Betterment vs. Wealthfront: Which is Best for You?

Wealthfront and Betterment are well-known for pioneering many of the features that have become standard in the digital investment advisory space. Among the earliest entrants into the industry, both platforms have garnered recognition, with Wealthfront winning our Best Overall and Best for Goal Planning categories and Betterment winning our Best for Beginners and Best for Cash Management categories. 

On the surface, Betterment and Wealthfront look similar, but there are some key differences. For example, Betterment offers human financial advisors and a premium version, while Wealthfront has a stellar digital financial planner without any human touch. This means beginners to advanced investors seeking human financial advisor access might prefer Betterment. On the other side, Wealthfront is better suited for investors who are seeking customization options and are comfortable with an all-digital platform.

• Great for those looking to customize their portfolio with additional ETFs and cryptocurrency funds.
• Access to a portfolio line of credit for those interested in a loan.
• Single stock and risk parity portfolios are available for clients with more than $100,000.

• Great for beginners due to no account minimum.
• Certified Financial Planners are accessible for all users.
• Sustainable, income, and cryptocurrency portfolios are available.

Account Setup

Betterment’s account setup is smooth — just input your name, email, and a password, and then complete basic profile information, including your name, address, and Social Security number. After creating an account, you can complete the brief goals, timeline, and risk questionnaire. The platform provides an investment portfolio comprised of diverse U.S. and international stock and bond ETFs, informed by your responses to the initial quiz.

Investors can also adjust recommended asset percentages and opt for a fixed income, smart beta, or environmental, social, and governance (ESG) sustainable portfolio. Newly acquired Makara will add cryptocurrency investing choices soon. 

There’s no minimum required to fund the account, so you can get started investing with small dollar amounts. You can also view portfolio options before funding, which is a plus. Unfortunately, you can’t view potential portfolios without creating an account in a process that requires a Social Security number. Digital clients can purchase low-fee financial planning packages, while Premium users with $100,000 or more have unlimited access to Certified Financial Planners at no additional cost. Phone customer service representatives are available to help with questions.

At Wealthfront, you can create an account, take the initial questionnaire, and view potential portfolios by inputting your name, email address, phone number, and password. Wealthfront doesn’t require potential users to input a Social Security number initially which makes it easier than Betterment to check out the platform. Wealthfront will recommend a core portfolio, informed by your responses to the initial quiz, comprised of diverse U.S. and international stock and bond ETFs, as well as a real estate investment trust (REIT) fund. You can also view other investment portfolios options before funding your account. 

Wealthfront requires a $500 minimum investment and only offers a digital financial planner — no human advisors. That said, customer service representatives all have a minimum of Series 7 investment licenses. Customers can customize premade portfolios from a choice of 200+ ETFs and two Grayscale cryptocurrency funds. All account holders, even those who haven’t funded their account, can use Wealthfront’s free and comprehensive goal-planning tools. 

While both Betterment and Wealthfront have smooth account setup processes, we prefer Wealthfront in this category because you can get a deeper preview into the platform and your suggested portfolio without providing your Social Security number. 

Goal Planning

At Betterment, clients can set up multiple goals and enable distinct asset allocations in line with the goal type and time horizon. For example, your home down payment goal will be invested conservatively with more cash and short-term bonds, while your retirement goal portfolio will own greater percentages of stock ETFs, suitable for long-term investing. The goal tracking tool enables you to determine when you might reach the goal. Users can also connect outside accounts for a 360º view of all their assets

Wealthfront’s goal planning is integrated with their excellent Path digital financial planning tool. Like Betterment, users can also link outside accounts for comprehensive financial planning. Users select from six initial goals. Your goal progress is automatically updated on the  dashboard and you can test out various goal-based scenarios. Wealthfront explains that Path is equipped to answer more than 10,000 financial planning questions such as “how much home can I afford,” “when can I retire,” and “can I take time off to travel.”

It was a tight race between the two in the goal planning category as each platform excels with goal planning tools, reporting, and scenario analysis. Wealthfront won our Best for Goal Planning category in the 2022 review, and it takes this category here as well due to its more comprehensive analysis of all your synced data to determine your current financial health. 

Account Services

Cash Management

Betterment’s fee-free cash management offers two account types: checking and Cash Reserve savings accounts. These accounts can be opened separately from the Betterment investing account. The checking account includes a Visa cash-back debit card and ATM fee reimbursement in the US and internationally. There are no overdraft fees or minimum balance requirements. The Cash Reserve is a high yield cash account with funds deposited across several banks. 

Wealthfront Cash is fee-free and similar to an interest bearing checking account. Wealthfront Cash requires a separate sign up from the investing service and is available to individuals whether they sign up for the investing services or not. Top features include goal-based saving, ATM debit card, automated transfers to the investment account, bill pay, and direct deposit. Wealthfront Borrow also offers lending options for users, which is something Betterment doesn’t have. 

Overall, Wealthfront and Betterment are evenly matched in terms of cash management, but for different reasons. Betterment has two choices for your cash management and ATM fee reimbursements while Wealthfront has lending in addition to a solid checking account. So if you want borrowing options, Wealthfront has an edge, but if you are just looking for cash management, Betterment may make more sense.

Portfolio Construction

Both Betterment and Wealthfront employ Modern Portfolio Theory (MPT) principles, yet each digital investment advisor modifies the low-fee, diversified ETFs in their Core Portfolios to suit specific investment research theories. They each offer Core Portfolios, sustainable ESG options, and additional customization options as well. 

Betterment’s Core portfolios include the basic market-cap weight diversified U.S. and international stock and bond ETFs. Unlike Wealthfront, Betterment lacks REIT ETFs. Additionally, the firm includes value and small cap equity funds, found to outperform over long periods of time, according to factor research. Betterment also adds international bond funds to their other fixed income offers. Betterment’s specialty portfolios include a BlackRock Target Income, Goldman Sachs Smart-Beta factor, and three ESG portfolios, suitable for specific types of investors. Cash accounts are good for short-term goals.

Beyond diversified U.S. and international stock and bond funds, Wealthfront’s core portfolio asset classes differ from those at Betterment. Wealthfront adds commodity and emerging market bond ETFs along with REITs. Anyone can open a cash account. Investors with more than $500,000 can opt for a Smart Beta portfolio. While those with $100,000 can choose a Risk Parity option which allocates capital across multiple asset classes, in an attempt to outperform a market-matching portfolio.

Betterment Account Types:

• Individual taxable
• Joint taxable 
• Traditional IRA 
• Roth IRA
• 401(k) rollover IRA
• SEP IRA 
• Trust 
• High-interest savings and checking

Wealthfront Account Types:

• Individual taxable
• Joint taxable
• Traditional IRA
• Roth IRA
• 401(k) rollover IRA
• SEP IRA
• Trust 
• 529 College saving plan
• High-interest cash

Both Betterment and Wealthfront offer the typical account types, including cash management, but neither offers custodial accounts. Wealthfront inches ahead slightly in this category with a 529 college savings account, a rare offering among digital financial advisors.

Portfolio Customization

Betterment’s recent acquisition of Makara will broaden the investment choices to include cryptocurrency funds as well. Unlike Wealthfront, Betterment doesn’t provide customers the opportunity to add individual ETFs to their portfolios. 

Wealthfront recently upped its customization game by adding more than 200 ETFs and two Grayscale cryptocurrency funds to their offering. Now, users can add these funds to existing portfolios or create their own for Wealthfront to manage. Those with more than $100,000 can choose direct indexing which includes individual stocks. The ESG portfolios can be created by selecting from the many sustainable ETFs available. 

Although we expect Betterment to up its game in this area shortly, Wealthfront still has the edge when it comes to portfolio customization.

Portfolio Management

At Betterment, rebalancing is triggered when assets veer 3% above or below the selected asset allocation metric. You can link outside accounts to get a holistic look at your assets, and the platform will offer suggestions based upon your total assets.

Wealthfront monitors your portfolio daily and rebalances when there are big differences between your desired asset allocation and the actual asset class balance. After linking your accounts, the Path digital financial advisor can use all of your investment information to project your finances and net worth over time and make recommendations regarding spending, saving, and investing.

Both Wealthfront and Betterment offer regular rebalancing and the opportunity to link outside accounts. Based on the fact that there’s no indication that linked account data is used for asset allocation recommendations for either service, this category is a tie.

Tax-Advantaged Investing

Both Wealthfront and Betterment offer tax-loss harvesting for their taxable accounts, while making sure to avoid wash sales. This process minimizes taxes by selling losing investments to offset capital gains and income. Wealthfront and Betterment both have frequent automated tax-loss harvesting to gain the greatest financial benefit from the strategy. Here again, the two digital investment advisors are tied.

Security

Both Betterment and Wealthfront enable top-level financial institution-grade security protocols. Betterment Cash Reserve and Wealthfront Cash accounts are insured for up to $1 million with the FDIC, which is above the legal limit. Betterment checking is FDIC insured up to $250,000 per depositor. Investment accounts at Wealthfront and Betterment are covered by $500,000 of SIPC insurance, including $250,000 for cash claims. Losses caused by normal investment value volatility are not insured. Overall, Wealthfront and Betterment are evenly matched when it comes to security.

User Experience

Desktop

Betterment and Wealthfront each offer easy-to-navigate websites, as you might expect from these legacy digital investment managers. Users can access most features with one or two clicks from the dashboard. Betterment investors can monitor and adjust goals from the dashboard.

Mobile App 

Both Wealthfront and Betterment offer Android and iOS apps with the ability to use most desktop features on the mobile devices. The Google Play store reviews were unimpressive for both apps, while the iOs app users had more favorable experiences. Overall, we found both apps were equally well-designed and could be used as the sole platform for mobile-only investors.

Customer Service

At Wealthfront, the phone customer service number is less publicized and they lack an online chatbot. Overall, we found Betterment’s customer service to be a notch ahead of Wealthfront’s.

Fees

Wealthfront and Betterment are effectively identical when it comes to the base fee, and neither charges any additional trading fees. The basic fee structure is 0.25% of assets under management (AUM) for Wealthfront and Betterment Digital. If you have $100,000 in assets under management at Betterment, you can opt for Betterment Premium which charges 0.40% of AUM and includes unlimited access to Certified Financial Planners for all Premium clients. If you don’t opt for the Premium tier at Betterment, then there is no difference in fees between it and Wealthfront.

Final Verdict

The decision to hire Betterment or Wealthfront as a digital investment advisor is not as clear-cut as it appears. The basic fee structure is identical and neither Betterment Digital or Wealthfront include access to financial advisors in the basic fee. Betterment Digital does provide low-fee financial planning packages for topics like college planning and investment review. If a human financial advisor is really important to you and you have $100,000 to invest, then Betterment Premium is your answer. If you are uninterested in having a human face deliver financial advice, however, Wealthfront’s Path digital financial planner is tough to beat. It approximates the services you get from a human financial planner and does it quite well.

Beginners to advanced investors can be confident that their portfolios will be well-managed by either robo-advisor. There are a lot of little differences between the two, of course. Wealthfront is best if you want more control of the ETFs in your portfolio and are seeking lending. Betterment’s acquisition of Makara will enable users to invest in many diverse cryptocurrencies. Despite Wealthfront’s lack of financial planner access, their customer service representatives are well-qualified and have a minimum of Series 7 investment credentials. Beginners who can’t swing the $500 minimum at Wealthfront should opt for Betterment to get started. 

If none of these specifics swayed you either way, then we recommend Wealthfront overall. You have to be willing to let go of the human element, but you get an incredibly powerful financial analysis platform wrapped inside a customizable digital investment advisor in exchange.

Frequently Asked Questions

Can I lose money at Betterment or Wealthfront?

Yes. When investing in financial markets, your account value goes up and down with the market value of the investments. If you sell at a down point, you will lose money. Historically, over decades, the returns on a well-diversified portfolio have been positive. The portfolios constructed by both Wealthfront and Betterment are meant to show positive growth over time, but they can experience periods of negative returns depending on when they were funded and how the market has performed since.

Does Betterment or Wealthfront have better returns?

The returns for each platform depend upon when you invest and which portfolio you choose. It is difficult to compare returns in a head-to-head comparison. In general, digital investment managers have returns that align with those of the ETFs included in the portfolio. More aggressive portfolios at either robo-advisor will have generally higher returns than the more conservative ones, but they also come with more risk.

Methodology

Our mission at Investopedia is to provide investors with reviews and ratings of robo-advisors that are comprehensive and unbiased. Our team of researchers and expert writers, led by senior editor Michael Sacchitello, spent months evaluating all aspects of a robo-advisor’s platform, including the account setup process, goal planning tools, account service options, portfolio construction offerings, portfolio management, mobile and desktop user experience, educational content, fees, and security. As part of this evaluation, we extract critical data points that are weighted by our quantitative model that produces a powerful star-scoring system.

With the individual investor in mind, we’ve designed a comprehensive ranking methodology to find the best overall robo-advisors and the best robo-advisors across nine key categories. Each advisor is then scored across multiple variables to rate performance in every applicable category. The score for the overall award is a weighted average of the categories.