Best if you want
Betterment was one of the first companies to provide automatically managed portfolios 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: 0.25% per year (e.g. $25 for a $10,000 account): access to an automated portfolio for your IRA.
- Premium plan: 0.40% per year (e.g. $40 for a $10,000 account): a digital plan plus unlimited calls with Betterment’s licensed financial experts. Unfortunately, you’ll need a minimum balance of $100,000 to get access to the Premium plan.
What you can invest in
When you set up your account with Betterment, they’ll ask you a series of questions about your financial situation and preferences. This is known as a “risk-tolerance questionnaire” and is a common starting point when a portfolio is created for you.
Based on your answers and how much risk you’re willing to take, Betterment will create a portfolio for you. They’ll invest your money in a combination of “asset classes” like equities (stocks), fixed income (bonds), and international investments. Like other roboadvisors, they tend to invest your money in exchange-traded funds (ETFs) that allow you to efficiently get access to these asset classes. ETFs are often provided by large financial institutions like Vanguard and Blackrock.
Betterment is broadening its product offering from just investment accounts to other financial services. They now offer a Cash Reserve savings account that offers a higher yield than most banks, and they recently launched a Checking account (with a debit card).
In addition, if you opt for the Premium plan and have more than $100,000 to manage, you’ll get access to licensed human financial advisors who can answer questions on a range of financial topics.
Betterment does not have physical locations like some legacy providers, but they do have knowledgeable and responsive customer service online. While human financial experts are available, you’ll have to pay an additional fee for a consultation (packages range from $199 to $299). However, if you opt for the premium plan, you get unlimited access to experts for no additional cost.
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.