The robo-advisor industry was pioneered by Betterment and Wealthfront, and while the companies started out with very similar models, they’ve slowly made changes to differentiate themselves.
The biggest deciding factor at this point: If you want to work with a human, you’ll find that option only at Betterment. If you’re after only digital advice, Wealthfront’s offering may be more robust.
Other considerations include the type of account you plan to open, investment portfolios and key features. Here’s how to choose the best match for your money.
Comparison: Betterment vs. Wealthfront
Human advisors available
|$5,000 managed free for NerdWallet readers||Up to 1 year of free management with qualifying deposit|
How to open an account
Betterment and Wealthfront both charge an annual fee of 0.25% for digital portfolio management.
For those who want human interaction, Betterment has a second tier, Betterment Premium. It includes a team of financial advisors available via phone and email and costs 0.40%, with a minimum $100,000 investment.
Some other bits of pricing information you might consider, though they’re unlikely to sway your account one way or the other: Wealthfront offers NerdWallet readers free management of the first $5,000 invested — a savings of $12.50 a year that, while small, makes it slightly less expensive than Betterment overall.
On the other hand, large-balance investors may save at Betterment: For portions of an account balance over $2 million, Betterment reduces its fee to 0.15% for Digital and 0.30% for Premium. (Customers who funded their accounts before Sept. 18, 2018 are grandfathered into an old policy that offered free management on the portion of any balance that tops $2 million.)
The basic offerings at Betterment and Wealthfront are similar and fit the standard robo-advisor mold. Both include automatic (and free) portfolio rebalancing, tax-loss harvesting and portfolios of low-cost exchange-traded funds. Both can integrate — but not manage — outside accounts so you get a picture of your finances in one place.
Notable at Wealthfront
- PassivePlus. This suite of portfolio-enhancing features includes stock level tax-loss harvesting, a tax-optimization service offered at no extra charge to taxable accounts with balances of $100,000 or more. Stock level tax-loss harvesting is like a souped-up version of tax-loss harvesting: It mimics an index fund by buying individual securities. The company says it can add as much as 2.03% to annual investment performance.
- College savings. Wealthfront offers 529 college savings plan management through the Nevada state plan. The plan has all-in fees (investment expenses and management fees) of no more than 0.46%.
- Digital financial planning. Path, an intuitive planning tool, is designed to grow with you and help you understand how life changes will impact your future needs. The tool is offered to clients at no extra cost and can help plan for long-term goals like retirement, college and a home purchase.
- Wealthfront Cash Account: Wealthfront offers a free savings option that currently pays 1.78% interest, competitive with many online banks. The account carries up to $1 million in FDIC coverage, four times more insurance than the average bank account. The money deposited in a Wealthfront Cash Account is not subject to investment risk, and the balance is not charged Wealthfront’s management fee. Read our review of Wealthfront’s Online Cash Management Account.
Notable at Betterment
- Access to human advice. Betterment’s Premium plan offers unlimited access to financial advisors, but if you’re not ready for the 0.40% price or the $100,000 minimum, you can talk with a financial advisor by purchasing one of Betterment’s advice packages targeted to specific life events, such as marriage or retirement. Packages include one phone call with an advisor, plus an action plan with recommendations. Prices range from $199 to $299.
- Charitable giving service. This tax-smart giving feature allows clients to gift appreciated shares to charity directly through Betterment’s platform.
- Smart Deposit. This feature harvests “unneeded” money out of your checking account. You tell Betterment 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.
- Tax-Coordinated Portfolio. Betterment practices asset location by allocating assets across multiple accounts, putting the most tax-efficient in taxable accounts and investments that are taxed highly in IRAs.
- Stash your savings: Like Wealthfront, Betterment offers a high-yield savings option. Called Everyday, it comes with a 1.83% APY. There’s no minimum account balance, and savings balances aren’t subject to Betterment’s management fee. The savings product comes with $1 million in FDIC insurance coverage. Read our review of Betterment’s Everday Cash Management Account.
- Two-Way Sweep. This is a more robust version of Smart Deposit that works alongside the savings product: Two-Way Sweep runs a daily algorithm to identify excess money in a linked checking account, and moves that money into your Betterment savings. If your checking account balance dips too low, it will transfer money back out of savings to replenish it. You can set the target balance for your checking account, and like Smart Deposit, Betterment notifies you before each sweep.
Both companies use portfolios composed of low-cost ETFs; the differences in expense ratios are negligible.
Wealthfront offers exposure to alternative asset classes such as natural resources and real estate, and it buys individual securities through its stock level tax-loss harvesting service for investors who qualify. Those clients can also add individual stocks they don’t want to invest in to a restrictions list, creating a socially responsible portfolio if they wish.
Wealthfront also has a proprietary mutual fund, the Wealthfront Risk Parity Fund, which is used to achieve higher risk-adjusted returns and carries an expense ratio of 0.25%. Taxable accounts of $100,000 or more may opt to have up to 20% of their portfolio allocated to the fund, bringing the weighted average expense ratio of the portfolio to 0.11% (the weighted average expense ratio of a Wealthfront taxable portfolio without risk parity is 0.08%). Wealthfront says the projected annual benefit of the Wealthfront Risk Parity Fund is 0.24%.
Betterment offers fractional shares — which can reduce uninvested cash — and allows investors to select a socially responsible investment portfolio. That portfolio uses ETFs that hold companies whose business practices are in line with social causes and exclude companies with poor records on social issues. Betterment also offers a BlackRock Target Income portfolio for investors primarily looking to generate income from their portfolios.
|U.S. stocks||Vanguard Total Stock Market ETF (VTI)||Vanguard Total Stock Market ETF (VTI)|
|Dividend growth stocks||Vanguard Dividend Appreciation ETF (VIG)|
|Large-cap stocks||Vanguard Value ETF (VTV)|
|Mid-cap stocks||Vanguard Mid-Cap Value ETF (VOE)|
|Small-cap stocks||Vanguard Small-Cap Value ETF (VBR)|
|Foreign stocks||Vanguard FTSE Developed Markets ETF (VEA)||Vanguard FTSE Developed Markets ETF (VEA)|
|Emerging market stocks||Vanguard FTSE Emerging Markets ETF (VWO)||Vanguard FTSE Emerging Markets ETF (VWO)|
|U.S. government bonds||Vanguard Total Bond Market ETF (BND)|
|U.S. high-quality bonds (government and corporate)||iShares Barclays Aggregate Bond Fund (AGG)|
|U.S. corporate bonds||iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD)|
|International bonds||Vanguard Total International Bond ETF (BNDX)|
|Emerging market bonds||iShares JPMorgan USD Emerging Markets Bond ETF (EMB)|
|Municipal bonds||Vanguard Tax-Exempt Bond ETF (VTEB)||iShares National Muni Bond ETF (MUB)|
|Treasury inflation-protected securities (TIPS)||Schwab U.S. TIPS ETF (SCHP)||Vanguard Short-Term Inflation-Protected Securities ETF (VTIP)|
|U.S. short-term treasury bonds||iShares Barclays Short Term Treasury Bond ETF (SHV)|
|Real estate||Vanguard Real Estate ETF (VNQ)|
|Natural resources||Energy Select Sector SPDR Fund (XLE)|
|Risk parity||Wealthfront Risk Parity Fund (WFRPX)|
* Note that the investments included in each client portfolio may vary and are subject to change.
Which is right for you: Wealthfront or Betterment?
Wealthfront and Betterment are strong choices for a robo-advisor; there’s a reason they are NerdWallet’s top picks in our list of the best online advisors. Both offer low-cost, diversified ETF portfolios, automatic rebalancing and low ongoing management fees.
At Betterment, we like the option to purchase financial-advice packages, the retirement and goal-oriented saving features and the choice of socially responsible investment portfolio. Wealthfront stands out for college savings accounts, its digital financial planning software and tax optimization services, especially on taxable accounts of $100,000 or more.