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Wealthfront vs. Betterment: Choose the Best for You

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.

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Key facts about each advisor
Management fees
Features
Investment portfolios

Comparison: Betterment vs. Wealthfront

Wealthfront
bettermentsmall
Quick facts
  • Management fee: 0.25%
  • Account minimum: $500
  • Accounts offered: Individual and joint investment accounts; IRAs; 529 college savings accounts
  • Management fee: 0.25% to 0.40%
  • Account minimum: $0
  • Accounts offered: Individual and joint investment accounts; IRAs
Best for
  • Free management of $5,000
  • Taxable accounts with balances of $100,000 or more
  • Saving for college
  • Digital-only financial planning
  • No minimum deposit requirement
  • Retirement accounts
  • Socially responsible investing
  • Access to human financial advisors
Human advisors available
No
Yes
Promotion
$5,000 managed free for NerdWallet readersUp to 1 year of free management with qualifying deposit
How to open an account

Management fees

Betterment and Wealthfront both charge an annual fee of 0.25% for digital portfolio management. At Betterment, that fee also includes messaging with human financial advisors via the advisor’s app.

For those who want additional 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 — and Betterment waives management fees on the portion of an account balance that tops $2 million.

Features

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.

 
Wealthfront
bettermentsmall
Automatic rebalancing
Human advisors
Tax-loss harvesting
Direct indexing
SRI portfolio
Fractional shares
Retirement tools
College savings management
Charitable giving assistance
Portfolio line of credit

Notable at Wealthfront

  • PassivePlus. This suite of portfolio-enhancing features includes direct-indexing, a tax-optimization service offered at no extra charge to taxable accounts with balances of $100,000 or more. Direct-indexing 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, offered 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 can help plan for long-term goals like retirement, college and a home purchase.

Notable at Betterment

  • In-app human advice. The base cost at Betterment includes in-app messaging with financial advisors, with messages answered within 24 hours.
  • 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.

Investment portfolios

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 direct-indexing service for investors who qualify. 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%.

Unless they opt out, Wealthfront clients with taxable accounts of $100,000 or more may 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.

 
Wealthfront
bettermentsmall
U.S. stocksVanguard Total Stock Market ETF (VTI)Vanguard Total Stock Market ETF (VTI)
Dividend growth stocksVanguard Dividend Appreciation ETF (VIG)
Large-cap stocksVanguard Value ETF (VTV)
Mid-cap stocksVanguard Mid-Cap Value ETF (VOE)
Small-cap stocksVanguard Small-Cap Value ETF (VBR)
Foreign stocksVanguard FTSE Developed Markets ETF (VEA)Vanguard FTSE Developed Markets ETF (VEA)
Emerging market stocksVanguard FTSE Emerging Markets ETF (VWO)Vanguard FTSE Emerging Markets ETF (VWO)
U.S. government bondsVanguard Total Bond Market ETF (BND)
U.S. high-quality bonds (government and corporate)iShares Barclays Aggregate Bond Fund (AGG)
U.S. corporate bondsiShares iBoxx $ Investment Grade Corporate Bond ETF (LQD)
International bondsVanguard Total International Bond ETF (BNDX)
Emerging market bondsiShares JPMorgan USD Emerging Markets Bond ETF (EMB)
Municipal bondsVanguard 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 bondsiShares Barclays Short Term Treasury Bond ETF (SHV)
Real estateVanguard Real Estate ETF (VNQ)
Natural resourcesEnergy Select Sector SPDR Fund (XLE)
Risk parityWealthfront 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 message financial advisors, 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.

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