Betterment vs. Wealthfront: Which is the Better Robo-Advisor?

Betterment vs Wealthfront: these are the two largest and best-known independent providers in the robo-advisor space.

They’re also two of the earliest entries to the field. Because of that, they’ve evolved to the point where they have far more services than what is offered by the typical robo-advisor.

Betterment and Wealthfront are automated online investment platforms. Both charge a low annual advisory fee and manage your portfolio by computer algorithms that primarily track the movements of the general markets. Betterment and Wealthfront also each offer cash accounts that come with low fees and great APY rates.

So let’s do a drill down to determine exactly what each service offers, including key similarities and differences.

Betterment vs. Wealthfront–The Basics

Both Betterment and Wealthfront operate completely online and have you complete a questionnaire when you apply for an account. The purpose of the questionnaire is to determine your investor profile.

That’s comprised of your investment goals, your time horizon, and your risk tolerance.

Building Your Portfolio

Once your profile has been determined, they build a portfolio for you incorporating those factors.

The portfolio is built based on Modern Portfolio Theory (MPT), a strategy that maximizes returns while minimizing risks through the use of proper asset allocation. Your portfolio is managed by computer algorithms that are designed primarily to track the movements of the general markets.

Keeping Costs Low

Both Betterment and Wealthfront charge an extremely low annual advisory fee to create and manage your portfolio.

In fact, the fee is only a fraction of what you would pay for a traditional human financial advisor while delivering much the same service. They’re able to operate with a low fee structure because they’re strictly online, have no real estate, and have relatively few employees.

Your portfolio is comprised of asset allocations invested in exchange-traded funds (ETFs). Because they are index funds designed to match the underlying markets, they have very low expense ratios.

Through the use of a small handful of ETFs, each platform is able to invest in literally thousands of individual securities at a very low cost. Each robo will then manage your portfolio on an ongoing basis, which will include periodic rebalancing to maintain target asset allocations, as well as reinvestment of dividends.

The big advantage of either robo-advisor is all you need to do is fund your account–the mechanics of managing it are handled completely by the service.

Check out our full Betterment review.

Here are the basic features of the two services:

Initial Investment$0$500
Available AccountsIndividual and joint taxable accounts; traditional, Roth, SEP and rollover IRAs; trustsIndividual and joint taxable accounts; traditional, Roth, SEP and rollover IRAs; trusts and 529 plans
Tax-loss HarvestingYesYes. Wealthfront offers an advanced service with stock-level tax-loss harvesting
Dividend ReinvestingYesYes
Mobile AppAndroid & iOS devicesAndroid & iOS devices
Live SupportYesYes. Wealthfront has free phone support and employs at least 13 RIAs for your support.

Portfolio Mix

The portfolio mix of both Betterment and Wealthfront looks generally similar, at least on the surface. Each includes a limited number of asset classes in both stocks and bonds. And each of those asset classes is represented by a single exchange-traded fund (ETF).

Tax-loss harvesting

Since each robo-advisor employs tax-loss harvesting in the management of their portfolios, most asset classes are represented by two or three nearly identical ETFs. Under tax-loss harvesting, losing positions are sold to offset capital gains in other asset classes.

This minimizes the capital gains tax due in any given year. But to maintain the target asset allocations, ETFs sold are replaced by secondary ETFs, in just over 30 days to avoid the IRS wash sale rules.

Betterment Portfolio Mix

Betterment’s basic portfolio applies to both its Digital and Premium plans. It includes a mix of 14 different asset classes–six for stocks and eight for bonds and fixed income.

Due to the fact that Betterment employs tax-loss harvesting, each stock asset class includes the use of three similar funds. Since tax-loss harvesting is less used with bonds and fixed income asset classes, four include one or two alternative ETFs, while four have no alternatives. Since they’re income-generating assets, tax-loss harvesting isn’t a consideration.

Here are the asset classes used for both stocks and bonds, as well as the ETFs used for each.


Asset ClassPrimary ETFSecondary ETF
US Total Stock MarketVanguard US Total Stock Market (VTI)Schwab US Broad Market ETF (SCHB)
US Value Stocks – Large CapVanguard US Large-Cap Value (VTV)iShares S&P 500 Value ETF (IVE)
US Value Stocks – Mid CapVanguard US Mid-Cap Value (VOE)iShares Russell Midcap Value Index (IWS)
US Value Stocks – Small CapVanguard US Small-Cap Value (VBR)Russell 2000 Value (IWN)
International Developed Market StocksVanguard FTSE Developed Markets (VEA)Schwab International Equity ETF (SCHF)
International Emerging Market StocksVanguard FTSE Emerging Markets (VWO)iShares Inc/Core MSCI Emerging (IEMG)


Asset ClassPrimary ETFSecondary ETFSecondary ETF
US High Quality BondsiShares Barclays Aggregate Bond Fund (AGG)Vanguard Total Bond Market ETF (BND)N/A
US Municipal BondsiShares National AMT-Free Muni Bond (MUB)SPDR Nuveen Barclays Capital Muni Bond (TFI)N/A
US Inflation-Protected BondsVanguard Short-term Inflation Protected Securities (VTIP)N/AN/A
US High-Yield Corporate BondsXtrackers USD High Yield Corporate Bond (HYLB)SPDR Barclays Capital High Yield Bond (JNK)iShares iBoxx $ High Yid Corp Bond (HYG)
US Short-term Treasury BondsiShares Barclays Short Treasury Bond (SHV)N/AN/A
US Short-term Investment Grade BondsiShares Short Maturity Bond (NEAR)N/AN/A
International Developed Market BondsVanguard Total International Bond (BNDX)N/AN/A
International Emerging Market BondsiShares Emerging Markets Bond (EMB)Vanguard Emerging Markets Government Bond (VWOB)PowerShares Emerging Markets PCY Debt (PCY)

Interesting Betterment Asset Class Feature

Notice that three of the six stock asset classes are held in US value stocks, for large-, mid-, and small-cap stocks.

A value stock is a security trading at a lower price than what the company’s performance may otherwise indicate. These stocks tend to outperform the general market over the long-term, and investing in them is one of the most time-honored strategies on Wall Street. It’s a standard feature of Betterment’s investment strategy.

Click here to get started with Betterment.

Wealthfront Portfolio Mix

Wealthfront invests your portfolio in nine asset classes, including five for stocks and four for bonds. Since Wealthfront also uses tax-loss harvesting, each asset class for both stocks and bonds includes two ETFs, to enable buying and selling similar funds for each class.


Asset ClassPrimary ETFSecondary ETF
US StocksVanguard CRSP US Total Market Index (VTI)Schwab DJ Broad US Market (SCHB)
Foreign StocksVanguard FTSE Developed All Cap ex-US Index (VEA)Schwab FSE Dev ex-US (SCHF)
Emerging MarketsVanguard FTSE Emerging Markets All Cap China A Inclusion Index (VWO)iShares MSCI EM (IEMG)
Real EstateVanguard MSCI US REIT (VNQ)Schwab DJ REIT (SCHH)
Natural ResourcesState Street S&P Energy Select Sector Index (XLE)Vanguard MSCI Energy (VDE)


Asset ClassPrimary ETFSecondary ETF
US Government BondsVanguard Barclays Aggregate Bonds (BND)Vanguard Barclays 5-10 Gov/Credit (BIV)
TIPSSchwab Barclays Capital US TIPS (SCHP)Vanguard Barclays Capital US TIPS 0-5 Years (VTIP)
Municipal BondsVanguard S&P National Municipal (VTEB)State Street Barclays Capital Municipal (TFI)
Dividend StocksVanguard Dividend Achievers Select (VIG)Schwab Dow Jones US Dividend 100 (SCHD)

Interesting Wealthfront Asset Class Features

There are two. The first is the inclusion of both real estate and natural resources in the stock portfolio. This provides a measure of alternative investments, as well as greater protection against inflation. The second is the inclusion of dividend stocks in the bond/fixed income portfolio.

Dividend stocks not only provide steady income but also the potential for capital appreciation, especially in rising stock markets.

Learn more about Wealthfront here

Related: The Best Robo-Advisors to Automate Your Investing

Specialized Portfolios

In addition to the basic investment portfolios, each robo-advisor offers one or more specialized portfolios.


Betterment offers five specialized portfolios, in addition to the basic portfolio for Digital and Premium plans.

Socially Responsible Investing

This portfolio reflects a 42% improvement to social responsibility scores for their US large-cap holdings. It makes use of stocks of companies meeting certain social, environmental, and governance rules.

They replace the US Stocks–Large-cap and Emerging Market Stocks with the following ETFs: iShares MSCI KLD 400 Social (DSI), iShares MSCI USA ESG Select ETF (SUSA), and iShares ESG MSCI EM ETF (ESGE).

Goldman Sachs Smart Beta

The portfolio is managed by Goldman Sachs and attempts to outperform the conventional market cap strategy. It’s an actively managed portfolio, involving both higher risk and potentially higher rewards. It departs from typical robo-advisor portfolios that only attempt to match the underlying market.

Please note that this service comes at an added cost.

BlackRock Target Income

A portfolio that’s 100% invested in bonds of various yields and designed to provide insulation against the ups and downs of the stock market. Its main purpose is generating income and not capital appreciation. Income is generated by a combination of longer-term bonds, and lower-quality bonds that provide higher yields.

Tax-Coordinated Portfolio

Allocates investments between taxable accounts and tax-deferred accounts, to create the most tax-efficient portfolio possible. For example, capital gains generating stock ETFs, are held in taxable investment accounts, where they can take advantage of tax-loss harvesting. But income-generating bond funds are held in tax-deferred accounts.

Flexible Portfolios

Basically, this portfolio enables you to adjust the individual asset class weights in the portfolio Betterment designs for you. It allows you to deviate from the recommended portfolio, while still enjoying the benefits of their overall advice. This capability is intended only for more experienced investors.

Learn more about Betterment here.


Wealthfront offers their own lineup of specialized portfolios through their PassivePlus investment suite:

Stock-level Tax-Loss Harvesting

This portfolio is designed for even greater tax efficiency, including a mix of ETFs and individual stocks. The inclusion of stocks increases the ability to take advantage of tax-loss harvesting.

Stock-level Tax-Loss Harvesting is an enhanced form of Tax-Loss Harvesting that looks for movements in individual stocks within the US stock index to harvest more tax losses and lower your tax bill.

Up to 500 individual stocks will be purchased from the S&P 500 index, rather than through an index-based ETF. This is available for account balances over $100,000 at no additional cost.

Wealthfront Risk Parity

This strategy has shown higher long-term returns by allocating the portfolio by equalizing the risk contributions of each asset class, without considering their expected returns. The strategy uses leverage with certain positions in the portfolio. It’s also available for accounts over $100,000 for an additional fee of .03%.

Risk Parity is an alternative methodology to allocate capital across multiple asset classes, much like Modern Portfolio Theory (MPT), also known as mean-variance optimization. Historically, Risk Parity has generated better returns for a given level of portfolio risk than the more common MPT.

Smart Beta

This strategy uses multiple factors to determine the weighting of stocks in a portfolio. Traditional index-based investing relies on market capitalization, meaning the companies with the highest market capitalization weigh the most heavily in a portfolio. But Smart Beta deemphasizes market capitalization in favor of multi-factor models.

This service is also available at no additional fee, but only on account balances over $500,000.

Learn more about Wealthfront here

Cash Accounts

Both Betterment and Wealthfront offer cash account products that are low-cost and come with interest rates that are much higher than the industry average.

Betterment Cash Reserve

Betterment Cash Reserve is the name that Betterment has given to its savings and checking accounts.

With a Betterment Cash Reserve account, you’ll earn a higher-than-average APY. And their advisory fee does not apply to Betterment accounts.

Betterment Checking comes with absolutely zero fees. That means with no account fees, no overdraft fees, and no minimum balances. And any ATM fees are reimbursed worldwide.

Get started with Betterment here

Wealthfront Cash Account

This high-yield savings account has zero market risk, zero fees, and it earns you 1.27% APY.

You will not be charged any advisory, withdrawal, or other fees for the cash account. And the investment advisory fee of 0.25% does not apply to Wealthfront’s Cash Account. Like Betterment, Wealthfront is able to keep this account free by receiving a small portion of the interest earned on the money in your cash account.

Get started with Wealthfront here

Fees & Pricing

Betterment and Wealthfront are both incredibly affordable investment choices. Here is how they stack up on cost.

How Much Does it Cost to Use Betterment?

On the basic Digital plan, the advisory fee is 0.25% on balances up to $2 million and 0.15% on higher balances.

On the Premium plan, the fee is 0.40% on balances up to $2 million and 0.30% on higher balances.

There are no fees on Betterment Cash Reserve (savings) or checking accounts.

How Much Does it Cost to Use Wealthfront?

Wealthfront charges an annual advisory fee of 0.25% of your total portfolio under management.

There is no fee for Wealthfront Cash Account or Wealthfront Free Financial Planning.

Protecting Your Investments

When you’re considering any financial institution, it’s important to know that you’re not going to lose your money if they go belly-up. You shouldn’t have to worry about that with Betterment or Wealthfront. Here’s how they protect your assets.

Is Betterment FDIC Insured?

Betterment cash accounts are FDIC insured up to $1 million on Savings accounts and up to $250,000 on Checking accounts.

Betterment investment accounts, however, are not FDIC insured. Instead, they are protected by SIPC up to $500,000 of missing assets and $250,000 on cash claims. Even if Betterment became insolvent, there’s a very small chance that SIPC insurance would need to step in. But it’s still good to know that it’s there just in case.

Is Wealthfront FDIC Insured?

Wealthfront Cash accounts are FDIC insured up to $1 million. This is the same as Betterment and is four times what the average bank provides.

Like Betterment, Wealthfront protects their investment accounts with SIPC insurance of up to $500,000 per account and $250,000 on cash.

Access to Funds

Low fees and advanced portfolio theory is great. But none of that may matter if you can’t get access to your cash when you need it. Here’s what the withdrawal process looks like for both companies.

Can You Take Your Money Out of Betterment?

Yes, you can take your money out of Betterment and you’ll be charged no fees to do so. For withdrawals from cash accounts, Betterment says that you can expect your funds to arrive within 1-2 business days.

For investment accounts, Betterment estimates that funds should arrive within 4-5 business days. You could receive your funds sooner. But if Betterment needs to sell some of your securities to satisfy the withdrawal, they’ll need time for trade settlement and ACH processing.  Betterment says that whenever they sell shares for you, they do it in a way that minimizes taxes.

Also, you can choose to transfer a Betterment IRA to another IRA provider or simply close your account altogether. But no matter which option you choose, you won’t be charged any fees.

Get started with Betterment here

Can You Take Your Money Out of Wealthfront?

Yes, you can withdraw your funds from Wealthfront at any time with no fees. However, Wealthfront does set a daily ACH withdrawal limit of $250,000.

For cash accounts, Wealthfront says that funds typically arrive within 1-3 business days. And for investment accounts, they give an estimate of 3-4 business days. To prevent money laundering, Wealthfront does place a 5-day hold on any new deposits.

If you want to move a Wealthfront IRA, you’ll need to talk to someone from their Client Services team.

Get started with Wealthfront here

Other Specializations

While there is a lot of overlap between these companies, there are a few differences. Let’s take a look at a few of the things that set these robo-advisors apart from one another.


Here are a few products and services that are unique to Betterment. 

Betterment Financial Experts

Betterment enables you to get live advice from human financial advisors, who can help you with any questions you have regarding your investment activities. 

Financial Advice Packages

As a premium service, you can also get one-on-one help from a financial expert. You can purchase one or two sessions ranging from 45 to 60 minutes each, under the following plans:

  • Getting Started Package – $199
  • Financial Checkup Package – $299
  • College Planning Package – $299
  • Marriage Planning Package – $299
  • Retirement Planning Package – $299

External Account Analysis

For most investors, investing goes beyond the immediate portfolio. Betterment has the capability to review your entire financial situation, including accounts not managed by Betterment.

This will give you a more holistic view of your overall financial situation. However, this service is available only with Betterment Premium (see below).

Betterment Premium Plan

With a minimum account balance of $100,000, and an annual advisory fee of 0.40%, you get all the benefits and services of the Digital plan, plus:

  • External Account Analysis
  • Unlimited access to Betterment’s Certified Financial Planners

This plan combines the best of the basic robo-advisor service, with unlimited access to human financial advisors.

Charitable Giving

With this program, Betterment customers with appreciated shares can donate long-term investments from their taxable accounts. Not only does doing good by donating shares help you put your money where your values are, but it can also help your tax burden.

You are eliminating capital gains tax on donated shares and you can deduct the value of the gift on your tax return. And Betterment makes sure that their Charitable Giving program works in tandem with their other tax strategies.

To make charitable giving easy for you, Betterment tracks how much of your account is eligible to give to charity, estimates the tax benefits of your gift, moves assets from your account to a charitable organization’s account without any paperwork, and provides you with a tax receipt. 

Get started with Betterment here


Here are a few products and services that are unique to Wealthfront. 

Wealthfront Free Financial Planning

Wealthfront free financial planning is run by software-based advice engine called “Path.” It delivers financial planning tools to help you plan for retirement, homeownership, and college funding for your children at no cost whatsoever.

You can use the app to determine the impact of increased savings or determine how much financial aid you can expect when your children attend college.

For housing, Path allows you to participate in virtual house hunting through Zillow and provides the best strategies to save for your down payment.

Wealthfront Portfolio Line of Credit

This feature is automatic if you have investment accounts with Wealthfront totaling $25,000 or more.

You can borrow up to 30% of your account value, and make repayments on your own schedule. Plus, the line of credit is secured by your Wealthfront portfolio. That means there is no application process, and no qualification based on credit or income. Current interest rates are between 3.9% and 5.15% APR (as of November 2019). 

Get started with Wealthfront here


Each robo-advisor offers promotional opportunities to help you make your choice easier.

Currently, Betterment is offering up to one year managed for free. Deposit up $250,000 or more within 45 days of opening an account, and you will receive one-year free management. Deposit $100,000 – $249,999 within 45 days, and receive six months free, and deposit $15,000 – $99,999 for 1 month free.

Betterment vs. Wealthfront–Which is the Better Robo-advisor?

In truth, neither! More than anything else, it comes down to your own preference in what you want a robo-advisor to do for you. If you feel that a portfolio mix that emphasizes value stocks is more appealing, Betterment will be your choice. But if you prefer a portfolio that also includes inflation-sensitive investment, like real estate and natural resources, Wealthfront will be the clear winner.

The other differences, like Wealthfront’s line of credit or 529 accounts, or Betterment’s access to financial advisors or Charitable Giving, may be considerations for your decision.

Study each robo-advisor and see which will work best for you. But they’re both excellent services, and you can’t go wrong with either.

Do you have experience with either of these companies? How did you find them?

Betterment vs. Wealthfront: Which is the Better Robo-Advisor?

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