Best if you want
Betterment was one of the first companies to provide fully managed accounts for a low-fee, launching its extremely popular service in 2008. It’s commonly referred to as a “roboadvisor”, and it pioneered the category along with several other players like Wealthfront. Betterment has grown rapidly over the years and now manages almost $30 billion of investment assets.
Despite its growth and a broadening range of services, Betterment has retained its customer-first philosophy. At its core, Betterment offers an easy-to-use service that manages your money for you. This is often referred to as a “set-it-and-forget-it” portfolio and it’s best for those who don’t want to be actively picking investments in their retirement account.
Most automated accounts charge what’s known as an “advisory” or “management fee” to manage your portfolio for you. This fee is usually expressed as a percentage of your assets that’s paid each year (e.g. 0.50% per annum).
Betterment is no different, and has two pricing models:
- Digital plan: $4/month for balances under $20,000, and 0.25% annual fee for balances over $20,000 (e.g. $25 for a $10,000 account): access to an automated portfolio for your IRA.
- Premium plan: 0.40% per year (e.g. $400 on $100,000 account) which provides unlimited access to financial advisors. You’ll need $100,000 to get access to this plan
What you can invest in
When you set up your account with Betterment, you will be asked a variety of questions regarding your financial situation, as well as your investment objectives and time horizons. These inputs help Betterment determine a recommended portfolio allocation (and risk level) for you to select or edit based on personal preferences. Betterment will provide guidance on how your portfolio allocation correlates to your level of risk. Portfolios are comprised of exchange-traded funds (ETFs) and can give you exposure to a variety of asset classes (domestic and international stocks and bonds).
Betterment does not have physical locations like some legacy providers, but they do have knowledgeable and responsive customer service online. Access to human financial advisors is only available through their Premium plan, or through purchase of an advice package for the Digital plan.
Betterment offers one of the best digitally managed IRAs in the market today. Their commitment to doing right by the customer and providing simple-to-use products make it a very good choice for people looking to have their retirement account handled for a low-fee.