Betterment Vs Wealthfront – 2019 Review & Comparison

Looking for a review and comparison of Betterment vs Wealthfront?

These are 2 of the giants when it comes to investment advice / management but who is better?

Let’s take a closer look in this Betterment vs Wealthfront review and get all the questions answered.

Before I start…

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Betterment vs Wealthfront Review

I recently share my reviews of both Betterment and Wealthfront separately so figured it was only right that I do a comparison of both of them since they are 2 big competitors in the space.

I’ve been reviewing a lot of investment / management and personal finance companies lately and my other recent reviews include Edward Jones, Personal Capital and WiseBanYan.

betterment website

Here’s what the Betterment website looks like

Getting back to Betterment & Wealthfront… 

The term robo advisor or robo advisory is quite common in the Fintech age we live in today but before choosing a robo advisor, it is important to consider a few factors.

A robo or robo advisor service is basically the use of cleverly-programmed algorithms to trade and invest your money.

This modern advisor makes automated actions and decisions on everything to do with your investments using some of the best statistical models and algorithms with less human factors.

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These automated investment services almost function in a similar way but there are a few unique differences between the two robo-advisors worth noting. Betterment was founded in 2008 by Jon Stein and Eli Broverman with the intention to create a portfolio from the users risk tolerance and placing them into an appropriate asset allocation of exchange traded funds that matches well with that tolerance.

Betterment basically provides fiduciary and since it is an independent robo advisor, you will have a peace of mind that you will be getting the best service because this robo-advisor has no funds of its own to push.

Its investment strategy is based on the Modern Portfolio Theory (MPT) which emphasizes that proper asset allocation is more important than individual individual security selection.

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Wealthfront on the other hand was designed to resemble the portfolios of stock professionals only this time with your money.

Founded in 2008 by Andy Rachleff and Dan Carroll, this robo advisor was initially known as KaChing before it renamed itself Wealthfront in 2011.

Barton Malkiel is its chief investment officer and is behind the classic financial book “A Random Walk Down Wall Street”.

He believes that it is not possible to beat the market and that you are best placed when you mirror the market.

Upon sign up, this robo advisor will take you through a series of questions and based on your answers, it will determine your asset allocation.Your money will then be invested with index Exchange-Traded Funds (ETFs) that mirror the market.

It is important to note that with Wealthfront, your portfolio may vary depending on whether you choose a tax-deferred or taxable account.

3 Important Factors To Consider When Choosing A Robo Advisor

When choosing a robo advisor, there are a few factors to keep in mind since robo advisors are not created the same.

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These include:

Evaluating their investment strategies

Even the best robots in the world are programmed and managed by humans hence it is important to be careful when evaluating your robo advisor’s investment strategies as well as how they are able to adapt to the ever-dynamic market forces. Some robo advisors have different concentrations and specialties on certain regions or products. It is also a good idea to check how they communicate with you as well as the availability and responsiveness of their customer service.

Experience and expertise

Robo advisors are new in the market hence they have not been thoroughly tested by time. While some claim to use superior methodologies and algorithms, the results should speak for themselves. It is important to look into the people behind the robo advisors to ensure that they have the experience and expertise that you can have confidence in. Robots should also have report cards and resumes to help you identify their past performances without having to rely solely on their website.

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Level of clarity and transparency on fees

Most robo advisors will claim to have lower fees than the traditional financial advisor but while this may be true for some cases, it is good to be careful especially when it comes to tax considerations and transaction fees.

A reliable robo-advisor should be clear and transparent in their transactions and methodologies. Before allowing automation to take full control of your investment, it is prudent to exercise due diligence as a wrong systematic action can have disastrous consequences.

As mentioned earlier, all robo-advisors are not created the same but they are definitely a potentially good way to invest.

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Personally I am not involved with robo-advisors as I prefer to maintain full control over my investment decisions however if you are in the market for them then you can see they both have pros and cons and it’s really of personal preference which you should go for.

Hopefully my article has given you a greater insight into both Betterment and Wealthfront.

Before you leave

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Betterment Vs Wealthfront - 2019 Review & Comparison 5