Betterment vs. Vanguard: Which Is Best for You?

Arielle O'SheaOct 12, 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, read below.

Betterment
NerdWallet rating 

on Betterment's website

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

Account minimum

$0.

Account management fee

0.25%.

Investment expense ratios

Average expense ratio of 0.11%.

Account fees (annual, transfer, closing)

None.

Portfolio mix

Core portfolio uses ETFs from 13 asset classes.

Portfolio options include: Betterment Core, 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

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 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.

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. 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

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

Asset-weighted average is 0.06%.

Portfolio construction

PAS creates customizable portfolios on a 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).

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.

  • 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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SoFi Automated Investing
Vanguard Digital Advisor
Betterment
NerdWallet rating 
NerdWallet rating 
NerdWallet rating 
Fees

0%

management fee

Fees

0.15%

per year (approximately)

Fees

0.25%

management fee

Account Minimum

$0

Account Minimum

$0

Account Minimum

$0

Promotion

Free

career counseling plus loan discounts with qualifying deposit

Promotion

No advisory fees

your first 90 days of Vanguard Digital Advisor investment management (Enrollment requires a Vanguard account with a minimum of $3,000)

Promotion

Up to 1 year

of free management with a qualifying deposit

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