Wealthfront vs Betterment: Which One is the Best Investment for you as an Investor?

The most celebrated Robo-advisor industry was initiated by the Wealthfront and betterment companies, and initially, the companies came up with the same model but gradually differentiated themselves. 


These two companies play a very vital role in delivering automated investment advice. Choosing either of the models depends on whether, as an investor, you wish to work with a human or with a digital device. Other factors include:

·         The type of account you open.

·         Key features of the account.

·         The investment portfolios.

This article brings you to the light of the two powerful investment models that bring success to the most highly rated investors in the current online markets.

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Betterment Company

Among the robot-advisors currently existing, the Betterment Company emerges as a clear leader that delivers two service options. The services are; Betterment premium, which offers its certified clients unlimited phone access to 0.40% fee and a $100,000 account minimum. There is the betterment Digital cost plan that entails automatic rebalancing, personalized advice, and tax-saving strategies. Here are the core features of the betterment company;

Management fees- the Betterment company issues two plans by which each of the plans requires a different management fee.

You will have Betterment Digital’s 0.25% management fee once you choose to take its path. This kind of management plan is proved to be inexpensive when compared with most other Robo-advisors in the larger market. Whenever you have the urge to consult a financial advisor, you can decide to purchase one of the company’s financial advice packages that are available.

The Betterment Premium plan majorly embraces human advice through fiduciary advice. Interestingly, the Betterment Company does not have the ability to supplement its management fee by spending its own funds. 

Concerning the portions of the account balance that may be over $2 million, an investor will need 0.15% and 0.30% for Betterment digital costs and Premium costs, respectively.

Portfolio options and customization- modern portfolio theory is the basic investment philosophy of the Betterment company. This theory advocate for diversification for greater benefits. For different risks, goals, and tolerance levels, the Betterment company uses the exchange-traded funds that epitomize around 13 asset classes.

The existing SRI portfolio in Betterment that was availed in 2017 and later renamed to Broad Impact portfolio has been diversely enhanced. Betterment has added two other SRI portfolios termed Climate impact and Social impact. The Climate impact zeroes in on mitigating climate change, whereas the social impact delivers additional focus to U.S companies that embrace and value diversity.

Another powerful portfolio embraced is the smart beta which seeks higher than average returns by practicing systematic risks. There is the income portfolio that is composed of bonds, along with other portfolios like the socially responsible ones that use ETFs. The ETFs comprise those companies that compose of businesses that align with certain social causes.

Account minimum- Betterment is one of the few robot-advisors that hardly entertain any minimum deposit; however, that only works to the betterment of Digital offering. The Betterment premium needs a minimum of $100,000 balance that goes in exchange for unlimited phone access to legally approved financial planners.

Goal-based saving- a goal-setting exercise is the best sign-up process the Betterment employs that goes down to ask you for your age and your current annual income. After this, a series of goals are suggested based on the answers you delivered. An estimation is made up concerning a safety net of three to six months of expenses, a general investing goal, and a retirement savings target.

Two-way Sweep- an investor has got a chance to link his or her checking account to the savings with betterment and also with the company's Two-Way Sweep that is weaponized to move any unused money. The unused money is that which its cash analysis tool sees excess in line with an investor's regular expenditure.

Betterment's Forum

This investment company is meant for;

·         v All users having low balances

·         v Those users who prefer goal-based tools

·         v Any retirement investors

·         v All hands-off investor

·         v Investors interested in automatic rebalancing.

https://www.investopedia.com/wealthfront-review-4587933

Wealthfront Company

Wealthfront is the top choice when it comes to selecting the most trusted and often used Robo-advisors. This is the best investment model to embrace when it comes to goal setting as it offers a full package of goal-setting, banking, planning, and investing elegantly. Wealthfront boasts of its user-friendliness.

Over the past year, Wealthfront has gradually improved its services and has received top awards for including advanced personal banking services. 

Once you set up a Wealthfront account, you will get a grand chance to access Path, which is the free financial planning tool that integrates the account that you created with your data, and then through third-party data, your financial situation is well projected.

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The core features of Wealthfront are well explained as follows;

Account Setup- depending on how many other financial institutions and assets you will connect to your plan as an investor, you have full support from Wealthfront once you activate the account. After entering all the required data-including IRAs and 401(k) s, along with other investments you might possess. Wealthfront clients with beyond $100,000 can decide to take a stock portfolio rather than a portfolio of ETFs.

Goal Setting- ` Wealthfront shines at tracking and planning. This is made efficient by the inclusion of third-party data that incredibly opens up more on what way your trading should take. It has a clear dashboard that shows you all your assets and liabilities. This helps an investor get a quick check-in on the likelihood of achieving your goals.

Account services- setting up automatic deposits is easy since the investor's bank account is linked during the onboarding process. An investor possessing beyond $ 25,000 in their accounts are eligible to borrow up to 30% of the amount in their accounts. Any loan applied can be paid back by your own schedule.

Cash management- under the Wealthfront, you can enjoy the cash management services by only paying 0.10% interest as of April every year. Fluctuation in interest rates can be experienced depending on the federal funds rate. Money can be moved back and forth between this investment account and the cash management account.

Wealthfront also features an Autopilot performance that was launched in September 2020. This feature allows you to "self-drive" your money in the Wealthfront account.

Portfolio Construction- Wealthfront entertains the Modern Portfolio Theory in the urge to create asset allocations in an investor's portfolio. Wealthfront operates with 20 portfolios that are distinct from each other. These portfolios are available according to the client's risk scores. Primarily, Wealthfront operates with low-exchange-traded funds to cover 12 asset classes without including cash. Here is a list of the assets.

·         Foreign stocks

·         Municipal bonds

·         Corporate bonds

·         U.S government bonds

·         Natural resources

·         Emerging market stocks

·         Real estate

·         Dividend stock

·         Cryptocurrencies

·         Treasury inflation-protected securities

Portfolio Management- Wealthfront does not schedule any rebalancing. The main philosophy is to monitor portfolios and balance them when they drift significantly from the initial target asset strategy. Any sort of dividends reinvestments, deposits, or withdrawals can all be used to rebalance an investor's portfolio.

Customer service- Wealthfront is in its best terms with a non-human approach even if it does not have an online chat assistant on its website or in its mobile android apps. Instead, there is a support phone line that is staffed by licensed professionals who are more than ready to help you in any matter of concern. This may include any forgotten passwords or a question addressing your portfolio.

Education and Security- in terms of helping clients in figuring out a financial plan. On using the platform, there is a lot of support on the website, and the majority of it can as well be accessed via mobile apps. In addition, Wealthfront is a member of the Securities Investor Protection Corporation, and client accounts are secured with a maximum of $500 000. The company holds the investor's coverage.

Commissions and fees- most investors are marveled by the simple and competitive fee structure, where 0.25% of their portfolio is assessed every month. Interestingly, no fee is charged for any cash balances. There are these ETFs that compose most of the portfolios that have got an annual management fee of 0.07%-0.16%. Other larger portfolios enrolled in the smartbeta program can be invested in funds with a higher management fee.

https://www.investopedia.com/wealthfront-vs-betterment-4587963

Bottom line

Generally, Betterment is the best option for investing. You will not need much to open the account, and also, there is human help at a low fee of 0.40%. However, Wealthfront is perceived to be the best choice for investors who do not feel the need for human input. Most Wealthfront methodologies are well laid out such that an experienced investor can comfortably manage asset growth.