The robo-adviser industry is becoming an increasingly popular option for those that would like to invest their money without paying exorbitant fees. In this Betterment Review, we’ll go over the basic features and help you to decide if a robo-adviser is a good choice for you. One of the leading names in this industry is Betterment, which currently has more than 200,000 clients and manages more than $10 billion in assets. We recently reviewed WealthFront, a competitor to Betterment that offers a similar service. Betterment uses software algorithms and risk tolerance settings to decide where to invest their client’s money.
The company had recently announced some pretty big changes to their pricing, now offering two different packages. The legacy offering, Betterment Digital, has no minimum investment required and charges a 0.25% fee. Additionally, customers have the ability to speak to advisers in real time through their app. The company recently announced a new package, Betterment Premium, which provides unlimited access to advisers via phone, for a higher $0.30 fee, plus an additional $3 monthly fee. This new plan also institutes an account minimum of $100,000.
Betterment Review: What is Betterment? Is Betterment Legit?
Betterment is a software-based financial advisory service which helps to create diversified portfolios of low-cost stock and bond ETFs that are available to all investors. The company wants to create a service that simulates having your own financial advisory through better investment technology. Additionally, Betterment strives to provide their users with a higher level of tax efficiency, reinvesting dividends back into the portfolio.
When users first sign up to Betterment, they are asked to answer a series of short questions. These questions help determine the level of risk that they are willing to take on, and informs the system of how to invest the funds. The service allows users to have complete control over their own risk tolerance and changes the investment settings to match.
Betterment Review: How Does Betterment Work?
One of the biggest questions that new users have is exactly how Betterment works. Many have never used a robo-adviser to invest previously, but know that the huge savings in fees make it worth the effort. When you invest your funds with Betterment, your money goes directly into a diversified global portfolio of stock and bond exchange-traded funds (ETFs). There are up to 12 asset classes that these funds are invested into. The way that your funds are allocated depends completely upon the risk tolerance that you have already set for your portfolio.
Those that opt for lower-risk investments will receive more government backed bonds and fewer volatile stocks through Betterment. Those that are open to more risk will receive a lower percentage of government backed bonds as well as more volatile stocks. The securities that Betterment chooses will be based on liquidity, expense ratio, current assets, and capital gains implications.
Betterment’s advanced algorithm makes automated investing completely hands-off. Your entire portfolio runs basically on autopilot. You set the risk tolerance and deposit schedule, and Betterment will handle the re-balancing of your portfolio, harvesting tax losses to lower tax liability, and reinvesting dividends. The company allows you to set your own goals, and track how close that you are to reaching them.
Betterment Review: Betterment Account Types
Betterment makes many features available to their users, helping their clients to see a positive gain. The different types of accounts that Betterment currently supports include:
- Individual accounts. Users can open individual Betterment accounts and set goals for themselves.
- Joint accounts. Betterment also allows you to open joint accounts. To open a joint account, both people must have their own individual accounts with Betterment. Then, both participants will have full access to all aspects of the joint account and can work together to build wealth.
- Trust accounts. Betterment supports several different kinds of trusts, both revocable and irrevocable. These accounts must be U.S. domestic trusts that are already established and authorized to invest in stocks and bonds. The company is unable to create new trusts.
- IRAs. Betterment offers several different types of IRAs. The first is a traditional IRA, which receives a tax deduction when you contribute and pay taxes on withdrawals at a later date. They also offer both Roth, and Sep IRAs as well.
- 401(k). Betterment also offers 401(k) and 403(b) rollovers, allowing users to transfer their retirement accounts.
The long list of different account types have made Betterment a popular option for many users and allowed the company to rapidly grow.
Betterment Review: Betterment Review Conclusion
For those that are looking for a reliable way to invest their money with low minimums and fees, Betterment is an excellent option. The software is known as a leader in the robo-adviser space, and also offers a no-fee trial if you would like to test out the software. Typically, it takes just a few minutes to be up and running with a new Betterment account. So is Betterment worth it? Yes, for most it is. You’d be hard-pressed to find a cheaper investment option with no required minimum account balance to begin investing.