Betterment vs. Wealthfront

A comparison and review of Betterment Investing and New Class of Robo-Advisors and Investing Platforms

Betterment Investing: Official Review

Jon Stein, Co-founder of Betterment

Jon Stein, Co-founder of Betterment

 I'd like to give you some insight into a website called Betterment. You might have seen this company on the web. Maybe you've seen them on TV. Betterment is a new type of platform called robo-advising or robo-investing, where you can, as an investor, put money at very low fee every month and invest in things automated into what's called ETFs.

Now ETFs are exchange traded funds are a new type of way to invest in a block of companies that are publicly traded with a very low fee instead of having to pick stocks one by one. Betterment is taking off in terms of their user base.  It raised millions of dollars and now, you've probably seen them at some point if you're watching this review and want to learn more. What are the postiives? The first positive is that Betterment democratizes investing. Investing was all about finding somebody to put money into a company for you. What Betterment does is it reduces fees and allows you to automatically deposit money every month into an ETF such as Vanguard and to really just let it ride over time.

How much does it cost to use betterment?

There is a difference between trading and investing. Traders think short term, whereas investors think long term. Investing in Betterment is more about the long term. They also provide very low fees under what's called AUM or assets under management, depending on the amount you invest. Whether it's $500 up to $1 million plus, fees could be between $10 a month  to a couple of thousand dollars a month depending on how much you have invested. That does historically beat traditional wealth management fees which could be anywhere up between 1% to 2% on your money. That's a lot more per year.

Where can Betterment improve?

How much does it cost to use betterment? Who invested in betterment? The costs for Betterment average to .35% for investors.  The earliest investors were Citi Ventures and Menlo Ventures.

How much does it cost to use betterment? Who invested in betterment? The costs for Betterment average to .35% for investors.  The earliest investors were Citi Ventures and Menlo Ventures.

What are negatives about Betterment? With automated investing comes hazards and the biggest hazard is once you put your money in, it's very tough to get it out. From personal experience, I tried Betterment and found that after a while it was very tough. When I needed to withdraw some money for another project, Betterment made it pretty difficult. I will have to say that once you got your money in, don't expect the ease of use as of right now to get that out. I think they should improve that if they want to be more widely adopted.

Another negative or thing that Betterment should improve is that many of the risk of automated investing are not disclosed. When you invest in an ETF or a exchange traded fund through a site called Betterment, you are essentially allowing your money to sit there and grow, but you're not realizing that if the market were to drop and if you're uncomfortable with that drop, you will have a hard time moving that.

Also, the mobile app is pretty weak. When I say weak, whichever smartphone you have, the Betterment mobile app experience is very weak across all platforms. If Betterment wants to make this a bigger platform and more widely adopted, they've got to fix their mobile app, or investors are going to demand better, pun intended.

What does Betterment need to fix? Well, I'm a consumer and I've used Betterment and I say, look, you've got to make better and faster access to your money. Once investor puts money into your platform, that's great. I'm glad you can sit back and relax and make money off of these investors passively, but give an easier way to transfer in and out. I mean that accessibility of free flow capital is extremely important. Also, the Betterment mobile (iOS and Android) experience is terrible, improve it. We expect more as consumers and I hope now that Betterment is growing so fast that they'll allocate more capital in their project pipeline to make their iOS and Android experience better.

Which do we recommend? Betterment vs. Wealthfront?

Bottom line:  we believe Wealthfront is slightly better from an experience perspective, but still have hesitations for investing in robo-advisors.  In fact, we recommend a better strategy for investing which you can get access to below by including your email and information to learn more about investing 101 and how to make money investing in stocks, ETFs, bonds and more.  

 

If you had to choose between popular robo-trading platforms like Betterment, Wealthfront, Robinhood, which should you choose to invest?