If you are considering investing with Betterment, you probably have questions about whether the fees they charge are worth it. After all, there’s a lot of competition in the robo-advisor space. You may also be concerned about the security of your investment. With big names like LinkedIn, Yahoo, and even the IRS falling prey to data breaches in the past year, can Betterment keep your money and personal information safe? Here, we’ll take a look at the bang Betterment provides for your proverbial buck.
- Review of: Is Betterment Worth It & Safe?
- Reviewed by:Janet Berry-Johnson, CPA (Forbes.com Contributor)
-
Published on: January 18, 2020
-
Last modified: January 18, 2020
- Betterment Promotional Offer Link? Betterment Provides Non-pay 2 Months
Betterment fees and features
Betterment offers tiered fees based on average account balance:
- $1 – $9,999 account balance: 0.35% annual fee with a $100/month recurring deposit. Without a recurring deposit, the charge a $3 flat monthly fee.
- $10,000 – $99,999 account balance: 0.25% annual fee
- $100,000+ account balance: 0.15% annual fee
Beyond that, they never charge trade fees, transaction fees or rebalancing fees.
Betterment claims their portfolios are “designed to achieve optimal returns at every level of risk.” Included in that fee structure are several features that Betterment says can help their customers enjoy 4.30% higher returns than a typical DIY investor.
Those features include:
- Tax loss harvesting that systematically finds embedded capital losses to lower investment taxes and increase after-tax returns.
- The ability to link outside accounts so Betterment can give you advice on how much you’re losing to fees and idle cash.
- Goal-based investing with algorithms that let you know if you are on track to meet your goals.
- SmartDeposit – a tool to automatically invest your excess cash
- RetireGuide – a tool that can accurately predict when you can retire, taking into account existing assets, the cost of living where you live and how much income you’ll need in retirement
- Tax-Coordinated Portfolio – this feature optimizes and automates a strategy called asset allocation. It places assets that will be highly taxed into your IRAs, where they can grow tax-free until you take distributions in retirement. Lower-taxed assets are put in taxable accounts. Betterment claims their research shows that this strategy can boost after-tax returns by an average of 0.48% each year, amounting to an extra 15% after 30 years.
- Portfolio rebalancing every time you make a deposit or receive dividends. This feature is often available only for premium accounts with other investment services.
But is it worth it?
Those features sound great, but does Betterment live up to the hype? To find out, we took a look at what several Betterment reviewers had to say.
Earlier this month, Arielle O’Shea of Nerdwallet reviewed Betterment and gave them five out of five stars, calling them “the clear leader among the startup services, with over 150,000 clients and $6 billion in assets under management.” She also noted that “Investors with $100,000 or more benefit from one of the lowest management fees available, just 0.15%.”
Larry Ludwig of InvestorJunkie also gave Betterment five out of five stars, calling them “an almost perfect investment service” due to their low fees, improved asset allocation and the constant addition of new features.
Mr. Money Mustache conducted an experiment with Betterment starting in October 2014, investing $100,000 and auto-investing another $1,000 from his bank account every month. As of December 31, 2020, he says “Betterment combines the (slight) advantages of more advanced investing, with an even simpler experience than you would get with just buying shares of [the Vanguard Total Market Index Fund],” his typical recommendation for simple, one-step investing. He goes on to say, “In exchange, [Betterment] charges a fee that is quite a bit lower than the advantage they deliver (and at least 85% less than most financial advisers), so in my view it is a win/win way to invest.”
Andrew Fiebert, host of the popular podcast Listen Money Matters reviewed Betterment and also gave it five out of five stars, praising the investment service by saying “under the hood it’s a beast of a service putting traditional brokerages to shame with both its technological prowess and solid returns.”
Is Betterment secure?
Giving out your personal information online and entrusting your money to, well, anyone can be scary. Betterment knows that online security is top-of-mind for investors these days. That’s why they use the strongest browser encryption available and store all of their data on servers in a secure facility that is safeguarded 24 hours a day.
They also use two-factor authentication, which provides an extra layer of protection every time you log in by forcing you to enter a unique verification code that is sent via a mobile authenticator app or text every time you log in. So even if your Betterment password is obtained by a hacker, your account is protected.
Betterment also offers fraud assistance and will work to recover any loss resulting from unauthorized use of your Betterment account, as long as the transaction is covered under the federal Electronic Fund Transfer Act, you notify Betterment within 60 days of the unauthorized transaction, and you’ve exercised the appropriate account safeguarding practices.
Is your investment safe?
Betterment is a member of the Securities Investor Protection Corporation (SIPC), which protects securities customers of its members up to $500,000, including $250,000 for claims of cash). If Betterment were to fail, SIPC would work to restore the securities and cash in your accounts, up to the protection limits.
Of course, SIPC does not protect against a decline in the value of your securities due to market fluctuations or protect against bad investment advice.
Handing over your money to an investment institution always comes with some risk. It’s important to do your research to make sure that anyone offering to safeguard and invest your money is legitimate and secure. Betterment may not have been around as long as some of the big-name brokerage houses, but they’ve already earned high praise from – and good returns for – many people with knowledge about the investing world.
FAQ
Can you take your money out of betterment?
You can withdraw your money from Betterment at any time, without additional fees. We do not charge any trading fees or assess penalties for requested withdrawals or account closures. It's your money, and is always accessible to you.
Is betterment worth the fee?
Full Review The company offers two service options: Betterment Digital, its legacy offering, has no account minimum and charges 0.25% of assets under management annually. Betterment Premium provides unlimited phone access to certified financial planners for a 0.40% fee and 0,000 account minimum.
Is betterment everyday safe?
It was fairly safe but FDIC insurance is rock solid. Within the next thirty days, Betterment will transition all Smart Saver accounts to Everyday Cash Reserve.
How much can betterment make you?
Betterment earns money from its annual fee: 0.25% for its Digital Plan and 0.4% for its Premium Plan. That amounts to .50 a year for every ,000 you invest with them through their Digital Plan.
How is betterment doing?
Betterment offers a smarter investing experience. Better Returns: The Betterment portfolio is designed to achieve optimal returns at every level of risk. Through diversification, automated rebalancing, better behavior, and lower fees, Betterment customers can expect 4.30% higher returns than a typical DIY investor.
Can you lose money with betterment?
Loss if the company fails That means if Betterment goes out of business, you will recover your funds. But Betterment or the SIPC does NOT protect you from losing money through investing.
Is investing in Betterment a good idea?
Betterment is an affordable roboadvisor and a good choice for new investors. If you're new, have little in assets, or prefer a professional help but don't want to pay through the nose, Betterment is a good solution. Wealthfront is similar if you want to see Betterment vs.
Is it safe to invest in betterment?
The answer is yes. When you manage your investments through Betterment, all the assets and securities in your portfolio are strictly under your ownership. ... Finally, the Securities Investor Protection Corporation (SIPC) protects all Betterment accounts (up to0,000 per account).
Can you lose money with betterment?
Loss if the company fails That means if Betterment goes out of business, you will recover your funds. But Betterment or the SIPC does NOT protect you from losing money through investing.
How much can you earn with betterment?
You can have up to 0,000 account managed with Betterment for 0 per year. Even at the lowest service tier, you get all the benefits of a Betterment – rebalancing, tax harvesting, diversification, etc.
Is betterment real?
In real estate, betterment (making better) is the increased value given to real property by causes for which a tenant or the public, but not the owner, is responsible; it is thus of the nature of unearned increment.
Can you make money on betterment?
You can have up to 0,000 account managed with Betterment for 0 per year. Even at the lowest service tier, you get all the benefits of a Betterment – rebalancing, tax harvesting, diversification, etc. For a Betterment Premium account, which requires a 0,000 minimum account balance, the annual fee is 0.40%.
What is the average return on betterment?
The average return per year is 4.3%. Time-weighted returns can be used for comparison to market benchmarks. This is how my Betterment returns compare to some benchmarks during the same time period: Betterment's returns may seem poor compared to the S&P 500—a benchmark many investors use.
How good is betterment?
Betterment is equally a good starting point for beginning investors and a useful platform for more experienced investors. The robo advisor has no minimum deposit and costs 0.25% annually. If you need the assistance, it recently added human advisors who can assist with your retirement account.
