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Wealthfront vs. Betterment: What’s the difference?

Not all robo-advisors offer the same services and accounts. Here's the differences between two of the leading options.

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Investing can seem like a daunting task if you don’t know where to begin. But you don’t need loads of money or a background in finance to get started. All you need is the internet and a robo-advisor, automated investment software that makes the complicated decision of where to invest your money, with little upfront costs.

Two major robo-advisors -- Wealthfront and Betterment -- are leading the pack in the crowded field of online investing. Here’s how they compare and how to decide which one is right for you.

What is a robo-advisor?

A robo-advisor is an automated online investment platform that creates an investment portfolio based on your age, the type of investor you are and when you plan to retire.

Robo-advisors tend to have lower fees than online brokerages or accounts where you micro-manage your money. Instead, robo-advisors handle your investments for you with little human intervention. It’s hands-off investing.

To get started, you’ll answer a few questions about yourself, like: 

  • How old you are
  • How much money you have to get started
  • How much you think you can contribute to your account every month
  • When you plan to retire
  • How risky or conservative you are with your investments

Most robo-advisors let you change your risk management when you feel like it. But normally, the older you get, the less risky you you should be with your money. Because you’ll be cashing out sooner as you get closer to retirement, robo-advisors will automatically start to make you more conservative with your cash as you get older.

Read more: What is a robo-advisor? How Wealthfront, Betterment and others manage your money

Wealthfront vs. Betterment at a glance

Robo-advisors such as Wealthfront and Betterment invest in exchange-traded funds, or ETFs, which don’t cost a lot to manage. Since robo-advisors have computers managing your portfolio -- not humans -- they can charge you lower fees than a traditional adviser.

Account minimum$500$0
Annual fee0.25%0.25%; 0.40% if you choose the premium account
Other feesFund fee: 0.07% to 0.16%Starts at $199 for a one-time call with a financial expert; 0.07% to 0.15% fund fee
Access to human advisersOnly through customer service for technical support.Premium account offers unlimited access to certified financial planners.
Types of accountsTraditional IRA, Roth IRA, SEP IRA, 401(k) Rollover, 529 College Savings, Individual, Joint, TrustTraditional IRA, Roth IRA, SEP IRA, 401(k) and 403(b) Rollovers, Individual, Joint, Trust

What does Betterment offer?

Betterment is one of the first robo-advisors and also one of the leaders in the space. There’s no minimum to start, which means if you have a few extra dollars in your pocket, you have more than enough to open an account right now.

Aside from not needing a minimum balance to get started, Betterment has experts on-hand for tailored advice. Since not everyone’s investment plans are the same, you can talk to a certified financial planner to get specific advice just for you. The premium plan charges a higher annual fee -- 0.4% instead of 0.25% for a regular account -- and you’ll need at least $100,000 to get started. Or you can talk to a pro for at least $199 if you don’t meet the premium account minimum.

Betterment offers socially responsible investing, where your money gets put into accounts that meet certain social and environmental standards. Betterment also offers a cash account for which you’ll need a minimum deposit of $10 -- it currently has a competitive APY (annual percentage yield ) of up to 0.30%.

Read more: Diversity isn’t a priority for investors, report finds    

What does Wealthfront offer?

Wealthfront has an account minimum of $500. This might sway you another way, but it depends on what you want to invest in.

Wealthfront has a 529 college savings plan, while Betterment doesn’t. If you’re looking to save for college, a Wealthfront account might be where you put your money.

Wealthfront offers stock-level tax-loss harvesting. It’s like regular tax-loss harvesting, but instead of investing in only ETFs or index funds, it invests in individual stocks in the S&P 500. For investors who want to take their portfolios up a notch, this might be enticing. Wealthfront also offers a cash account (with a 0.26% APY) -- you’ll need just $1 to open one.

Wealthfront vs. Betterment: Which one is right for you?

Both choices shine in different ways, as well as some similar ones: They both feature tax-loss harvesting and automatic rebalancing. Wealthfront offers a college savings plan. Betterment doesn’t have an account minimum. 

If you’re looking to get started today with a few dollars, Betterment might be a better option for you. But more money could bring you more options with Wealthfront. If you have $100,000, you can use Wealthfront’s PassivePlus program, which includes stock-level tax-loss harvesting.

Where you decide to put your money depends on which account will work best for you, not just today, but in the long-term. Like you, your investments can grow and change. Make sure to find an account that grows and changes with you.

More personal finance advice

Dori Zinn loves helping people learn and understand money. She's been covering personal finance for a decade and her writing has appeared in Wirecutter, Credit Karma, Huffington Post and more.
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