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.
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.
| Key Portfolio Management Features | |
|---|---|
| Automatic Rebalancing | Daily account monitoring, triggered when portfolio drifts 3% from the target allocation and account meets minimum balance threshold |
| Reporting Features | Dashboard provides a financial overview with net worth, goal progress, and investment performance; Betterment provides regular nudges and reminders to keep users invested |
| Tax Loss Harvesting | Yes; it keeps users invested and avoids short-term capital gains tax |
| External Account Syncing/Consolidation | Yes; clients can link retirement, banking, and brokerage accounts, but only Betterment assets are rebalanced |
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 circ*mstances 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.
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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 0.65%.
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.
Everything You Need to Know About Robo-Advisors
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 18robo-advisors. While the information collected did not influence the development of our ratings model, it was instrumental in gathering the valuable insights published inInvestopedia's 2023Robo-Advisor Consumer Survey.
Participants in our 2023Robo-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.
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*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.
