Betterment vs. Vanguard: Which Is Best for You?

Arielle O'Shea
By Arielle O'Shea 

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One question facing robo-advisors like Betterment: If these services are simply building portfolios out of index funds and exchange-traded funds — primarily from Vanguard — why wouldn’t investors just go straight to the source?

Vanguard has heard that question, of course. That may be one reason why it created its own successful online advisor, Vanguard Personal Advisor Services, and launched a strictly digital, lower-cost option, Vanguard Digital Advisor, in 2020. So how does Vanguard Personal Advisor Services compare with Betterment? This Betterment versus Vanguard comparison shakes that all out to help you decide which company is best for you.

For details on each service, read below.

Betterment is best for:

  • Hands-off investors.

  • Retirement investors.

  • Users with low balances.

  • Those who want automatic rebalancing.

  • Users who like goal-based tools.

Betterment at a glance

Reviewed: Oct. 2022

Period considered: Aug. - Oct. 2022

Account minimum

$0 ($10 to start investing).

Account management fee

0.25% annual fee on balances over $20,000 or if you set up recurring monthly deposits totaling $250 or more. Otherwise, $4 per month.

Investment expense ratios

Average expense ratio of 0.06% for Betterment Core Portfolio as of Oct. 20, 2022.

Account fees (annual, transfer, closing)

None.

Portfolio mix

Core portfolio uses ETFs from 12 asset classes. Portfolio options include: Betterment Core, Goldman Sachs Smart Beta, Blackrock Target Income, Betterment Flexible Portfolio and Innovative Technology. Clients can also build their own portfolios from a pre-vetted list of ETFs. Portfolio mix is well-diversified but lacks exposure to non-market correlated assets like real estate investment trusts (REITs) and commodities.

In October 2022, Betterment also added four cryptocurrency portfolios; Universe, Sustainable, Metaverse and Decentralized Finance.

Socially responsible portfolio options

Three socially responsible investing portfolio options: Broad Impact, Climate Impact, and Social Impact.

Accounts supported

Individual and joint nonretirement accounts.

Roth, traditional, rollover and SEP IRAs.

Trusts.

Ability to link external accounts for personalized advice (but not direct management).

Tax strategy

Tax-loss harvesting.*

Tax-Coordinated Portfolio (asset location) tool.

Tax Impact Preview tool.

Charitable giving tool.

Automatic rebalancing

Free on all accounts.

Actively monitored, rebalancing triggered when drift passes 3% with consideration for tax impact.

Also, Betterment uses any cash flow, such as a dividend or deposit, to partially rebalance your portfolio.

Human advisor option

Betterment Digital doesn't offer access to financial advisors. However, for a fee, anyone can buy an advice package that includes a consultation with an advisor, regardless of if they have a Betterment account or not. Prices start at $299.

Savings account/cash management option

Cash Account** with no fees or minimum balance requirements, unlimited transfers and FDIC coverage for balances up to $1 million. Includes a feature that enables customers to save in separate buckets for different goals. Checking account that reimburses ATM fees and foreign fees and has a debit card with cash back.

Customer support options (includes how easy it is to find key details on the website)

Phone support Monday-Friday 9 a.m.-8 p.m. Eastern time for checking/cash reserve inquiries.

Monday-Friday 9 a.m.-6 p.m. Eastern time for investing and general inquiries.

Email support and questions also answered through social media.

Vanguard Personal Advisor Services
NerdWallet rating 

on Vanguard's website

Vanguard PAS is best for

  • Access to financial advisors.

  • Comprehensive financial planning.

  • Larger account balances.

Vanguard PAS at a glance

Reviewed: Oct. 2022

Period considered: Aug. - Oct. 2022

Account minimum

$50,000

Account management, planning or subscription fee

Starts at 0.30% but tiered (drops at higher balances):

  • 0.30% on account balances less than $5 million.

  • 0.20% on account balances from $5 million to $10 million.

  • 0.10% on account balances from $10 million to $25 million.

  • 0.05% on account balances over $25 million.

Other account fees

None.

Setup or onboarding fee

None.

Advisor access and credentials

  • Unlimited appointments over phone, email or videoconference.

  • Most advisors are certified financial planners; all are fiduciaries and compensated with salary instead of commissions.

  • Investors with account balances of $50,000 to $500,000 get a team of advisors; investors with balances of $500,000 or more get a dedicated advisor.

Financial planning services

Can advise and create a custom portfolio for a variety of situations, such as saving for retirement, college or a family vacation home.

Services include: Social Security optimization, dynamic spending, tax efficiency, long-term care and medical costs, high-level guidance on estate planning, charitable giving, Roth conversions and trust services.

Investment expense ratios on portfolios

Average expense ratio is 0.06%.

Portfolio construction

Vanguard PAS creates customizable portfolios on a client-by-client basis. It uses low-cost Vanguard index funds and ETFs, which are diversified with tight tracking. Vanguard PAS also offers three ESG funds (scored on environmental, social and governance factors for sustainable investing).

Brokerage options

Clients must move money to Vanguard but can keep outside investments if there are embedded gains or other reasons to do so.

Accounts supported

  • Individual and joint brokerage accounts.

  • Roth, traditional, rollover, SEP and SIMPLE IRAs.

  • Trusts.

Tax strategy

  • Assets are allocated strategically among taxable and tax-advantaged accounts to optimize for taxes.

  • Customers have access to tax-loss harvesting

  • Tax-exempt municipal bonds used to reduce taxes for taxable accounts.

  • Minimum tax cost basis method minimizes tax impact by identifying select units or quantities (lots) of securities to sell based on ordering rules.

Customer support options (includes how easy it is to find key details on the website)

Customer support is available Monday through Friday, 8 a.m. to 8 p.m. Eastern time. Ability to schedule appointments with an advisor at any time.

» Want to check out other providers? See our top picks for robo-advisors.

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Methodology

How do we review brokers and robo-advisors?

NerdWallet’s comprehensive review process evaluates and ranks the largest U.S. brokers and robo-advisors. Our aim is to provide an independent assessment of providers to help arm you with information to make sound, informed judgements on which ones will best meet your needs. We adhere to strict guidelines for editorial integrity.

We collect data directly from providers through detailed questionnaires, and conduct first-hand testing and observation through provider demonstrations. The questionnaire answers, combined with demonstrations, interviews of personnel at the providers and our specialists’ hands-on research, fuel our proprietary assessment process that scores each provider’s performance across more than 20 factors. The final output produces star ratings from poor (one star) to excellent (five stars).

For more details about the categories considered when rating providers and our processes, read our full broker ratings methodology and our full robo-advisor ratings methodology

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