Betterment is one of the largest automated wealth management company having accumulated over $11 billion (in asset under management) as of October 2017 and over 300,000 users. In line with its mission “Investing Made Better”, it has built an intuitive platform to help users attain expected returns from their investments and minimize risks. For this to be possible, the robo advisor utilizes a wide range of strategies.
What you should know is that Betterment has also adopted an easy way of fulfilling its customers’ requests. For starters, clients are required to inform Betterment experts in regards to their financial situation or future plans. With the provided response, Betterment experts are in a position to build a portfolio and leverage the power of the robo advisor to provide you with a working investment plan.
Afterwards, your investment plan will be put in motion as Betterment manages your ever growing portfolio using tax smart technology.
Who is suited to use Betterment services?
Investors in search of a sound retirement plan
Investors who practice a hands off approach
Investors who are in search of goal based tools
Upcoming investors with low balances
Betterment Features and Services
To ensure that you get to benefit from Betterment features and services, you need to register for an account. Betterment has ensured that the sign up process is easy (actually takes approx. 5 minutes or less).
The first step requires you to respond to a set of short questions. These questions cover your investment needs. You will notice a slide bar on the web page. This enables new customers like you to set your asset allocation. For instance you can set the slide bar at 65% stocks with 35% bonds.
Afterwards, you will be required to link your Betterment account with your checking account. Once you have done this, you have the option of automating your deposits or transferring money into your Betterment account, manually.
With the available funds, Betterment financial experts can help you purchase ETFs. Alternatively, you can automate the process and allow Betterment algorithm to take over from you. Not only will the algorithm perform the sell trades on your behalf but it will help to reinvest dividends earned.
After every quarter, Betterment will rebalance any portfolio below 5%, automatically.
Personalized Advisory Services
As you chart your financial path towards retirement, there are a lot of investment and financial decisions that have to be made along the way. For starters, you have a home to buy, kids to educate, a business to start, a vacation(s) to plan and finally, retirement.
A vast majority of people lack the financial knowledge and skills to leverage the cash they have to ensure it works for them. Yes, they have the ability of making the decision of purchasing a home, selecting the best school for their kids according to their financial ability and even plan their retirement but there is more that needs to be done.
For instance, instead of having your money in a CD account where it gets to earn a fixed interest rate for years to come, that money can be invested in a security as advised by Betterment experts with the expectations of making higher returns.
Betterment utilizes a personalized strategy called goal based investing which has been found to enhance wealth management. As a new client at Betterment, you will be advised on the following:
On retirement – How to save and what type of accounts to save in to ensure maximum returns
On Home buying – experts will help you create a conservative portfolio with short term and long term goals
On Recently acquired inheritance – experts will advise you on how to invest
You also have the option of syncing your outside accounts that include bank accounts and investments thus eliminating the chances of losing money.
Access To Licensed Experts
Although Betterment has a wealth of financial tools designed to improve your portfolio, the touch of an expert is needed to ensure maximum returns for you. Betterment licensed experts are available round the clock which means your queries will be answered anytime, anywhere.
Here are some of the questions they can address:
Mortgages among others
To ensure all customers have access to in-depth financial advice, Betterment has established a modern call and support center where CFP professionals are ready to answer all queries. Customers also have a chance of working with a dedicated advisor. The one on one relationship between a customer and a financial advisor ensures that the customer has access to comprehensive financial planning information which can be used to grow your investment portfolio and maximize your returns.
What you ought to know is that access to a dedicated financial advisor is available through Betterment Premium Plan whose features will be highlighted later on in this review.
Retirement Planning Tools
As your preferred robo advisor, Betterment has made available a wide range of retirement tools that helps to ensure your retirement is less stressful and less complicated. One of the most useful tool that Betterment offers is a retirement calculator. It factors in where you reside, your income, your tax rate and current savings. To ensure that you have the best retirement plan, the calculator does consider your spouse investments too.
The calculator is powered by a Nobel Prize winning framework of Modern portfolio and technology thus helping you to calculate asset allocation designed for all your retirement needs. Betterment has taken a step further by helping you manage your risks finally ensuring that you have a reliable income from your investment. Basically, the company experts work round the clock to safeguard your retirement and investments.
They currently offer the following retirement accounts:
In addition, they help you select the right retirement account depending with the information provided earlier.
Smart Trust Management
Betterment offers a smarter way of managing your trust. To get started, you need to set up a trust with Betterment. The process can be completed online in a few easy steps. For starters, you will be required to select whether the trust is a US domestic trust or not.
Afterwards, fill in your Trust’s legal name, nickname, select date of trust establishment, indicate state of organization, select type of TIN, add your social security number, your address, city of residence, state and zip code. Once you are done, check the available box to agree with the terms before submitting the form.
Betterment financial experts will take a look at your trust application before approving it. Once it’s approved, the financial experts can help you create multiple goals suited to every beneficiary. In addition, they can help you automate cash transfers to all beneficiaries.
Some of the features available on the smart trust management tool that you can enjoy include:
Ability to manage different trust accounts via single login
Online access to statements detailing account activity, annual tax forms and quarterly statements
Smart cash flow management that helps to minimize taxes
Access to performance graphing tools
Provision of full portfolio visibility
Tax Loss Harvesting
This is a new service that entails the sale of an asset which has experienced a loss. Basically, Betterment financial experts help their clients to offset taxes on their income and returns. After the asset has been sold, the financial experts will help you select a similar security finally maintaining an optimized asset allocation.
Unlike other tax harvesting services known to avoid the reinvesting of dividends and usually hold onto their clients deposit until a certain period has elapsed, Betterment’s algorithm helps to ensure every harvested dollar is reinvested. The algorithm is designed to handle all complexities which mean your portfolio will never hold cash. Basically, it will optimize your portfolio by investing all your cash and helping you navigate all wash sales.
Since the algorithm is automated, it continuously checks the customers tax lots on a daily basis for harvesting opportunities. All harvest transactions are covered by Betterment’s management fee and so, you will not incur any extra trading costs.
At the time of writing, Betterment was running a limited promotion that enables all customers to get up to 1 year managed free. Once you sign up and make a deposit, the system will automatically waive your management fee. It is important to understand that the time allocated for the managed free period is based on the total amount deposited within 45 days after registering for an account.
Here is an overview of the promotion:
$15,000 to $99,000 deposit equals to 1month time managed free
$100,000 – $249,999 deposit equals to 6 months time managed fee
$250,000+ deposit equals to 1 year time managed fee
Apart from the current promotion, Betterment has two packages namely: Digital and Premium.
Here is a highlight of the pricing features:
Digital – $0 minimum balance, 0.25% annual fee, personalized financial advice, auto rebalancing, advanced tax saving strategies, reliable customer service and access to licensed financial advisors.
Premium – $100,000 minimum balance, 0.40% annual fee, in-depth advice on outside investments, unlimited access to CFP professionals plus all the benefits available in Betterment’s Digital pricing package.
There are tons of features available at Betterment that we haven’t mentioned in this review but you will get to discover them if you ever select Betterment as your preferred robo advisor.
For instance they have SmartDeposit, Two Factor Authentication, Tax Coordinated Portfolio, BlackRock Target Income Portfolio and Goldman Sachs Smart Beta Portfolio among others. When coupled with its goal oriented tools, automated algorithm and access to CFP professionals, investors are assured of maximized returns.
At the moment, Betterment does not offer direct indexing together with its tax loss harvesting feature. This service helps users to purchase on taxable incomes with balances amounting to $100,000+. If Betterment had a direct indexing tool, investors with taxable accounts would be able to save a lot.
All in all, Betterment is a great robo advisor with a wealth of financial management tools, portfolio management tools and provides access to licensed CFP professionals.