Betterment vs. Vanguard: Which Is Best for You?

Arielle O'SheaApr 15, 2021
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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 do these services, plus Vanguard’s brokerage, compare with a managed experience at 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, click to expand the accordions below.

Betterment at a glance

NerdWallet rating 

on Betterment's website

Account minimum

$0 for Betterment Digital, $100,000 for Betterment Premium.

Account management fee

0.25% for Betterment Digital, 0.40% for Betterment Premium.

Investment expense ratios

Average expense ratio of 0.11%.

Account fees (annual, transfer, closing)


Portfolio mix

  • Core portfolio uses ETFs from 13 asset classes.

  • Portfolio options include: Betterment Core, Betterment Socially Responsible Investing (SRI), Goldman Sachs Smart Beta, Blackrock Target Income, Betterment Flexible Portfolio.

  • Portfolio mix is well-diversified but lacks exposure to non-market correlated assets like real estate investment trusts (REITs) and commodities.

Socially responsible portfolio options

Clients can choose to invest in SRI portfolio options for no additional fee.

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).

  • High yield savings/cash account (not charged management fee).

Tax strategy

  • Tax-loss harvesting

  • Tax-Coordinated Portfolio tool

  • Tax Impact Preview tool

  • Charitable giving tool

Automatic rebalancing

  • Free on all accounts.

  • Monitored daily. Buy/sell rebalancing triggered whenever portfolio drifts, reaches or exceeds 3%.

  • 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 range from $199 to $299.

  • Betterment Premium customers get unlimited phone calls and emails with a team of certified financial planners.

Savings account/cash management option

  • High-yield savings with no fees or minimum balance requirements, unlimited transfers and FDIC coverage for balances up to $1 million.

  • New Cash Goals feature enables customers to save in separate buckets for different goals.

Customer support options (includes website transparency)

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

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

  • Email support and questions answered through social media as well.

Vanguard Personal Advisor Services at a glance

Vanguard PAS at a glance

Account minimum


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.

Setup or onboarding fee


Other account fees


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

Asset-weighted average is 0.06%.

Brokerage options

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

Portfolio construction

Customizable on client-by-client basis to fit their goals, circumstances and preferences. Uses Vanguard index funds and ETFs, which are low-cost and diversified with tight tracking. As potential alternatives to core index options, offers three ESG funds (scored on environmental, social and governance factors for sustainable investing).

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.

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 website transparency)

Customer service hours are Monday to Friday, 8 a.m. to 8 p.m. Eastern time. Ability to schedule appointments with an advisor at any time.

Vanguard Digital Advisor at a glance

Account minimum

$3,000 for retail brokerage accounts, $5 for eligible defined contribution plan participant accounts.

Account management fee

Net advisory fee is approximately 0.15%, although actual fee will vary depending on the specific holdings in each enrolled account.

Investment expense ratios

0.05% for retail clients with Vanguard brokerage accounts; fees vary for defined contribution plan participant accounts.

Account fees (annual, transfer, closing)


Portfolio mix

For retail accounts, portfolios will be constructed with varying contributions of four Vanguard ETFs: Total Stock Market ETF, Total International Stock ETF, Total Bond Market ETF and Total International Bond ETF. Portfolio is well-diversified but lacks exposure to non-market correlated assets like real estate investment trusts (REITs) and commodities. No socially responsible investing (SRI) options.

Socially responsible portfolio options


Accounts supported

Individual and joint brokerage accounts, Roth and traditional IRAs, 401(k) (Vanguard is rolling out this service to eligible defined contribution plans on its full-service record-keeping platform).

Tax strategy

Portfolios constructed with low-turnover, tax-efficient ETFs. Using an "asset location" approach optimizes tax efficiency by allocating investments strategically among taxable and tax-advantaged accounts.

Vanguard Digital Advisor uses the minimum tax cost basis method, which is generally designed to minimize tax impact and lower an individual's tax burden by identifying selective units or quantities (lots) of securities to sell in any sale transaction (including rebalancing) based on specific ordering rules.

Automatic rebalancing

Portfolios evaluated daily to compare against target asset allocation, and rebalanced as necessary when portfolio found to deviate by more than 5% in any asset class. Monitoring in place to rebalance if cash balance is more than $300.

Human advisor option

None through Digital Advisor. Vanguard does offer access to advisors through its Personal Advisor Services platform, which has additional fees.

Bank account/cash management account

Self-directed cash allocation can be put in a Vanguard money market fund. There is no other short-term savings option, but no gross advisory fee is assessed on any cash equivalent balances. Excess cash is automatically transferred into the Vanguard Federal Money Market Fund with current 7-day SEC yield of 0.01% (as of 2/22/21).

Customer support options (includes website transparency)

Phone support Monday-Friday, 8 a.m.-8 p.m. Eastern time.

Vanguard at a glance

Account minimum

$0; however, fund minimums start at $1,000

Stock trading costs


Options trades

$0 + $1 per contract

Account balances with $1 million+ get 25 trades for free each year; accounts of $5 million+ get 100 free trades per year.

Account fees (annual, transfer, closing, inactivity)

No closing, inactivity or transfer fees. $20 annual account service fee for all brokerage accounts and IRAs. Waived for clients who sign up for statement e-delivery.

Number of commission-free ETFs

All available ETFs trade commission-free.

Number of no-transaction-fee mutual funds

More than 3,100 from outside providers; none of Vanguard's 120-plus open funds charge transaction fees.

Tradable securities

• Stocks. • Bonds. • Mutual funds. • ETFs. • Options. • CDs.

Trading platform

Basic trading platform

Mobile app

Trade mutual funds, ETFs and stocks; monitor account activity and analyze performance; follow market news and research investments

Research and data

Average quality but free

Customer support options (includes website transparency)

Phone support Monday-Friday, 8 a.m.-9 p.m. Eastern; email support

Costs and account minimums

It’s almost inarguable that building and managing your portfolio yourself will save you money, at least strictly on a fee basis.

But in some cases, that extra fee for management — especially the relatively small one charged by online advisors — is worth it. That extra layer might prevent you from panic selling during a downturn, for example, or guide you toward investments that are best suited for your goals. Both could improve your investment returns.

And so while you could build a portfolio yourself at Vanguard using many of the very same funds that Betterment uses, you also have to commit to managing that portfolio. That means selecting investments, rebalancing as needed, keeping your hands off when they’re not needed and performing tax-loss harvesting and tax optimizations if it’s a taxable account. None of this is particularly hard; you just have to do it.

If you don’t want to do it, there are robo-advisors. Betterment charges 0.25% and requires no minimum for its basic digital offering; Vanguard charges 0.15% for Vanguard Digital Advisors, with a minimum investment requirement of $3,000.

Both companies also have options for clients who want access to human financial advisors:

  • Vanguard Personal Advisor Services charges 0.30% and requires a $50,000 minimum investment, with unlimited access to financial advisors via phone, email or video. Clients with a balance of more than $500,000 get a dedicated advisor; others have access to a team of advisors.

  • Betterment Premium charges 0.40% and requires $100,000 for phone and email access to a team of financial advisors.

Winner: It depends on what type of investor you are. Vanguard’s brokerage is easily the best choice for DIY investors. For investors who prefer to be hands-off, Betterment Digital wins for clients who are happy with goal-oriented tools and features, and don't need access to a human advisor, as Vanguard Digital's offerings are fairly basic (though the company says more tools and features will roll out soon).

Vanguard Personal Advisor Services wins pretty handily for clients who want robust access to financial advisors. Compared with Betterment Premium, Vanguard PAS is lower cost, has a lower minimum balance requirement and includes a dedicated advisor offering at $500,000.


This is almost an unfair battle for Betterment, which by design streamlines investment choices down to around 12 exchange-traded funds that it then uses to build a variety of portfolios with varying levels of risk. Many of those ETFs are from Vanguard.

On the other hand, investors at Vanguard can self-manage their account, selecting from thousands of commission-free ETFs and no-transaction-fee mutual funds. Vanguard also offers access to individual stocks, option contracts and bonds.

Then there’s Vanguard Personal Advisor Services and Vanguard Digital Advisors, both of which primarily use Vanguard index funds. Expense ratios on portfolios from Betterment and Vanguard's online advisor services are in the same ballpark. One thing worth noting: Vanguard has an interesting structure in that the company is owned by its funds. That means fund investors benefit when the company does well. But some investors will still prefer an independent advisor like Betterment, which has the freedom to choose investments from all fund families.

Winner: Vanguard, but Betterment gets points here for its independent status.


Most online advisors offer some form of regular rebalancing, along with tax-loss harvesting for taxable accounts. It’s part of the appeal; investors may not do this on their own, and this kind of account hygiene can increase your after-tax returns and ensure you’re taking the appropriate amount of risk.

Vanguard Personal Advisor Services rebalances quarterly or as outlined in each client’s financial plan, but it doesn't offer automatic rebalancing. The service also performs tax-loss harvesting as needed. Vanguard Digital Advisors clients get automatic rebalancing, but the service's tax strategy is limited at this point.

Betterment takes an automatic approach, rebalancing via algorithm as needed and searching daily for tax-loss harvesting opportunities. Accounts enrolled in Betterment Premium are also monitored by the company’s team of financial advisors.

Both companies practice smart asset location, strategically placing tax-efficient investments like municipal bond funds in taxable accounts. (This only applies, of course, in situations where the client has both types of account.)

Winner: We’d give an edge to the daily, reflexive rebalancing and tax-loss harvesting of Betterment, but some investors may prefer Vanguard Personal Advisor Services’ more personalized approach.

Which is best for you?

For some, this is an easy answer. Want to build your own portfolio? Open a brokerage account or IRA at Vanguard and DIY from their excellent funds. If you’re looking for an online advisor with powerful planning tools and features, Betterment Digital is our pick for low-cost, inexpensive robo-advisory services.

For investors seeking a robust digital-human hybrid, Vanguard Personal Advisor Services pretty easily beats Betterment Premium, due to a lower fee, more personalization and a lower minimum deposit requirement.

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

SoFi Automated Investing
Vanguard Digital Advisor


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