Betterment is a pioneering robo-advisor fiduciary that still offers tremendous value for hands-off, cost-conscious investors eager to build market-tested passive investment portfolios without paying more than they should.
More recently, Betterment has also made a name for itself as a low-cost online bank. Its checking and cash management accounts make it easy to manage day-to-day and long-term funds with Betterment, even if you’re not ready or willing to open an investment account here.
Is Betterment perfect for everyone? Not quite. Although its automated asset management tools are at once sophisticated and beginner-friendly, Betterment doesn’t have a self-directed investing platform and omits alternative asset classes like cryptocurrencies, forex, and options. And Betterment only offers two deposit accounts.
Still, whether you’re thinking about replacing your current financial advisor or seeking a better branchless bank to park your funds, Betterment is worth a closer look.
Betterment’s Products and Key Features
Betterment has two core plans for investors, both of which assess fees based on users’ asset balances. Betterment also offers a cash management and checking account for day-to-day and longer-term money management needs along with some other value-added features available to all users.
Account Opening Bonus
For a limited time, get up to one year managed free when you open a Betterment account and make a qualifying deposit within 45 days. Your bonus is calculated based on your account funding amount:
- 1 Month Free: Fund your account with $15,000 to $99,999 within the qualification period.
- 6 Months Free: Fund your account with $100,000 to $249,999 within the qualification period.
- 12 Months Free: Fund your account with $250,000 or more within the qualification period.
This offer is available to U.S. residents only and can’t be combined with any other offers. See our list of the top brokerage account promotions for more details.
Investing Plans and Pricing
Betterment offers two investing plans: Digital and Premium. Both plans allow investors to open and invest with a variety of taxable and tax-advantaged brokerage accounts (individual retirement accounts), including:
- General investment accounts (taxable brokerage accounts) for individuals and joint holders
- Traditional IRAs
- Roth IRAs
- SEP IRAs
- Rollover IRAs
Both plans also allow investors whose income or tax filing status disqualify them from contributing to Roth IRAs to convert traditional IRA balances to Roth IRA balances right in the Betterment app. This maneuver is known as a backdoor Roth conversion (or simply Roth conversion) and may have significant tax benefits.
Betterment Digital Plan
The Digital plan has no minimum deposit requirements or ongoing balance requirements. It has a flat annual fee of 0.25% of assets under management (AUM), regardless of balance.
The Digital plan’s capabilities and benefits include:
- Flexible portfolio construction (a version of Betterment’s core portfolio, composed of sector and ETFs backed by low-cost issuers like Vanguard) based on your stated risk tolerance, financial goals, and investing objectives
- Optional access to Betterment’s three socially responsible investing (SRI) portfolios: Broad Impact (focused on broad environmental, social, and governance goals), Climate Impact (focused on low-carbon companies and industries), and Social Impact (focused on minority empowerment and gender diversity)
- Standard robo-advisor portfolio management functions, like periodic portfolio rebalancing to optimize asset allocation and dividend reinvestment via fractional share investing
- Automatic tax minimization activities, like tax-loss harvesting (which reduces taxable capital gains)
- Access to Betterment Checking and Cash Reserve accounts at no additional charge
Betterment makes these features and benefits available regardless of account type or investment strategy. With the Digital plan, they’re yours whether you have a taxable account, a tax-advantaged account, or both.
Betterment Premium Plan
The Premium plan requires a $100,000 minimum balance across all tax-advantaged and taxable accounts, at which point Betterment prompts both Digital plan members and new account holders to upgrade. The upgrade is strictly optional.
Premium has a flat annual fee of 0.40% of AUM, regardless of balance. It includes all the features and capabilities of the Digital plan, including automatic rebalancing and access to a variety of low-cost exchange-traded funds across multiple flexible portfolios, plus:
- Unlimited access via phone and text with Betterment’s in-house team of Certified Financial Planners (CFP professionals)
- Advice on investments held outside Betterment (including those held with other brokerages) from Betterment’s in-house financial planners, including asset allocation and tax minimization guidance
- Optional access to Goldman Sachs Smart Beta Portfolios, a more sophisticated (and potentially higher-risk) investment strategy developed by Goldman Sachs Asset Management
Banking and Cash Management Products
Betterment has two deposit account options with virtually no fees: Betterment Checking and Betterment Cash Reserve.
Betterment Checking’s top features include:
- A tap-to-pay Visa debit card that earns rewards on purchases with thousands of merchant partners, including major consumer products vendors like adidas and national retailers like Walmart
- ATM fee and foreign transaction fee reimbursement worldwide
- Card security controls (including card locking) through the Betterment mobile app
Betterment Cash Reserve
Betterment Cash Reserve is a cash management account with a competitive interest rate (APY) on all balances and virtually no account fees. Its key features include:
- No limits on inbound and outbound transfers from and to external accounts, unlike most savings accounts
- FDIC insurance up to $1 million, compared with the typical savings account limit of $250,000 per account
- Savings buckets for specific goals with automatic, recurring transfers for each
Retirement Planning Tools
Betterment offers free retirement planning tools for DIY savers and investors. While these can’t replace customized, one-on-one advice from a human financial planner, they’re useful for Betterment users who aren’t sure where to start on the road to retirement and other long-term goals.
Among other things, Betterment’s retirement planning tools help users estimate how much they’ll actually need in retirement and provide semi-customized advice about getting there in the most efficient way possible.
Betterment Savings Goals
Betterment can also help with nonretirement savings goals, both nearer-term (like saving for a new car) and longer-term (like funding a child’s college education).
Financial Advice Packages
For Digital plan and banking-only users who aren’t eligible for unlimited financial planning assistance, Betterment offers a la carte financial advice packages that cost $299 for a 45-minute session and $399 for a 60-minute session. These packages cover five broad themes:
- Getting started with Betterment (basic account setup and optimization), 45 minutes
- Retirement planning, 60 minutes
- Financial check-up (general review of investments and financial position), 60 minutes
- College planning, 60 minutes
- Marriage planning, 60 minutes
Betterment Satisfaction Guarantee
Betterment has a satisfaction guarantee that, while not without exceptions, provides some peace of mind. The terms of the guarantee are simple: If you’re not satisfied with your Betterment advisory experience for any reason, Betterment will waive your advisory and brokerage fees for an upcoming period of 90-days.
Betterment is a low-cost robo-advisor and online banking platform that makes it easy to plan, save, and invest for the future. Although not a replacement for a full-service financial advisor or planner, it does replicate some of the functions offered by those professionals.
- Betterment Is a Fiduciary. The Betterment investment platform operates as a fiduciary. In plain English, this means it’s required to act in its clients’ best financial interests. This is a fundamental advantage over non-fiduciary investment advisors and financial planners whose first loyalty is often to their own profit margins — and who can steer clients into subpar investments that pay higher commissions or fees.
- No Minimum Balance Required to Open a Checking or Investing Account. Betterment doesn’t impose any minimum balance requirements for its deposit or investment accounts. This is good news for low-asset savers and investors just starting out.
- Virtually No Cash Account Fees. Betterment’s Checking and Cash Reserve accounts are virtually fee-free. Notably, Betterment Checking automatically reimburses ATM fees worldwide, all but eliminating a hidden cost of using cash.
- Reasonable Asset Management Fees. Betterment’s asset management fees are reasonable by robo-advisor standards. The Digital plan charges a flat 0.25% of AUM, regardless of account balance, while the feature-rich Premium plan charges a flat 0.40% of AUM — significantly less than a full-service human financial advisor.
- Backdoor Roth Conversion in the Betterment App. Betterment makes it easy to execute backdoor Roth conversions in the app, unlocking potentially significant tax savings for investors whose income or tax filing status make them ineligible to contribute directly to Roth IRAs. This might sound like a niche capability, but it’s often intimidating for DIY investors.
- DIY Financial Planning Tools at No Additional Charge. All Betterment users have access to free, DIY-friendly financial planning tools at no additional charge. For capable investors, Betterment’s retirement planning tools and savings goal architecture might just make human assistance redundant.
- Flexible Financial Advice Packages Available for an Additional Fee. Betterment makes a la carte financial advice packages available to all users for a reasonable additional fee, starting at $299 for a 45-minute consultation and $399 for a 60-minute meeting. These packages are useful for users looking ahead to major life events like marriage, college planning, and retirement.
Betterment has some significant drawbacks. As noted, it’s not a suitable replacement for a full-service financial advisor or planner, and it can’t accommodate self-directed investors or alternative investments.
- No Self-Directed Investment Options. Betterment is not suitable for self-directed investors looking to build fully customized portfolios composed of individual stocks and other market-traded instruments. As a fundamentally passive platform, it’s better for investors OK with allowing advisors — automated or human — to do the heavy lifting.
- No In-House Full-Service Wealth Management Option. Although Premium plan holders do have access to in-house financial planning professionals, Betterment doesn’t offer full-service wealth management. For investors hoping to consistently beat the market or take advantage of more advanced wealth management strategies that robo-advisors typically can’t accommodate, Betterment leaves something to be desired.
- Limited Access to Alternative Investment Opportunities. Betterment isn’t the place to profit from alternative investment opportunities like cryptocurrencies, forex (currencies), or even options. That’s fine for most investors, but more sophisticated, risk-tolerant market participants won’t be satisfied here.
Betterment isn’t the only low-cost robo-advisor worth considering. It competes against other well-known robo-advisors and low-cost automated investing providers like Wealthfront, Personal Capital, and M1 Finance, to name just a few.
Betterment has some real advantages over the competition, though. It has been in business for more than a decade, giving risk-averse investors confidence that it won’t simply disappear overnight. It has a nice banking vertical that’s ideal for both day-to-day and long-term money management. And it offers flexible financial advice packages for an additional fee, going partway toward accounting for the lack of in-house human advisors.
Is Betterment right for you? That depends on what you hope to get out of a robo-advisor relationship. It certainly deserves your consideration.