Betterment Review 2022: Pros, Cons and How It Compares

Betterment’s goal-oriented tools and helpful tax strategies should appeal to investors of all types. Access to human advisors is available with the Premium plan, or by purchasing a standalone advice package.

Paid non-client promotion. NerdWallet doesn’t invest its money with this provider, but they are our referral partner – so we get paid only if you click through and take a qualifying action (such as open an account with or provide your contact information to the provider). Most importantly, our reviews and ratings are objective and are never impacted by our partnerships. Our opinions are our own. Here is a list of our partners and here's how we make money.


The investing information provided on this page is for educational purposes only. NerdWallet does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments.

Our Take

5.0

NerdWallet rating 

Reviewed in: Oct. 2022

Period considered: Aug. - Oct. 2022

The bottom line:

Betterment is a clear leader among robo-advisors, offering two service options: Betterment Digital provides automated portfolio management at $10 to start an account; Betterment Premium provides unlimited phone access to certified financial planners for a $100,000 account minimum.

Betterment
Fees
0.25%
management fee
Account minimum
$0
Promotion
Up to 1 year
of free management for new clients. Terms apply.
Learn more

on Betterment's website

AD

Paid non-client promotion

Pros & Cons

Pros

  • Multiple portfolio options and customization.

  • Low account minimum and fees

  • Fractional shares mean all your cash is invested.

  • Robust goal-based tools.

Cons

  • No direct indexing.

Compare to Other Advisors

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Betterment
Fidelity
Interactive Brokers IBKR Pro
Merrill Edge
TD Ameritrade
NerdWallet rating 

5.0

/5
NerdWallet rating 

5.0

/5
NerdWallet rating 

4.7

/5
NerdWallet rating 

5.0

/5

Fees

0.25%

management fee

Fees

$0

per trade for online U.S. stocks and ETFs

Fees

$0.005

per share; as low as $0.0005 with volume discounts

Fees

$0

per trade

Fees

$0

per trade

Account minimum

$0

Account minimum

$0

Account minimum

$0

Account minimum

$0

Account minimum

$0

Promotion

Up to 1 year

of free management for new clients. Terms apply.

Promotion

Get $100

when you open a new, eligible Fidelity account with $50 or more. Use code FIDELITY100. Limited time offer. Terms apply.

Promotion

Exclusive!

US resident opens a new IBKR Pro individual or joint account receives 0.25% rate reduction on margin loans. Tiers apply.

Promotion

Up to $600

when you invest in a new Merrill Edge® Self-Directed account.

Promotion

None

no promotion available at this time

AD

Paid non-client promotion

NerdWallet doesn’t invest its money with this provider, but they are our referral partner – so we get paid only if you click through and take a qualifying action (such as open an account with or provide your contact information to the provider). Most importantly, our reviews and ratings are objective and are never impacted by our partnerships. Our opinions are our own. Here is a list of our partners and here’s how we make money.

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Full Review

Where Betterment shines

Lots to like: Betterment offers multiple portfolio options and customization, has a low minimum investment, and charges a very reasonable annual management fee of just 0.25%.

Fractional shares: Fractional shares mean all your cash is invested.

Where Betterment falls short

No direct indexing: While Betterment does offer tax-loss harvesting, the firm does not offer direct indexing. This is where Betterment falls short of competitor Wealthfront, where direct indexing is available for free on accounts of $100,000 or more.


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

Reviewed: Oct. 2022

Period considered: Aug. - Oct. 2022

Account minimum

$0 ($10 to start investing).

Account management fee

0.25%.

Investment expense ratios

Average expense ratio of 0.06% for Betterment Core Portfolio as of Oct. 20, 2022.

Account fees (annual, transfer, closing)

None.

Portfolio mix

Core portfolio uses ETFs from 12 asset classes. Portfolio options include: Betterment Core, Goldman Sachs Smart Beta, Blackrock Target Income, Betterment Flexible Portfolio and Innovative Technology. Clients can also build their own portfolios from a pre-vetted list of ETFs. Portfolio mix is well-diversified but lacks exposure to non-market correlated assets like real estate investment trusts (REITs) and commodities.

In October 2022, Betterment also added four cryptocurrency portfolios; Universe, Sustainable, Metaverse and Decentralized Finance.

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 (asset location) tool.

Tax Impact Preview tool.

Charitable giving tool.

Automatic rebalancing

Free on all accounts.

Actively monitored, rebalancing triggered when drift passes 3% with consideration for tax impact.

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 start at $299.

Savings account/cash management option

Cash Account** 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.

More details about Betterment's ratings

Looking for access to financial advisors? Jump to Betterment Premium.

Account minimum: 5 out of 5 stars

Betterment doesn't have an account minimum, but it is $10 to start investing.

Account management fee: 5 out of 5 stars

Betterment’s digital investing tier charges a 0.25% annual fee. That fee is on the cheaper end compared to many other robo-advisors, and if you want to talk to a financial advisor, you can purchase one of the company's financial advice packages (more on those below).

If you have a high account balance, for the portion of your household balance above $2 million, you'll receive a 0.10% discount. This means that on the Digital plan, you'll pay just 0.15% for the portion of your balance above $2 million, and on the Premium plan, you'll pay 0.30% for the portion of the balance above $2 million.

Investment expense ratios: 5 out of 5 stars

An expense ratio is an annual fee charged by mutual funds, index funds and ETFs, as a percentage of your investment in the fund. If you invest in a mutual fund with a 1% expense ratio for example, you’ll pay the fund $10 per year for every $1,000 invested. If high, these fees can significantly drag down your portfolio returns, but the expense ratios of the funds used in Betterment portfolios are only 0.11% as of Oct. 20, 2022. Expense ratios are paid in addition to Betterment’s management fee (but since they are deducted from your account, you won’t see it as a separate fee).

Account fees: 5 out of 5 stars

Betterment charges no fees aside from its account management fee and expense ratios.

Portfolio mix: 4 out of 5 stars

Like many robo-advisors, Betterment bases its investment philosophy on modern portfolio theory, which highlights the benefits of diversification. In its core portfolio, the company uses exchange-traded funds that represent about 12 asset classes for different levels of risk tolerance and your goals. Customers who want a bit more control over their investment portfolio can use Betterment’s “flexible portfolios” tool to adjust the percentage of their money invested in any particular ETF.

Investors also can choose among other portfolio options: a smart beta portfolio that seeks higher-than-average returns by embracing systematic risks; an income portfolio made up solely of bonds; and an innovative technology portfolio that focuses on industries such as semiconductors, virtual reality and artificial intelligence. Betterment also offers several socially responsible portfolios, which use ETFs comprising companies whose business practices align with certain social causes (more on this below).

In October 2022, Betterment rolled out a distinctive cryptocurrency product, through which it allows customers to buy a diversified portfolio of digital assets focused on particular sectors of the blockchain space. 

Among the baskets of investments available are a Sustainable option, which focuses on cryptocurrencies that seek to avoid the use of energy-intensive mining processes. Another option is a diversified Universe portfolio that includes some of the most dominant cryptos such as Bitcoin and Ethereum. 

Another notable aspect of Betterment’s offerings a “golden rule” feature that encourages overall portfolio diversification by pushing customers not to put more than 5% of their investable assets into crypto. 

Betterment says fees for its crypto products can vary, but they top out at about .15% per trade. That is on the lower end of the spectrum among crypto exchanges reviewed by NerdWallet. 

Socially responsible portfolio options: 5 out of 5 stars

Betterment not only has a socially responsible portfolio option, it has three. Broad Impact doesn’t focus on any one particular issue, but is intended for those who are interested in Environmental, Social and Governance investing at large. Climate Impact invests in companies with lower carbon emissions, the funding of green projects and divestment from fossil fuels. The Social Impact portfolio focuses on supporting minority empowerment and gender diversity.

Accounts supported: 5 out of 5 stars

Betterment supports individual and joint nonretirement accounts, Roth, traditional, rollover and SEP IRAs and trusts.

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

Betterment will allow you to link external accounts for personalized advice (but it will not manage those accounts directly).

Tax strategy: 5 out of 5 stars

Betterment offers tax-loss harvesting on taxable accounts. The platform automatically reviews your investments daily to reduce tax exposure. But it doesn’t have direct-indexing like Wealthfront, which provides this service on taxable accounts with balances of $100,000 or more. Direct indexing buys the single securities held by an index, rather than the ETF tracking that index. That can help single out tax-loss harvesting opportunities and save investors with taxable accounts a significant amount of money.

Betterment's Tax-Coordinated Portfolio is a solid attempt to bridge this gap. This is an "asset location" strategy that automatically puts tax-efficient investments into taxable accounts and investments that have a heavy tax burden into tax-advantaged accounts that will shelter them. (You need to have both taxable and tax-advantaged retirement accounts at Betterment for the strategy to work.)

Betterment offers a Tax Impact Preview tool that lets you see the potential tax hit of any portfolio moves before you make them. Betterment also has a charitable giving tool that gives customers a tax-efficient way to donate appreciated securities to charities directly on the Betterment platform.

Automatic rebalancing: 5 out of 5 stars

Automatic rebalancing is regular rebalancing of your portfolio in response to market fluctuations or other factors that shift your portfolio out of its intended investment allocation. The market moves and over time, your allocation will move, too. So if your target was having 60% in stocks and 40% in bonds and your stocks are doing well, you could end up having 70% in stocks, which may be more risk than you are comfortable with. With automatic rebalancing, the computer monitors your allocation and will automatically adjust your investment if it gets out of line. Betterment’s algorithms check daily for the need to rebalance within your portfolio and automatically rebalances investor portfolios when cash flows in or out — in the form of dividends, contributions or withdrawals — or when the allocation to a particular asset class drifts 3% or more from its target level.

Human advisor option: 2 out of 5 stars

Betterment offers advice packages targeted to specific life events. A $299, 45-minute “getting started” call with a CFP helps new clients set up their Betterment account, make the most of Betterment tools and features, and start investing. The other four packages each cost $399 for a 60-minute call, with advice geared toward college planning, marriage, retirement and general financial health. With all of the packages, you're speaking with a CFP.

Betterment’s sign-up process takes you through a goal-setting exercise, asking for your age and current annual income. Then it suggests a series of goals based on your answers, estimating a safety net of three to six months of expenses, a retirement savings target and a general investing goal. Each goal comes with a recommended target and asset allocation, which you can adjust. You can also add other, personalized goals that will dictate the account types used and the way your money is invested. And you can set up auto-deposits into each goal.

If you’re looking for advice from a financial advisor, jump to .

Savings account/cash management options: 4 out of 5 stars

Betterment offers both checking and cash accounts. The cash account is called Cash Reserve and it comes with an interest rate of 3.20%. (Annual percentage yield (variable) is as of 11/07/2022.) Your Cash Reserve account will get up to $1 million in FDIC insurance coverage, there's no minimum balance requirement, and you won't pay a fee on your balance. The Cash Reserve account allows you to create separate buckets of cash for specific goals and set up auto-deposits for each.

Betterment’s checking account has no minimum balance, no foreign transaction fees and no overdraft fees. The company reimburses ATM fees worldwide. There is also a joint checking account option.

» Want more details? Read about Betterment's Cash Management Account.

Customer support options: 4 out of 5 stars

Betterment offers phone support Monday to Friday 9 a.m. to 8 p.m. Eastern time for checking and cash reserve inquiries and Monday to Friday 9 a.m.-6 p.m. Eastern time for investing and general inquiries.

Betterment also has email support and will address questions through social media.

Other features you should know

Betterment’s retirement planning tool lets you link your non-Betterment accounts, including 401(k)s, giving a full picture of all your savings and investment accounts.

With this information, the tool can offer comprehensive retirement planning advice, including comparing current savings levels with your desired spending levels in retirement, answering questions about whether you’re saving enough money, when you’ll be able to retire, and if you’re using the correct savings vehicles and investments. It updates and syncs to outside accounts daily and allows for Social Security data uploads.

Betterment’s latest move into crypto, which isn't a common offering among robo-advisors, builds off of its recent acquisition of the cryptocurrency investment platform Makara, which focused on selling similar collections of crypto investments. And it seeks to take on a gap in the field of crypto, which has few readily available products that offer diversified access to the sector. 

Another notable aspect of Betterment’s offerings a “golden rule” feature that encourages overall portfolio diversification by pushing customers not to put more than 5% of their investable assets into crypto. 

Betterment says fees for its crypto products can vary, but they top out at about .15% per trade. That is on the lower end of the spectrum among crypto exchanges reviewed by NerdWallet. 

Betterment Premium at a glance

Betterment Premium is Betterment’s upper-tier service. Betterment Premium charges a 0.40% annual fee and requires a minimum $100,000 balance in exchange for unlimited phone access to a team of certified financial planners. You can also get advice on investments held outside of Betterment from your team of CFPs.

» Want to compare options? Check out our roundup of the best wealth advisors

Reviewed: Oct. 2022

Period considered: Aug. - Oct. 2022

Account minimum

$100,000.

Account management, planning or subscription fee

0.40%.

Setup or onboarding fee

None.

Advisor access and credentials

Clients have unlimited access to a team of CFP professionals for no additional fee. Advisors can be reached by phone and email Monday to Friday from 9 a.m. to 6 p.m. Eastern. If clients are looking for a dedicated advisor, Betterment may be able to connect them to a dedicated advisor depending on availability.

Financial planning services

Premium includes all the features of Betterment's lower-tier offering, including investing portfolios, socially responsible investing options, automatic features, such as portfolio rebalancing, dividend reinvestment, and auto-adjust. Premium CFPs will be able to help you with some financial planning, such as debt reduction, but not estate or business planning. Premium clients also receive in-depth advice on investments held outside of Betterment.

Brokerage options

Only manages accounts held within Betterment.

Is Betterment right for you?

Betterment’s goal-oriented tools and features should appeal to retirement investors, and the human advice offering through Betterment Premium is inexpensive compared with other independent hybrid advisors, such as Personal Capital. But Betterment’s CFPs won’t be able to help you with everything a typical financial advisor can, such as estate and business planning. Betterment’s variety of socially responsible portfolios is a great option for socially conscious investors.

How do we review robo-advisors?

NerdWallet’s comprehensive review process evaluates and ranks the largest U.S. robo-advisors. Our aim is to provide an independent assessment of providers to help arm you with information to make sound, informed judgements on which ones will best meet your needs. We adhere to strict guidelines for editorial integrity.

We collect data directly from providers through detailed questionnaires, and conduct first-hand testing and observation through provider demonstrations. The questionnaire answers, combined with demonstrations, interviews of personnel at the providers and our specialists’ hands-on research, fuel our proprietary assessment process that scores each provider’s performance across 16 factors. The final output produces star ratings from poor (one star) to excellent (five stars).

For more details about the categories considered when rating robo-advisors and our process, read our full methodology.


*Betterment is not a licensed tax advisor. Tax Loss Harvesting+ (TLH+) is not suitable for all investors. Read more at and consider your personal circumstances before deciding whether to utilize Betterment’s TLH+ feature. Investing involves risk. Performance not guaranteed.

**Cash Reserve is only available to clients of Betterment LLC, which is not a bank, and cash transfers to program banks are conducted through the clients’ brokerage accounts at Betterment Securities. For Cash Reserve (“CR”), Betterment LLC only receives compensation from our program banks; Betterment LLC and Betterment Securities do not charge fees on your CR balance. Checking accounts and the Betterment Visa Debit Card provided and issued by nbkc bank, Member FDIC. Checking made available through Betterment Financial LLC. Neither Betterment Financial LLC, nor any of their affiliates, is a bank. Betterment Financial LLC reimburses ATM fees and the Visa® 1% foreign transaction fee worldwide, everywhere Visa is accepted.

on Betterment's website