Betterment vs. Wealthfront: Which Is Better in 2024?
Written by
Scott Jeffries
Edited by
Susan Kim
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It can help to have a service that guides your portfolio choices when investing. Betterment and Wealthfront are two popular investing advisement services — but which is better?
Check Out: 3 Things You Must Do When Your Savings Reach $50,000
Here’s what you need to know about Betterment vs. Wealthfront to invest.
Betterment vs. Wealthfront
Betterment and Wealthfront simplify investing with tools and collections of investments that take the guesswork out of deciding where to put your money. They also give you ways to manage your cash and automate saving and investing.
Both platforms’ auto-investing features include ready-made portfolios categorized by themes. And both charge a 0.25% annual management fee on the amount you invest this way.
Whichever platform you choose, you’ll have access to a high-yield cash reserve account. Betterment’s earns a variable annual percentage yield, and Wealthfront cash accounts earn APY.
Wealthfront’s version comes with a debit card and allows unlimited transfers and free same-day withdrawals, plus bill pay and the ability to send and deposit checks. Betterment also has no limits on how often you can withdraw funds, although withdrawals take one or two business days. However, it makes up for that with a separate, no-fee checking account. For some investors, these accounts can replace bank accounts.
Betterment vs. Wealthfront: Advanced Features
When it comes to features, both Betterment and Wealthfront are impressive. But each service has a few differences in what they offer.
Here are the notable features of both services.
Wealthfront
In addition to auto-investing with pre-built portfolios, Wealthfront allows investors to purchase individual stocks as whole or fractional shares. It makes selecting investments easier by grouping select stocks into themes — just select a theme and select stocks from the list included in the group.
Here are other benefits of investing with Wealthfront:
- Risk Parity: Wealthfront builds a hypothetical risk parity strategy for its clients in two steps. First, it curates a portfolio balancing the constituent asset classes’ risk contributions. Second, it applies leverage to get volatility to a target level.
- Tax-Loss Harvesting: Wealthfront’s tax-loss harvesting methodology takes advantage of investments with a decline in value by selling these investments below their purchasing price to generate a tax loss.
- College Savings: Wealthfront offers a 529 college savings account, with plans to offer custodial/UGMA accounts in the future.
- Socially Responsible Investing: Wealthfront offers a diversified, automated and fully managed portfolio designed to provide risk-adjusted returns like that of classic portfolios through socially responsible investing.
- Portfolio Line of Credit: With Wealthfront, it takes under a minute to request cash through the app and get it in just one business day. Your diversified investment portfolio secures the line of credit. Annual percentage rates range from 7.65% to 8.90%, and approval is automatic, with no credit check. What’s more, you can pay it back whenever, and however, you wish.
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Betterment
While Wealthfront is exclusively digital, Betterment has both all-digital and digital plus human advisor investing options. One way to take advantage of that perk is by enrolling in the higher-tier Premium service with digital investing plus unlimited over-the-phone access with its team of certified financial planners. The Premium plan incurs a management fee of 0.40% per year. A minimum account balance of $100,000 is required to enroll in this option.
Although you can’t trade individual stocks with Betterment, you can opt for a Flexible portfolio that lets you customize asset distribution to better represent your asset and risk preferences.
You’ll also receive the following benefits with Betterment:
- Socially Responsible Investing: Betterment helps you invest in companies working toward gender diversity and minority empowerment. Invest in ETFs that comprise ESG elements, including ethical labor management, lower carbon emissions and greater board diversity.
- Retirement Savings: Betterment estimates the total money you need to save for retirement. Users can connect external accounts, make required adjustments and determine which accounts they need to prioritize.
- BlackRock Target Income Portfolio: It’s a bond-only strategy that helps investors avoid the stock market’s volatility by leveraging bond income instead of market returns.
- Cryptocurrency Investing: Pre-built portfolios include a broad cryptocurrency basket offering exposure to crypto-related funds and a bitcoin and ethereum fund weighted by the coins’ market share.
Betterment vs. Wealthfront: Tax Strategy
Betterment offers the following tax strategies:
- Charitable giving tool
- Tax impact preview
- Tax-coordinated portfolio
- Tax-loss harvesting
Meanwhile, Wealthfront offers the following tax strategies:
- Automatic tax-loss harvesting
- Easy importing of Wealthfront tax information into TurboTax
- Stock level tax-loss harvesting
Betterment vs. Wealthfront: How To Get Started
Both Wealthfront and Betterment offer a diversified ETFs portfolio with different asset classes. Getting started on both platforms is quite simple and takes under five minutes.
Wealthfront asks you a few questions about your risk tolerance and how long you want the investment plan to be. The service shows you the exact portfolio before funding your account. Wealthfront also lets users add or remove certain ETFs from their accounts. Moreover, investors can choose different themes, like socially responsible investing and technology.
Likewise, if investors don’t want to put their money in certain companies, they can create a restricted list to ensure those stocks don’t end up in their portfolio.
Meanwhile, Betterment uses the Modern Portfolio Theory to design its portfolios.
Which Is Better: Betterment or Wealthfront?
Betterment is an ideal option for users with a low balance, who want to invest for retirement, who need automatic rebalancing — or who have $100,000 to invest and want low-cost advisory services. If you want to use goal-oriented tools or invest in cryptocurrency, Betterment also works for you.
Meanwhile, Wealthfront is more customizable, and it allows you to invest in individual stocks, albeit from a limited selection. Wealthfront is suitable for taxable accounts, especially considering that you can import your information into TurboTax. This is also the better choice for college students who want to manage their savings plans for the long run.
Daria Uhlig, Cynthia Measom and Amber Barkley contributed to the reporting for this article.
Rates are subject to change; unless otherwise noted, rates are updated periodically. All other information on accounts is accurate as of March 19, 2024.
