-loss harvesting opportunities in a taxable account on a regular basis. The algorithm avoids wash sales and takes external accounts into consideration. Tax-loss harvesting at Betterment may be paused or postponed when markets are choppy, but over time the tax-loss harvesting can reduce an investor's tax burden by realizing losses to offset gains elsewhere in the portfolio. Tax-loss harvesting does not apply to the crypto portfolios.

Is Betterment FDIC Insured?

Betterment is FDIC insured for its checking and Cash Reserve accounts. The checking account has standard FDIC coverage of up to $250,000 per account. The Cash Reserve account offers FDIC insurance up to $2 million for individual accounts and $4 million for joint accounts through program banks. It provides higher limits as Betterment spreads cash across multiple program banks for higher coverage.

Betterment’s investment accounts do not have FDIC insurance, which only applies to deposit accounts. Instead, the investment account has SIPC insurance up to $500,000 for missing funds, with a $250,000 limit to cover missing cash.

Is Betterment Safe?

Yes, Betterment is safe as it provides numerous security features like two-factor authentication, encryption, and biometric authentication for mobile access. Betterment also has FDIC insurance for deposit accounts and SIPC insurance for investment accounts. If you invest with Betterment, there is always the chance that you could lose money based on your investment performance, but the Betterment security measures are very safe.

Is Betterment Only in the U.S.?

Yes, Betterment is only available in the U.S., Puerto Rico, and the U.S. Virgin Islands, but not in Guam. It does not accept customers from other countries. Americans living or working abroad also cannot use Betterment. When you sign up, you must provide proof of a U.S. permanent address and a U.S. banking account. Betterment does support U.S. military personnel living abroad as long as they can provide a valid U.S. address.

Who Owns Betterment?

Betterment is privately traded and owned by professional investors and venture capital firms who funded the company. This includes Investment AB Kinnevik, Bessemer Venture Partners, Francisco Partners, and Menlo Ventures. Together, they hold ownership under Betterment Holdings Company. Jonathan Stein founded Betterment. He was CEO until 2020 and now remains with Betterment as a board member. Stein was replaced as CEO by Sarah Kirshbaum Levy.

How We Review Robo-Advisors

Providing readers with unbiased, comprehensive reviews of digital wealth management companies, more commonly known as robo-advisors, is a top priority of Investopedia. We used our 2023 consumer survey to guide the research and weightings for our 2024 robo-advisor awards. To collect the data, we sent a digital survey with 64 questions to each of the 21 companies we included in our rubric. Additionally, our team of researchers verified the survey responses and collected any missing data points through online research and conversations with each company directly. The data collection process spanned from Jan. 8 to Feb. 9, 2024.

We then developed a quantitative model that scored each company to rate its performance across nine major categories and 59 criteria to find the best robo-advisors. The score for each company’s overall star rating is a weighted average of the criteria:

• Goal Planning - 21.00%
• Portfolio Contents - 17.00%
• Portfolio Management - 17.00%
• Fees - 15.00%
• Account Services - 10.00%
• Account Setup - 5.00%
• Customer Service - 5.00%
  
• Security & Education - 5.00%
• User Experience - 5.00%

Additionally, during our 2023 research, many of the companies we reviewed granted our team of expert writers and editors access to live accounts so they could perform hands-on testing.

Through this all-encompassing data collection and review process, Investopedia has provided you with an unbiased and thorough review of the top robo-advisors.

Read more about how we research and review robo-advisors.

Separately, our research team conducted a survey of 205 U.S. adults aged 18 to 72 who are current clients of one of 18 robo-advisors. While the information collected did not influence the development of our ratings model, it was instrumental in gathering the valuable insights published in Investopedia's 2023 Robo-Advisor Consumer Survey.

Participants in our 2023 Robo-Advisor Survey opted in to an online, self-administered questionnaire from a market research vendor. Data collection took place between Aug. 30 and Sept. 15, 2023, with 11 video interviews conducted with volunteer respondents from Sept. 7 to Sept. 17, 2023. Multiple quality checks, including screeners, attention gauges, comprehension evaluations, and logic metrics, among others, were used to ensure only the highest quality responses were included.

*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. For Cash Reserve (“CR”), Betterment LLC only receives compensation from our program banks; Betterment LLC and Betterment Securities do not charge fees on your CR balance. Checking accounts and the Betterment Visa Debit Card provided and issued by nbkc bank, Member FDIC. Checking made available through Betterment Financial LLC. Neither Betterment Financial LLC, nor any of their affiliates, is a bank. Betterment Financial LLC reimburses ATM fees and the Visa® 1% foreign transaction fee worldwide, everywhere Visa is accepted.