Betterment Review: How It Works, Pros & Cons, And How It Compares

Last updated on March 18, 2020 by

In today’s low-interest-rate environment, investors know stationing their money in a bank is a sure way of losing against inflation. But at the same time, many people feel powerless because investing in the stock market can be over complicated, and they may need the extra support that banks often offer.

So what does a smart investor do?

They go with a robo-advisor, which use computer algorithms to give personalized advice and help manage your investment portfolio. Many investors find this option to be stress-free, and they end up saving on high fees they would typically see with a traditional investment brokerage.

Betterment is one of today’s leading robot technology investment platforms. In this article, we’ll review Betterment to see if it’s the right option for you.

How Betterment works

Investors usually invest with an end goal in place, whether it’s retirement, a trip, a downpayment on a home, or a vacation. Betterment’s robot advisor is all about leading you step by step to achieve that end goal. Betterment predicts your chances of reaching your goals ahead of time by looking at your initial deposit, monthly savings, and timeline.

Betterment also recently implemented a feature that allows you to link external investing and retirement savings account, helping you reach your goals even easier. The feature gives you a better idea of where you are on reaching retirement (or whatever your goal might be). Betterment then analyzes these external accounts to advise you on their asset allocation, as well as projections on how your money would look like if you integrated your accounts with Betterment.

Even better, you don’t need to do any research to figure out which investments are best for your portfolio or what percentage of each you should buy. Betterment does this all for you, making it an excellent platform for beginner investors. Intermediate and advanced investors can also make use of Betterment’s tax-conscious advice and features.

So you’re probably thinking how the heck does Betterment do all this? Well, it’s thanks to Betterment’s advanced robot technology that advises investors to make the right choices and oversees all investments. They use Modern Portfolio Theory (MPT), which suggests by investing in a diverse pool of assets, your risks are lowered, and it keeps you earning long-term.

Creating an account with Betterment

When you create an account with Betterment, you’ll be asked some basic questions to determine your risk tolerance. Your age will also be considered.

Once your risk tolerance has been noted, you can choose which type of account you want. The types of accounts Betterment offers are:

  • Traditional IRA
  • Roth IRA
  • Huse downpayment savings
  • Trusts
  • Education savings (not tax-advantaged)
  • General savings

After you finish setting up and choose an account, Betterment will automatically start investing for you. It decides what to invest in based on your allocations. All your investments will go into different index funds.

If you don’t like how it turned out, you can adjust your allocation percentage at any time.

Betterment’s key features

Other than being an all-in-one robot advisor and zero work investment platform, Betterment has additional features worth considering.


Betterment uses modern portfolio theory, which suggests diversifying investments will end in more long-term success. This investment platform uses its robots to make smart decisions for its users. However, if you want more control, you can use the “flexible portfolio” tool to adjust the percentage of your investment in any ETF.

On top of being able to choose the type of account you like (we covered this above), investors can also choose from various kinds of portfolio options:

  1. Smart Beta: a portfolio that seeks higher-than-average returns by embracing systematic risks.
  2. Income portfolio: a portfolio made solely of bonds.
  3. Socially responsible portfolio: a portfolio that uses ETFs companies whose business aligns with certain social causes.

All in all, Betterment’s investment options are very flexible for all types of investors.

Account minimum

Betterment has a digital plan which doesn’t require a minimum account balance. With this account, you won’t have access to any human advisors, and everything from advice to investments is done by robot technology. However, you can opt for Betterment Premium, which requires a minimum of $100,000 balance. With this account, you’ll have unlimited phone access to real-life certified financial planners.

Management fees

Betterment’s Digital and Premium plans have different fees.

  • Betterment Digital: 0.25% annual fee. This plan includes all digital advice and tools.
  • Betterment Premium: 0.40% annual fee. Access to a team of certified financial planners for account monitoring and unlimited support through emails and phone calls.

The plan you choose depends on the kind of support you need. Besides, Betterment’s plans are relatively inexpensive compared to other robot advisor platforms.

Financial planning packages

If you wish for a little more hand-holding, Betterment offers advice packages. The first is a “getting started” package, which costs $199. You get 45 minutes to help you set up your account, learn about Betterment’s tools and features, and make your first investments.

The other 4 packages each cost $299 for 60 minutes of phone time, with advice pointed towards marriage, retirement, college planning, and general financial guidance.

With all packages, you’ll speak with a certified financial advisor.

High yield savings

Betterment also offers a savings account called Everyday. It has an interest rate of 1.37%, but you won’t pay a fee on your balance. Your savings will get up to $1 million in FDIC insurance coverage. You can stash as much money as you wish in your Everyday account, or as little. There’s no minimum balance.


With RetireGuide, you can link external accounts, including 401(k)s, giving a full picture of your savings and investment accounts. With this information, the robot can provide comprehensive retirement financial planning advice.

How does it know?

RetireGuide’s robot compares current saving levels with your desired spending levels in retirement. It answers questions about whether you’re saving enough money and when you can retire. It updates and syncs external accounts daily, so it always gives accurate advice.

Who is Betterment for?

  • Retirement investors.
  • Hands-off investors.
  • Investors who like automatic rebalancing.
  • Investors who have set goals in mind.
  • Users with low balances.

Betterment pros and cons


  • Simple asset allocation.
  • Great for young/new investors.
  • Low management fees.
  • No account minimum required.
  • Option for personalized advice packages.
  • Developed goal-based tools.


  • Not for DIYers.
  • No direct indexing.
  • Higher fees and balance required for expert help.
  • Some competitors, like M1 Finance, are entirely free for a basic plan.

Final Thoughts

Without question, Betterment is a great starting point for beginner investors. The robot advisor who has replaced traditional brokerages, will do your asset allocation, see your end goals, and help you achieve them all while you sit back and relax. Betterment’s fees are also a lot cheaper than what you’d pay to hire a traditional financial advisor. However, there are other robot advisors on the market that don’t charge any fees at all.

With all this said, an advanced investor looking for more investment control might get frustrated by Betterment’s automatic investment system and may be better doing it themselves with a diversified asset allocation selection.

Does Betterment sound like a good fit for you? Sign up today!

Also, don’t forget to check out our review on Betterment’s competitor, M1 Finance.