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The time when investors had to turn to a stock exchange to invest or pay the price of a financial advisor is over. In 2019, investors have many options, including robotics consulting sites and applications such as Betterment and Wealthfront.
Whether collecting tax losses or investing in ETFs, automated consulting services such as Betterment and Wealthfront have all planned.
But what is the difference between Betterment and Wealthfront and what is the best in 2019?
What is the improvement?
Betterment is a robo-advisor investment company that provides investors with effective investment advice, low fees, a minimum and a wide range of account options. Founded in 2008, Betterment is one of the premier robotic consulting sites and provides investment advice for various accounts and pricing levels.
Betterment aims to place the investor's badets in ETFs and other low-cost investment vehicles, and also allows you to set risk preferences once you sign up to continue to work to achieve your goals through the service.
Betterment does not require a minimum of funds, although they invest instantly in 100% of your funds (instead of having a cash balance on your account).
As an added benefit, Betterment collects tax losses – maximizing your earnings by using algorithms to automatically invest in securities or investment vehicles to maximize tax losses and reduce capital gains you report to the IRS. Unlike Wealthfront, Betterment offers human advisors in addition to their automated consulting capabilities.
According to their website, Betterment manages approximately $ 380 billion in badets under management, spread over 380,000 clients. And unlike Wealthfront, the company offers phone and email support seven days a week.
Betterment is available online as well as on iOS and Android.
What is Wealthfront?
Wealthfront is a robotic investment firm that applies low minimums and focuses on the recovery of tax losses at the stock level, which helps users maximize revenue while investing in individual stocks, as opposed to general ETFs. . The company offers comprehensive financial planning tools that are even available to non-account users, and boasts a minimal fee to get started.
According to their site, Wealthfront badets under management total approximately $ 12 billion out of approximately 200,000 customers (in 2018). Wealthfront has no trading fees.
One of the main attractions of Wealthfront is its option for recovering tax losses at the inventory level, which will only trigger when you invest $ 100,000. Unlike Betterment, Wealthfront uses equity-level tax loss recovery to invest directly in the S & P 500 (and not just in ETFs). If you can afford it, Wealthfront is the only major robo-advisor to offer this service.
In addition to their tax benefits, Wealthfront also offers a free savings account with 2.24% APY as well as a free financial planning tool called Path, which helps investors track their finances. and to set goals.
Just like Betterment, Wealthfront is available online as well as on iOS and Android.
Betterment vs. Wealthfront
Betterment and Wealthfront, some of the largest (and pioneering) robotic consulting companies, have had years to refine their offerings.
Although the two sites offer relatively similar services, there are significant differences that may prompt a customer to choose one over the other. So, how are Betterment and Wealthfront, and what is the best choice in 2019?
minimums
For investors with limited funds, Betterment does not require a minimum amount for your account, unlike Wealthfront. So you can create an account with as little as $ 0 with Betterment.
On the other hand, Wealthfront has a minimum of $ 500 for their accounts.
Both companies offer deposits the next day. Both accounts require a minimum of $ 100,000 for several additional benefits, including tax loss and line of credit recovery features.
Results
While returns are still dependent on the individual portfolio, the market and various other factors, investment advice generally has a good balance sheet compared to traditional financial advisors.
Betterment is a tool that helps investors navigate the company's historical returns relative to the average of advised investors between 2004 and 2018. For a 70% equity investment, Betterment investors reported a cumulative return of 163 %, against 94% for private investors, with an 80% equity risk. According to the website, "for more than 30,500 periods, the Betterment portfolio outperformed the portfolios managed by advisors 88% of the time".
On the other hand, Wealthfront claims five-year returns for taxable portfolios around 5.6% and historical returns (since 2011) around 7.6% (8.5% for the portfolios advantageous on the plan). like Roth IRA).
However, as Wealthfront offers tax-loss recovery at the stock level, the company says this strategy can help increase annual investment returns by up to 2%.
Fees
According to their website, Betterment charges an annual fee of 0.25% for its digital plan, which is well below the average of 1% of traditional fund managers' fees. For a Premium account, you will pay 0.40% fee.
Wealthfront has a comparable management fee of 0.25%. In addition, Wealthfront charges a fund charge of between 0.07% and 0.16%.
However, for large customers with $ 2 million, Betterment reduces annual fees to 0.15% for their digital account and 0.30% for their Premium account.
Characteristics
Betterment and Wealthfront manage all types of accounts, including IRA accounts, Roth IRAs, SEP IRAs, IRA accounts, individual investments, joint investments and trust investments.
However, Wealthfront also offers 529 college savings accounts, as well as high-yield savings accounts (unlike Betterment). And, unlike Betterment, Wealthfront offers a recovery of tax losses at the inventory level.
In addition, for mobile users, Wealthfront offers exclusively digital financial planning services, in addition to automated consulting, that can help users track their expenses and plan different financial goals. Wealthfront also offers a service called Custom Transfer, which allows users to transfer compatible badets to their Wealthfront account (which can be a huge advantage for investors with pre-existing stocks who want to manage their shares with the robot advisor).
Betterment also provides personal advice for a variety of financial situations, including saving for retirement, buying a home and other financial events. In addition, Betterment offers a Smart Saver account that can earn up to 2.19% of users with a low risk investment. Unlike Wealthfront, Betterment also offers a charitable giving service that allows users to donate valued shares to charities through this service.
In addition to offering investment tools to individuals, Betterment offers "Betterment for Advisors" which provides advisors with tools to help them manage their clients' investments.
Betterment and Wealthfront offer savings account options (or the equivalent). Wealthfront has a real savings account with a 2.24% APY. Betterment has a similar account called Smart Saver – a portfolio of low risk bonds, whose expected return is currently around 2.44%. Unlike the Wealthfront account, the Betterment account is subject to their fees as it is technically an investment account.
Invest
Although Betterment and Wealthfront offer similar investment vehicles and automated advisory services, there are some differences in their investment options.
On the one hand, Wealthfront does not offer human advisers – unlike Betterment.
Betterment offers the opportunity to invest in fractional shares, unlike Wealthfront. And for the more socially aware investor, Betterment also provides Socially Responsible Investment (SRI) portfolios, which allow users to choose investments that match their values.
Both companies invest primarily in low-cost ETFs. Both companies also use automatic rebalancing, although Wealthfront operates on a threshold-based rebalancing (which means that your portfolio is rebalanced based on how your badets move away from their target allocation and not time ).
Wealthfront also offers investments in real estate and natural resources, while Betterment offers a BlackRock Target Income portfolio (aimed at investors seeking to generate income through their investments).
security
Both Betterment and Wealthfront are registered with the Securities and Exchange Commission (SEC), as well as the Financial Regulatory Authority (FINRA), but are also not insured by the FDIC.
According to a press release published in December 2018, Wealthfront has recently been deeply concerned about its offers of tax losses to its customers with the SEC.
Nevertheless, both companies are members of the Securities Investor Protection Corporation (SIPC), which protects up to $ 500,000 (of which $ 250,000 for cash claims). The two companies also have an automatic rebalancing of the portfolios to guarantee their correct weighting. In fact, the algorithms of both companies are based more on an appropriate portfolio allocation than on individual security choices.
In addition, Wealthfront is not insured by the FDIC, but uses so-called program banks to allocate funds across multiple banks to provide FDIC insurance up to $ 1 million per account (much more than conventional FDIC insurance).
view
Betterment and Wealthfront have consistently earned high ratings from badysts and customers.
In fact, NerdWallet has awarded five stars to both companies this year.
But what do the critics say about services?
Improvement
Considered the best service for investors accustomed to inaction, Betterment offers two accounts: Betterment Digital (with a fee of 0.25%) and Betterment Premium (with a fee of 0.40%) offering different levels of services, including human advisors.
Betterment has been recommended to low-key, playful investors who want easy access to automatic rebalancing of their portfolios and personal financial planning.
Although Betterment does not offer inventory-level tax collection, it offers a regular collection of tax losses – a huge benefit for many investors, allowing them to minimize capital gains for the purpose of # 39; s tax. Betterment is still ranked high for its accounts without a minimum. However, this only applies to your digital account – Betterment Premium requires a minimum of USD 100,000 (which will give you unlimited access over the phone to licensed financial planners).
A major strength of Betterment lies in the fact that it offers fractional shares that minimize uninvested cash (unlike Wealthfront). However, Betterment does not allow direct indexation (it only allows you to hold broad-based ETFs), which may be negative for some investors.
Nevertheless, Betterment still receives high marks for its user-friendly services and socially responsible investments (as only one of the two offering SRI solutions).
Wealthfront
Wealthfront also received top marks for its set of full-service planning tools and its minimal fees.
Nevertheless, one of the main bonuses offered by Wealthfront is the fact that it offers direct indexation, which allows investors to hold individual stocks (as in the S & P 500 index). The direct indexing feature is only available to investors who hold $ 100,000 or more in their Wealthfront account.
If you have $ 100,000, Wealthfront users also have the option of receiving a line of credit using their collateral account badets (a feature that Betterment does not currently have). Users can borrow up to 30% of their wallet, up to 1.5 million dollars.
As an added benefit, Wealthfront added last year the Wealthfront Risk Parity Fund, which offers investors with $ 100,000 the opportunity to generate higher risk-adjusted returns in a taxable account (although their expense ratio) is higher.
One of the major bonus reviewers noted that Wealthfront allows you to link existing bank and retirement accounts to their site to leverage their financial planning tool, Path, without having to invest money in their robotic services. advice. So you can get free financial planning services (even if you decide to start investing, you will be subject to a fee of 0.25%). Path even takes into account social security and inflation to better estimate the costs of retirement. The service even allows you to connect a cryptocurrency if you have an account with an exchange like Coinbase.
Wealthfront is popular for its planning services that cover home, retirement, university savings, etc.
For TurboTax users, you can even enter your Wealthfront information to link any tax loss collection information when filing taxes.
Wealthfront is mainly lacking in that they do not offer split investments – which means there will always be some uninvested money in your account (for Wealthfront, at least enough to pay the costs of the next year for your account).
The Bottom Line: Which is the best in 2019?
As always, the best option for you depends largely on your investment goals and resources.
Betterment seems to win for uninitiated or novice investors in the sense that it does not require a minimum account, that its fees are low and that it has a complete and easy-to-use configuration. Betterment also offers human advisors available through the app and over the phone, which can be a huge benefit to novice investors looking for additional advice (or even experienced investors looking for that human input). A split investment through Betterment helps you make the most of the money you have invested.
For the investor with a little more money (for example, more than $ 100,000 or more), Wealthfront offers better options for investors to take advantage of benefits such as l & rsquo; Direct indexing via the recovery of tax losses at the stock level. Wealthfront offers a wide range of financial planning tools including home, retirement and college planning, all for free. And with a relatively low minimum ($ 500 for a regular account), you can still get value for money as a medium to low fund investor.
Nevertheless, although there are several differences, Wealthfront and Betterment offer fairly comparable services and options. The quality of automated consulting is therefore relatively similar for both companies.
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