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Betterment and Wealthfront are the two biggest robo advisors. Each has their own unique features. Which one is right for you?

Betterment and Wealthfront are not only two of the most popular robo advisors in the industry, but they may very well be the most innovative in the field. Though they represent two of the first robo advisors, both have built out their platforms and now offer robust portfolio options and other services to their clients.

Though they each have their own nuances–and specializations–you really can’t go wrong with either platform. Each will take complete control of your portfolio, managing every aspect of it for a very low annual fee. When you sign up with either service, your only responsibility will be to fund your account on a regular basis.

But what if you’re either new to robo advisors or you’re considering a switch from another one? If you’re researching robo advisors, the information will inevitably lead to Betterment and Wealthfront. So let’s take a look at the two heavyweights in the robo advisor space and see which might be a better fit for your portfolio.
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About Betterment

Betterment is not only the original robo advisor, but it’s also the largest independent robo (along with Wealthfront), with $21 billion in assets under management. The company is based in New York City and began operations in 2008.

As a robo advisor, Betterment is an automated, online investment platform that handles all aspects of investment management for you. When you sign up for the service, you complete a questionnaire that will help determine your investment goals, time horizon, and investment risk tolerance. From that information, Betterment creates a portfolio of stocks and bonds to meet your investor profile.

They don’t actually invest your money in individual securities, but instead through exchange-traded funds (ETFs), each representing a specific asset class. They can build an entire portfolio for you through about a dozen funds that will give you exposure to the entire global financial markets.

All this is done for a low annual management fee. Your only responsibility will be to fund that your account on a regular basis and let Betterment handle all the management details for you.

Better Business Bureau rates Betterment as “A+”, which is the highest rating in a range from A+ to F. The company also scores 4.8 stars out of 5 by more than 20,000 users on the App Store, and 4.5 stars out of 5 by more than 4,500 users on Google Play.

About Wealthfront

Wealthfront is, with Betterment, the largest independent robo advisor, and Betterment’s primary competitor. In fact, with over $24 billion in assets under management, it’s now slightly larger than Betterment. The company is based in Redwood City, California, and launched operations in 2011.

As a robo advisor, it works much the same as Betterment, creating a portfolio for you based on your answers to a questionnaire when you open your account. Wealthfront will also manage your account using a small number of ETFs spread across various asset classes. But on larger accounts, they’ll also add individual stocks to get greater benefit from tax-loss harvesting.

Like Betterment and virtually all robo advisors, Wealthfront’s basic investment strategy is based on Modern Portfolio Theory (MPT), which emphasizes asset allocation over individual security selection.

Similar to Betterment, and really all robo advisors, your account will receive full investment management for a very low annual fee. Your only responsibility will be to fund your account on a regular basis.

Unfortunately, Wealthfront has a Better Business Bureau rating of “F”, due to unanswered complaints. However, the company gets 4.9 stars out of 5 from more than 9,000 users on the App Store, and 4.8 stars out of 5 by more than 2,700 users on Google Play.

Investment Strategies – Betterment vs. Wealthfront

Betterment Investment Strategy

Betterment offers two plan levels, Digital and Premium. Premium is available for minimum account balances of $100,000, while Digital is open to all account balances. Like many robo advisors, Betterment has evolved past building and managing a basic portfolio comprised of a mix of stocks and bonds.

For example, if you choose the Premium Plan, you’ll have access to live financial advisors. But there are many other services and plans to choose from.

Read More: Betterment Promotions

Basic portfolio mix

Your portfolio will be invested in as many as six stock asset classes/ETFs and eight bond asset classes/EFTs.


  • US Total Stock Market
  • US Value Stocks – Large Cap
  • US Value Stocks – Mid Cap
  • US Value Stocks – Small Cap
  • International Developed Markets Stocks
  • International Emerging Markets Stocks


  • US High-quality Bonds
  • US Municipal Bonds
  • US Inflation-Protected Bonds
  • US High-Yield Corporate Bonds
  • US Short-term Treasury Bonds
  • US Short-term Investment-Grade Bonds
  • International Developed Markets Bonds
  • International Emerging Markets Bonds

Use of value stocks

Notice that three of the six stock asset classes involve value stocks. This is a specialization of Betterment and represents a time-honored stock market investment strategy. Value stocks are investments in companies with stock prices that are low in relation to their competitors by various standard measurements. But the companies are deemed to be fundamentally sound, and therefore likely to outperform the general market once the investment community realizes the true value of the stocks.

In this way, Betterment makes an attempt to outperform the general market, such as the S&P 500 or even some broader indices.

Smart Beta

This is another investment strategy Betterment uses with the potential to outperform the general market. This specific portfolio is managed by Goldman Sachs. Smart Beta is a form of active portfolio management, which seeks high-quality companies with low volatility, strong momentum, and good value.

Since it’s a higher risk/high reward type of investing, it requires a minimum portfolio of $100,000.

Socially responsible investing (SRI)

This is an investment option increasingly being offered by robo advisors. However, with Betterment only a portion of your portfolio will be invested in SRI. They replace the ETFs in the International Emerging Market Stocks and US Value Stocks – Large Cap with ETFs that specialize in socially responsible investing in those sectors.

Learn More: The Pros and Cons of Socially Responsible Investing

Flexible Portfolios

If you want more control over your investment portfolio, you can choose this option. It allows you to adjust the individual asset class weights in your portfolio allocation. It’s also designed for more advanced investors and gives you an opportunity to increase allocations in asset classes you believe are likely to outperform the market.

BlackRock Target Income

For investors looking for income and safety of principal, Betterment offers this portfolio, which consists of 100% of bonds. There is some risk of principal in this portfolio but it’s designed to be minimal. You can even choose the level of risk and return you want. It won’t provide the type of long-term gains you’ll get from a stock portfolio, but it will offer the kind of steady income that will work especially well for retirees.

Tax-loss Harvesting

Tax-loss harvesting is a year-end strategy in which asset classes with losses are sold (and later replaced with comparable ones) to offset gains in winning asset classes. The strategy helps to defer taxable capital gains on growing asset classes.

Betterment makes this strategy available on all account balances. However, it’s only offered on taxable accounts since it’s completely unnecessary for tax-sheltered retirement plans.

Betterment Everyday Cash Reserve

If you’re looking to add a cash option to your investment portfolio, you can do it through Betterment Cash Reserve. The account is currently paying 0.40% APY and is eligible for FDIC insurance up to $1 million. The minimum deposit is $10, and offers unlimited transfers, both in and out of your account.

Get up To 1 Year Free With Betterment

Wealthfront Investment Strategy

Unlike Betterment, Wealthfront has a single plan for all investors, with an annual management fee of 0.25% on all account balances. And like Betterment, Wealthfront has expanded its investment options menu in many different directions.

Basic Portfolio Mix

Wealthfront uses 11 asset classes in the construction of its portfolios, including four stock funds, five bond funds, plus real estate and natural resources.

The allocation looks like this:


  • US Stocks
  • Foreign Stocks
  • Emerging Market Stocks
  • Dividend Stocks


  • Treasury Inflation-Protected Securities (TIPS)
  • Municipal Bonds (on taxable investment accounts only)
  • Corporate Bonds
  • U.S. Government Bonds
  • Emerging Market Bonds


  • Real Estate
  • Natural Resources

Use of Alternative Investments

Wealthfront includes real estate and natural resources in its portfolio composition. The real estate sector invests in companies that provide exposure to commercial property, apartment complexes and retail space. Natural resources are held in ETFs representing that sector.

The combination of the two offers a stronger diversification away from a portfolio comprised entirely of stocks and bonds, largely because they offer protection in an inflationary environment. It’s possible for these sectors to perform well when the general financial markets are not.

Smart Beta

The Smart Beta option attempts to outperform the general financial markets. The strategy deemphasizes market capitalization in the creation of a portfolio. For example, rather than using the capitalization allocations of certain companies within the S&P 500, the strategy might increase some allocations and decrease others. It’s more of an active investment strategy and requires a minimum investment portfolio of $500,000.

Wealthfront Risk Parity

This is another investment strategy for investors with larger accounts and a greater appetite for risk. It’s been shown to provide higher long-term returns, but it may use leverage to increase those returns.

Stock-level Tax-loss Harvesting

Tax-loss harvesting is available on all taxable investment accounts. But Stock-level Tax-loss Harvesting is available to larger accounts to provide more aggressive tax deferral.

This is a fairly complex investment strategy, but it involves the use of individual stocks to take greater advantage of tax-loss harvesting. The use of individual stocks will make it easier to buy and sell securities to minimize capital gains taxes. Depending on the specific plan, the required minimum investment ranges between $100,000 and $500,000.

Wealthfront Path

This is a software-based financial advisory, providing you with financial planning tools. They can help you plan for retirement or saving for the down payment on a house or a college education for one or more of your children. The apps run “what-if scenarios”, that can make projections based on various savings levels for each of your specific goals.

Though it doesn’t offer live financial advice, the service is free to use.

Wealthfront Cash

You can open an interest-bearing cash account with Wealthfront Cash Account with just $1. There’s no market risk, no fees, unlimited free transfers, and your account is FDIC insured for up to $1 million. The account currently pays 0.35% APY and provides a safe, cash investment to go with your stock portfolios.

Read more:  Wealthfront Cash Account review

Wealthfront Portfolio Line of Credit

Much like a home equity line of credit, the Wealthfront Portfolio Line of Credit is secured by your investment account. You can borrow up to 30% of the value of your account for any purpose. There’s no prequalification since the line of credit is completely secured by your investment account.

The line of credit is automatic if you have a non-retirement account balance of at least $25,000. You can request funds against the line on your smartphone and receive them in as little as one business day.

Current interest rates paid on the line range between 2.45% and 3.70% APR, depending on the size of your account.

Get $5,000 managed free with Wealthfront

Retirement Planning – Betterment vs. Wealthfront

One of the most common uses of robo advisors is the management of retirement accounts. Both Betterment and Wealthfront can manage all types of IRA accounts, similar to the way they do with taxable accounts. But each also offers some level of retirement planning.

Read More: Best Robo Advisors – Find out which one matches your investment needs.

Betterment Retirement Planning

Betterment is strong in this category because in addition to their regular portfolios, they also offer income-specific investment options, like their BlackRock Target Income and Everyday Cash Reserve. The Target Income option in particular focuses on maximizing interest income, which is exactly what most people are looking for in retirement.

One of the advantages Betterment offers is that you can connect your 401(k) with your investment account. Betterment can’t manage the 401(k) (unless chosen to do so by your employer through their 401(k) management plan), but they can coordinate your Betterment retirement account(s) with the activity in your employer plan.

And of course, if you have at least $100,000 in your Betterment account, you can enroll in the Premium plan and have access to live financial advisors.

But Betterment also offers its Retirement Savings Calculator to help you know if you’re on track for your retirement. By answering just four questions, they’ll be able to determine if your current retirement plan will provide the income you’ll need in retirement, taking your projected Social Security income into consideration. If it isn’t, it’ll let you know how much more you need to invest on a regular basis.

Wealthfront Retirement Planning

You can take advantage of Wealthfront Path to help you with retirement planning. You’ll start by linking your financial accounts so the program can get a better understanding of your finances. Recommendations to help you reach your goals are made based on the amount of regular contributions you’re making and the income you will need in retirement.

Path will analyze your spending patterns, your average annual savings rate, the interest you’re earning on those savings, as well as your investment and retirement contributions. It will also analyze the fees you’re paying on your investment and retirement accounts. Loan accounts are analyzed as well.

The information is assembled, and future projections are made. You’ll be given advice on any needed increases in savings for retirement contributions, as well as asset allocations. And perhaps best of all, since all your financial accounts are linked to the service, it will provide continuous updates on your progress toward your retirement goals.

Betterment Pros & Cons


  • No minimum initial investment or account balance requirement.
  • Reduced fee structure on larger account balances.
  • Use of value stocks seeks to outperform the general market.
  • Unlimited access to certified financial planners on account balances over $100,000.
  • Comprehensive retirement planning package.
  • Multiple investment portfolio options, including a dedicated high-income portfolio.
  • External investment account syncing that can include your 401(k) plan.
  • Tax-loss harvesting on all taxable accounts.
  • Interest-bearing cash account option.


  • Limited investment diversification, excluding alternative asset classes, like real estate and natural resources.
  • The annual management fee rises from 0.25% to 0.40% if you select the Premium plan.
  • The reduced fee structure on large account balances doesn’t kick in until you reach a minimum of $2 million.

Wealthfront Pros & Cons


  • Your account includes alternative investments, like real estate and natural resources. This offers greater diversification than a portfolio invested only in stocks and bonds.
  • The minimum initial investment is just $500. That’s not zero, but it’s an amount most small investors can comfortably start with.
  • Flat-rate fee of 0.25% on all account balances.
  • Larger accounts get the benefit of more efficient tax-loss harvesting strategies through Wealthfront Risk Parity.
  • The Wealthfront Portfolio Line of Credit lets you borrow up to 30% of the value of your non-retirement accounts at very low interest and with no credit check.
  • Interest-bearing cash account option.


  • There’s no reduced management fee for larger account balances.
  • The retirement planning tool (Path) is an automated system and does not provide advice from live financial advisors.
  • Poor rating from the Better Business Bureau.

Bottom Line

We’ve covered a lot of territory – and details – in this side-by-side comparison between Betterment and Wealthfront. The summary table below should help you to be able to compare the various services each offers with a quick glance.

Minimum initial investmentDigital: $0

Premium: $100,000
PromotionsUp To 1 Year FreeFirst $5,000 Managed Free
Management feesDigital: 0.25% up to $2 million, then 0.15% above

Premium: 0.40% to $2 million, then 0.30%
Available accountsIndividual and joint taxable accounts; traditional, Roth, rollover and SEP IRAs; trusts and nonprofit accountsIndividual and joint taxable accounts; traditional, Roth, rollover and SEP IRAs; trusts and 529 accounts
Dividend reinvestmentYesYes
Tax-loss harvesting – on taxable accounts onlyYesYes
Socially-responsible investingYesAvailable through Smart Beta ($500,000 minimum) and Stock-level Tax-Loss Harvesting ($100,000 minimum)
Smart Beta investingYesYes, minimum $500,000
Interest bearing cash accountYesYes
Line of creditNoYes
Financial adviceYes, on Premium Plan onlyAutomated only
Mobile appYesYes
Customer servicePhone and email, Monday through Friday, 9:00 am to 6:00 pm Eastern timePhone and email, Monday through Friday, 10:00 am to 8:00 pm Eastern time

You’ve probably already guessed we’re not declaring a winner between these two popular roboadvisors. Both are first rate and you can’t go wrong with either. More than anything, your decision will likely come down to specific details–what features and benefits one offers that better suits your own personal preferences and investment style.

But one advantage that’s undeniable with both Betterment and Wealthfront is that not only is each a first-rate service, but they provide enough investment options and related services that they can accommodate your growing financial capabilities and needs well into the future.

For example, while you may start out with a basic managed portfolio, you’ll eventually want to get into higher risk/higher reward options as your wealth grows. As well, you’ll like the flexibility of having high-interest cash investment options, as well as low-cost or free financial or retirement advice.

We like both these services and are certain you can’t go wrong with whichever one you choose.

Author Bio

Total Articles: 131
Since 2009, Kevin Mercadante has been sharing his journey from a washed-up mortgage loan officer emerging from the Financial Meltdown as a contract/self-employed “slash worker” – accountant/blogger/freelance blog writer – on OutofYourRut.com. He offers career strategies, from dealing with under-employment to transitioning into self-employment, and provides “Alt-retirement strategies” for the vast majority who won’t retire to the beach as millionaires.

Article comments

Mjand says:

Do you have an opinion on Betterment’s self custody vs. Wealthfront’s use of a third party (apex)? Is there an appreciable difference in safety?


Chuck says:

Hey Rob,
Have you taken a look at SigFig yet? Wondering what your thoughts are. I like the option of leaving account with TD Ameritrade while having it robo managed.


Rob Berger says:

Chuck, I have looked at SigFig. As you’ve noted, you leave your money with (or move it to) TD Ameritrade. That’s very different than either Betterment or WealthFront. SigFig is really similar to FutureAdvisors. It seems to me to be another reasonable option.

Sam says:

can you please do a comparison on Charles Schwab intelligent portfolio? it is Schwab’s free robo advisor. thanks.

Jeremy G. says:

Wealthfront just announced today that everyone with a taxable account, not just those with $100,000 or more, will receive their tax-loss harvesting benefits. People with $100,000 or more will now have access to the Wealthfront 100, which is a separate offering as well.

JT says:

This was a great article, thank you for writing it. I opted to go with Wealthfront for my own situation. The referral program is a nice feature.

Brandon says:

I believe this article deserves and update. Betterment has changed its pricing policies and it seems for a vast majority of people it will cost .25% unless you are a multimillionaire. This may be ok so long as their tax harvesting highly pays for itself. I have my reservations about that but Mr Money Moustache has a lot of faith in them and is still depositing 1k a month on top of his 500k already invested with them. He was planning on moving over a full million but decided against it. Now I don’t really worry about tax loss harvesting since almost all but 9k of my investments are in 401k’s or IRA’s but I am almost at the point where I am maxing both. My home should be paid off in about 5 years when I reach 36. At that point I’ll need to find a good vehicle for that extra money each month and sadly it will need to be in a taxable account. The positive side is it will work on replacing my income should I want to retire early. I was thinking betterment might be the way to go but the 10% additional fee for the next 30 years has me leery since the previous .15% was already on top of the etf expenses. If we can get mutual funds and etfs around .5-.15% with vanguard, adding that .25% for some fancy tax loss harvesting algorithm makes me wonder how close the platform is getting to trying to be an active passive fund management firm. (Contradictory in my eyes)

Sean says:

Another option for you to look at would be WiseBanyan. Similar robo-advisor but no additional fees other than the etf fees.

John Antolak says:

The article says that Betterment’s new fee structure gets more expensive as your balance gets higher. However, that is only if you opt for the Plus or Premium packages. There is no requirement to do so. Therefore, the difference in fee for WealthFront is the waiver on the first $10K.

Bipin says:

I have both Betterment and Wealthfront account . The ROI of wealthfront is far better than Betterment .