Betterment Vs Wealthfront: Which Investing App Is Right for You?

Betterment and Wealthfront are two of the biggest robo-advisors on the market.

They helped revolutionize the investing world with ultra-low management fees and access to customized, diversified portfolios that take the guesswork out of investing.

Both of these industry giants have expanded into full-service financial companies, offering cash management accounts, retirement accounts and financial advising tools that make it easy to bank, invest and save for retirement with a single app.

You honestly can’t go wrong with either — but these apps do differ in a few key ways.

You may spot a clear winner, depending on your investing goals and personal preferences.

In this guide, we’ll compare their similarities as well as their differences so you can pick the one that’s right for you.

Betterment vs. Wealthfront: Costs and Fees

Both apps offer super affordable access to the market with 0.25% annual advisory fees. That’s $2.50 a year for a $1,000 account balance.

For reference, traditional brokerage firms like Edward Jones charge yearly fees of 1% or more. They usually require more cash to open an investment account, too.

And while micro-investing apps like Acorns and Stash let you start investing with just $1, you’ll pay a minimum $3 a month. For a $1,000 account balance, that’s $36 a year instead of $2.50.

Some online discount brokerage services like Robinhood don’t charge any yearly fees. But no fee means you’re stuck picking your own individual investments one-by-one and miss out on the helpful automated guidance and recommendations a robo-advisor provides.

Betterment

You don’t need any money to open a Betterment investment account or cash account.

Betterment has two membership tiers:

1. Digital Plan: An annual fee of 0.25% with a $0 minimum balance.
2. Premium Plan: An annual fee 0.40% with a $100,000 minimum balance.

Premium plan members pay a higher advisory fee for access to ongoing phone calls and emails with a Certified Financial Planner. These licensed financial advisors can provide more personalized advice on your portfolios, external accounts, retirement goals and other financial questions.

Digital plan members can also access personalized financial advice, but for an additional fee.

Wealthy investors get a 0.10% discount on the portion of their household balance above $2 million.

Wealthfront

One of the biggest differences between Wealthfront and Betterment is their investment minimum.

Wealthfront requires a $500 minimum deposit to start investing. There’s a $1 minimum to open a cash management account.

After transferring $500 to open your Wealthfront account, the annual advisory fee is identical to Betterment: 0.25% of your investment portfolio balance.

Wealthfront doesn’t have a premium account like Betterment, but it does offer additional features for higher account balances, such a stock-level tax-loss harvesting for accounts over $100,000, and a Smart Beta program available to accounts over $500,000.

Other Fees

The only other fee you’ll encounter with Betterment or Wealthfront is ETF expense ratios.

You’ll pay those fund fees with any broker or robo-advisor, and the cost is quite low: Both companies carry expense ratios in the 0.08% to 0.13% range on average.

Types of Accounts

Betterment and Wealthfront give you options.

You can open a bank account, different types of investment accounts and (in Wealthfront’s case) a college savings account.

Betterment and Wealthfront both offer these financial accounts:

• Individual and joint taxable accounts
• Roth IRAs
• Traditional IRAs
• SEP IRAs
• Individual and joint cash management accounts
• Trusts

The only difference is Wealthfront gives users access to a 529 college savings plan and Betterment does not.

Retirement Accounts

Wealthfront and Betterment will both recommend either a taxable account or a tax-advantaged individual retirement account (IRA) when you sign up. Depending on your financial goals, it might open one of each.

These recommendations are based on things like your age, risk tolerance and financial goals — information you’ll enter when you create your account.

In addition to traditional, Roth and SEP IRAs, Wealthfront and Betterment also accept IRA and 401(k) rollovers.

Both apps do a good job explaining the tax perks (and early withdrawal penalties) that come with investing in an IRA.

They also give you financial planning tools to create your own personalized retirement roadmap and track your progress.

You can also tweak the variables in your retirement plan, including your retirement age, planned savings, estimated spending and life expectancy.

Cash Management Accounts

Both robo-advisors offer digital banking services with no fees.

That’s right: Betterment and Wealthfront offer savings/checking accounts with no overdraft fees or minimum balances.

Other similarities between their cash accounts:

• High-yield cash account earns interest.
• FDIC insurance up to $1 million.
• Mobile check deposit, bill pay and check writing services available.
• Joint account option.

Wealthfront and Betterment will both send you debit cards when you open a checking account.

Wealthfront offers reimbursement at 19,000 ATMs, but Betterment is the clear winner on ATM fees.

Betterment’s Visa debit card reimburses all ATM fees worldwide. You’ll also skip foreign transaction fees when you use your debit card abroad.

You can start using Betterment’s banking features for free. You’ll need $1 to open a Wealthfront cash management account.

You don’t need to invest with either company to access their cash management services.

College Savings Accounts

If you’re looking for a way to save money for a child’s college expenses, Wealthfront offers 529 savings plans.

A 529 college savings plan is a tax-advantaged way to save and invest for higher education costs. Investments in a 529 account grow tax-deferred and money can be withdrawn federal tax-free if it’s used to pay for qualified higher education costs.

You won’t pay any annual fees on the first $5,000 invested in a Wealthfront 529 plan. After $5,000, fees range from 0.42% to 0.46%, plus expense ratios.

A 529 plan is a unique offering, since Betterment and most other robo-advisors don’t provide this type of account.

Portfolio Options and Portfolio Management

Wealthfront and Betterment both provide access to automated portfolios with low fees and an emphasis on passive investing.

They also both follow Modern Portfolio Theory — an investment strategy that focuses on diversified asset allocation to reduce your risk and increase your returns. By spreading your dollars across different asset classes — or categories of investments — you’ll take less of a hit if any particular security nosedives.

Other similarities include:

• Automatic rebalancing to maintain proper asset allocation.
• Automated portfolios consisting of exchange traded funds (ETFs).
• Socially responsible investing options.
• Government-issued Treasury Inflation-Protected Securities (TIPS) available.

Betterment focuses on goal-based investment strategies. It offers users a core investment portfolio consisting of stock- and bond-based exchange-traded funds (ETFs).

Betterment also offers a few curated investment portfolios you can choose from:

• Goldman Sachs Smart Beta Portfolio: This portfolio strategy uses a non-traditional approach to tracking the performance of stocks in an index (called advanced indexing) to improve your returns. Betterment offers this to all users, while Wealthfront requires a half-million dollar balance to access a smart beta option.
• BlackRock Target Income: This 100%-bond portfolio aims for less risk and higher return from income while protecting you from market volatility.
• Flexible Portfolio: This portfolio lets you adjust individual asset class weights within your portfolio, instead of going with Betterment’s recommendations. However, you can’t choose individual companies to invest in.
• Socially Responsible Investing Portfolios: Betterment offers three different socially responsible portfolios, including focuses on climate change and equality.

Betterment invests your money through fractional shares — tiny portions of equity that aren’t a full stock or bond. That means all your money is invested from day one. Wealthfront, in contrast, does not offer fractional share investing.

However, Wealthfront offers more opportunities for hands-on investment management than Betterment.

​​In 2021, Wealthfront gave users the option to add or remove specific ETFs from a recommended portfolio or build an entirely new ETF portfolio from scratch. Users also get the option to invest in portfolio themes like technology and health care.

People with $100,000 or more in their Wealthfront account can pick a stock-based portfolio instead of an ETF-based portfolio.

Wealthfront also has real estate investment trusts (REITs) along with two long-term cryptocurrency funds with exposure to Bitcoin and Ethereum. Betterment does not offer exposure to these alternative investments.

Wealthfront offers just one socially responsible portfolio instead of three, but users can customize any investment portfolio to include socially responsible options.

Access to Human Financial Advisors

Automation is the beauty of robo-advisors — but what if you need someone to talk to for more personalized investment advice?

Wealthfront doesn’t offer this service to its clients.

Betterment does, but it’s not unlimited access for everyone.

Betterment Premium account users get access to human financial advisors by phone or email for free, while Betterment Digital users can book over-the-phone financial planning sessions for a relatively high one-time fee.

In other words, if you have a basic Betterment account, expect to pay between $299 and $399 for up to an hour-long call with a financial advisor.

If you have $100,000+ invested and pay the Premium tier 0.40% advisory fee, you get ongoing access to a team of Certified Financial Planners whenever you need help.

Tax Strategy

Both Betterment and Wealthfront use advanced software to minimize capital gains taxes.

Both robo-advisors perform daily tax-loss harvesting on all taxable accounts. Tax-loss harvesting is a strategy that sells underperforming assets for a loss in order to offset capital gains taxes.

Betterment gives users three additional tax management tools:

• Tax Coordination: This feature spreads investments in certain asset classes across taxable accounts and tax-advantaged retirement accounts. Investments with a smaller tax bite are placed inside a taxable account while tax-heavy investments are placed inside tax-advantaged retirement accounts.
• Charitable Giving: You can support causes you care about by choosing to donate shares from your taxable accounts to partner charities — and enjoy the tax benefits.
• Tax Impact Preview: This tool lets you see the potential tax implications of any portfolio adjustment before you make it.

Meanwhile, Wealthfront offers a unique tax perk for investment accounts with $100,000 or more: stock-level tax-loss harvesting, also known as direct indexing.

Instead of using a single ETF to invest in U.S. stocks, Wealthfront’s direct indexing feature replicates the index funds inside your portfolio by purchasing up to 1,000 of the individual stocks held inside the fund. This makes it easier for the company to sell securities, offset gains and provide additional tax-loss harvesting opportunities.

Another Wealthfront tax feature: TurboTax users can directly import their tax-loss harvesting data by linking their Wealthfront account information.

Financial Planning Tools

Betterment and Wealthfront both give you access to powerful and easy-to-use online  planning tools.

Both robo-advisors let you link external accounts to provide a holistic, high-level look at your entire financial picture.

You can also pick different goals, such as saving up for a home or investing for retirement.

Betterment’s tools let you see how a one-time deposit, recurring deposits and early withdrawals can impact your goals.

The company’s built-in retirement planning advice also considers different variables — including Social Security income, future spending, tax rates and inflation.

Meanwhile, Wealthfront offers a free planning tool called Path. You don’t need a Wealthfront investment account to access Path.

Like Betterment, Wealthfront analyzes your financial data to make sure you’re on track to meet your goals.

But the Path tool includes some additional neat features. For example, if you create a home buying goal, Wealthfront integrates third-party data from Redfin and Zillow to show you cost estimates based on real estate prices in your area.

Or, if you’re saving up for a child’s college expenses, Path can pull data from the Department of Education to show forecasts of tuition and cost at thousands of U.S. universities.

Unique Features

These robo-advisor rivals share more similarities than differences.

Here’s what sets them apart from each other.

Wealthfront

Here are the features you’ll only find with Wealthfront.

• 529 college savings plans.
• Ability to build your entire portfolio from scratch.
• Portfolio line of credit: Investors with at least $25,000 in their accounts can borrow up to 30% of their portfolio’s value as a line of credit. Interest rates on a portfolio line of credit range from 2.40% to 3.65%.
• Risk Parity Fund: Wealthfront’s Risk Parity Fund is a proprietary mutual fund that aims to equalize risk by investing in opposing assets in your taxable account to smooth out your returns.
• Two-day early direct deposit: A Wealthfront cash account lets you get paid up to two days early through direct deposit.

Betterment

Here’s what Betterment offers that Wealthfront doesn’t.

• No minimum deposit requirement to start investing.
• Access to independent financial advice from human advisors for accounts with at least $100,000.
• Fractional shares.
• Charitable giving tool.
• Additional tax management features, including Tax Coordination and a tax preview tool.
• Debit card with free reimbursement on all ATM fees and foreign transaction fees.

Betterment vs. Wealthfront: Which Is Right for You?

It’s hard to pick a clear winner.

Betterment and Wealthfront both make investing easy by offering useful features like daily tax-loss harvesting and wealth-building tools.

Key differences include the option to speak with a human advisor for higher account balances through Betterment, a 529 college saving plan option with Wealthfront and a $500 minimum difference to start investing.

Betterment is a good fit if:

• You have less than $500 to start investing.
• You are focused on socially responsible investing.
• You want additional tax management tools.
• You want to take a passive, hands-off approach.
• You plan to invest more than $100,000 and want access to human advisors.
• You want a debit card that doesn’t charge foreign transaction fees or ATM fees.

Wealthfront is a good fit if:

• You want access to sophisticated financial tools without opening a stock portfolio.
• You want a tax-advantaged way to save for a child’s college education.
• You want to customize your portfolio allocation, or create your own ETF portfolio from scratch.
• You want access to alternative investments like crypto and REITs.
• You want to open a portfolio line of credit.

In short, the “best” robo advisor for you depends on what you want and need from an investing app.

Rachel Christian is a Certified Educator in Personal Finance and a senior writer for The Penny Hoarder.

This article contains general information and explains options you may have, but it is not intended to be investment advice or a personal recommendation. We can't personalize articles for our readers, so your situation may vary from the one discussed here. Please seek a licensed professional for tax advice, legal advice, financial planning advice or investment advice.

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