The robo-advisor industry was pioneered by Betterment and Wealthfront, and despite many new entries, these two companies continue to lead when it comes to independent advisors. That has many consumers rightly wondering: Which online advisor is better, Betterment or Wealthfront?

The truth is they’re both strong contenders, and the answer depends largely on you. Factors like how much you have to invest, which features matter most and what type of account you plan to open weigh heavily here. Still, we’ll do our part, which is to put the two side by side so you can zero in on which robo-advisor is the best choice for your investments.

Management fees

Fees are potentially the biggest drawback of a robo-advisor. Investment expenses are punishing enough; do you really want to lay an additional cost on top of them? You might, especially once you see what you can get from each for less than a third of the cost of the typical human financial advisor.

Here’s the short of it: Betterment and Wealthfront both charge an annual management fee of 0.25% for digital advice.

The long of it is that Wealthfront offers free management of $10,000 worth of your account balance. That means the annual cost at that advisor will nearly always be lower. The exception: Betterment waives management fees on the portion of an account balance that tops $2 million, so if you’re a high roller, that’s worth considering.

Here’s a look at how much you’d pay each advisor at various account balances.

*Wealthfront costs are based on NerdWallet’s promotion: The first $15,000 in the account incurs no management fee.

Winner: Betterment on account balances above $2 million; Wealthfront for the rest of us.

Features

A lot of the features here are similar and fit the standard robo-advisor mold. Both Wealthfront and Betterment offer a range of account types, as well as automatic portfolio rebalancing and tax-loss harvesting.

Where they differ: Betterment offers two plans that gain clients access to a team of financial advisors, for a higher fee and higher account minimum. Betterment Plus charges 0.40% and requires a minimum $100,000 balance; clients then get unlimited advice via email and one financial planning call per year. Betterment Premium charges 0.50% and requires a minimum $250,000. That offering comes with unlimited email and unlimited phone calls with advisors. Both the Plus and Premium options include account monitoring by that team of advisors, who the company says will proactively reach out to investors if they feel guidance is needed.

That tracks with Betterment’s overall approach — rooted in behavioral finance, the company puts a strong focus on goal-setting. Betterment’s algorithms use your answers to an initial questionnaire to suggest up to three goals — a safety-net fund, a retirement savings account or an investing account — and a target amount, and it recommends asset allocation for each. Users can also add their own goals and select an account type for them. For instance, you might start a wedding fund in a joint taxable account.

To help you reach those goals, an optional feature called Smart Deposit harvests “unneeded” funds out of your checking account. You tell the company how much you need in checking at any one time — enough to cover your monthly expenses, plus a buffer — and it monitors your account balance and scoops any excess into the Betterment account you designate. The tool sends a notification before a Smart Deposit takes place and allows you to opt out.

Betterment also offers RetireGuide, which, after you link and sync outside accounts, calculates the gap between where you stand in your savings progress and how much money you’ll need in retirement.

Wealthfront is one of a few robo-advisors who have not reintegrated a human advice team. But it has a lot to offer taxable accounts, and its portfolio analysis service can help you decide whether you want to transfer funds to the company.

It also offers an important feature that creates a hitch in the above fee comparison, giving Wealthfront an even bigger leg up: If you’re investing in a taxable account rather than a retirement account, you’ll want to take Wealthfront’s advanced tax-optimized direct indexing service into consideration when comparing costs. The service, offered at no extra charge to accounts with balances of $100,000 or more, is like a souped-up version of tax-loss harvesting.

Generally, index-based investing makes it harder to make use of tax-loss harvesting, a practice that reduces taxes by selling losing investments to offset the capital gains from winning investments. With this service, Wealthfront mimics an index fund by buying the individual investments it holds, opening the door to greater tax-loss harvesting opportunities by allowing it to sell individual securities.

The company says the service can add as much as 2.03% to annual investment performance. Keep in mind, though, that this service applies only to taxable accounts. IRA customers won’t benefit from tax assistance at either company, as money in those accounts is tax-deferred.

Winner: Betterment appeals to investors who may want access to financial advisors, but if you’re seeking advanced tax optimization, Wealthfront is the better option, especially for taxable accounts at or above $100,000.

Investment portfolio

Both companies use portfolios composed of low-cost exchange-traded funds; the differences in expense ratios are negligible. Wealthfront offers slightly more diversification through exposure to alternative asset classes such as natural resources and real estate, and it buys individual securities through its direct-indexing service for investors who qualify.

On the other hand, Betterment lets customers buy fractional shares of the ETFs it uses, which means you won’t have cash sitting on the sideline, waiting until you’ve accumulated enough to purchase a full share. Wealthfront doesn’t offer this service.

Winner: At the risk of sounding like CNN, this one is too close to call. Investors who want to avoid any and all cash in their portfolio — and that’s not a bad idea — will love Betterment for its fractional shares; investors who want exposure to natural resources or real estate will prefer Wealthfront.

Which one is right for you?

Wealthfront and Betterment are strong choices for a robo-advisor; there’s a reason they are NerdWallet’s top overall picks in our list of the best online advisors. Both offer low-cost, diversified ETF portfolios, automatic rebalancing and low ongoing management fees. Betterment has better features for the average retirement investor and offers optional human advice, but Wealthfront’s advanced tax-optimization services will easily win over investors with taxable accounts.

Comparing just costs — which are one of the most important factors in investing and one of the few things investors can control — investors with balances under $2 million will pay lower management costs at Wealthfront.

 

Arielle O’Shea is a staff writer at NerdWallet, a personal finance website. Email: aoshea@nerdwallet.com. Twitter: @arioshea.

Updated Jan. 31, 2017.