Wealthfront vs. Betterment: How Are They Different and Which is Right for You?

If you don't know how to invest money, one of the easiest ways to start is to use a robo-advisor. Two of the best robo-advisors out there are Wealthfront and Betterment. Each has its own benefits and drawbacks, and one might work better for you than the other.

In this Wealthfront vs. Betterment overview, we’ll look at the basics of each, as well as provide information that can help you make the best choice for your long-term goals.

Wealthfront vs. Betterment

Both Wealthfront and Betterment offer robo-advisor services and automated investment management. However, there are a few things to be aware of as a new investor before you choose one over the other. Here’s what you need to know.

Minimum investment	$500	$10
Management fees	.25%	.15%, .25%. .30%, or .40%, based on your plan and balance
Asset classes	Exchange-traded funds (portfolios made up of U.S. and international stocks and bonds)	Exchange-traded funds (portfolios made up of U.S. and international stocks and bonds)
Account types available	Individual taxable account Joint taxable account Trust Traditional IRA, Roth IRA, SEP IRA 529	Individual taxable account Joint taxable account Trust Traditional IRA, Roth IRA, SEP IRA, inherited
Features	Stock-level tax-loss harvesting Financial planning help through Path Banking products College savings plan Portfolio line of credit Automated funds transfers	Tax-loss harvesting Fractional shares Financial planning help from humans Banking products Automatic rebalancing Connect external accounts
Best for...	Those interested in a low management fee, and who want access to a college savings plan.	Those most interested in starting no matter their financial circumstance, and who want to put their long-term goals on autopilot.
	Visit Wealthfront Paid Non-Client Promotion FinanceBuzz doesn’t invest its money with this provider, but they are our referral partner. We get paid by them only if you click to them from our website and take a qualifying action (for example, opening an account.)	Visit Betterment Paid Non-Client Promotion Paid non-client of Betterment. Views may not be representative, see more reviews at the App Store and Google Play Store. No guarantee of future performance or success is being made. Learn more about this relationship.

What is Wealthfront?

Wealthfront¹ <p class="">FinanceBuzz receives cash compensation from Wealthfront Advisers LLC (“Wealthfront Advisers”) for each new client that applies for a Wealthfront Automated Investing Account through our links. This creates an incentive that results in a material conflict of interest. FinanceBuzz is not a Wealthfront Advisers client, and this is a paid endorsement. More information is available via our links to Wealthfront Advisers.<br></p> is a robo-advisor that allows you to start investing in the stock market with a minimum deposit of $500. You can invest in one of their recommended portfolios, adjust one of the recommended portfolios, start a new portfolio and build it yourself from scratch, or bring an existing portfolio over from another brokerage firm. You can even choose to invest in particular categories like socially responsible investing (SRI), technology ETFs, or healthcare ETFs. Wealthfront has also added the ability to invest in cryptocurrency funds.

If you chose to go with Wealthfront's recommendations, then after answering a few initial questions, Wealthfront's algorithms will put together a portfolio for you, based on your risk tolerance and other factors. Wealthfront focuses on using stocks and bonds to create a portfolio, though it also offers exposure to real estate and natural resources. All you have to do is contribute money to your account, and Wealthfront will automatically allocate it according to your profile and goals.

In addition to offering retirement accounts and taxable investment accounts, Wealthfront is a little different in that you can also open a 529 account. This allows you to use a tax-advantaged account to help save for a child’s college education.

You aren’t limited to investment products, though. Wealthfront also offers access to banking products, including the Wealthfront Cash Account, an FDIC-insured product that allows you to save and spend using a debit card. Plus, you get access to a portfolio line of credit, which provides you with a low-interest way to borrow based on the size of your portfolio.

Wealthfront's technology can also make depositing money into your accounts automatic. You just link an external checking account or a Wealthfront Cash Account and tell Wealthfront what the threshold is for the maximum balance you want to keep in that account. When your balance exceeds that amount, Wealthfront will automatically transfer the excess money into your chosen Wealthfront account. 

Finally, it’s possible to get planning help for specific goals by using Path, an advice engine designed to help you map out a way to achieve your goals.

Pros of Wealthfront

• Low expense ratios for ETFs
• One low annual fee for account management
• Tax-loss harvesting
• 529 account

Cons of Wealthfront

• Minimum of $500 required
• No discount for a large balance
• Focuses on Path, rather than human planners

What is Betterment?

Like Wealthfront, Betterment is a robo-advisor. Using principles of modern portfolio theory, Betterment will build you a portfolio based on your answers to questions designed to help determine your risk tolerance and goals. It’s possible to open different types of accounts to help you work toward various goals, and there is only a $10 minimum investment required to get started.

Betterment has also introduced different investment strategies, including a socially responsible investing strategy. If you have a specific goal, you can choose one of these strategies to better align with your values.

Betterment provides you with banking products as well, including FDIC-insured cash accounts. There’s even a Betterment Cash Reserve account² <p>Betterment Cash Reserve ("Cash Reserve") is offered by Betterment LLC. Clients of Betterment LLC participate in Cash Reserve through their brokerage account held at Betterment Securities. Neither Betterment LLC nor any of its affiliates is a bank. Through Cash Reserve, clients' funds are deposited into one or more banks ("Program Banks") where the funds earn a variable interest rate and are eligible for FDIC insurance. Cash Reserve provides Betterment clients with the opportunity to earn interest on cash intended to purchase securities through Betterment LLC and Betterment Securities. Cash Reserve should not be viewed as a long-term investment option.</p> <p>If you participate in Cash Reserve, you authorize Betterment, on a discretionary basis, to direct Betterment Securities as to the allocation of your funds among one or more Program Banks. Deposits at each Program Bank are insured by the FDIC up to $250,000 for each insurable capacity (e.g. individual or joint). In aggregate, funds deposited into Cash Reserve are eligible for up to $2,000,000 (or $4,000,000 for joint accounts) of FDIC insurance once the funds reach one or more Program Banks (up to $250,000 for each insurable capacity—e.g., individual or joint—at up to eight Program Banks). Even if there are more than eight Program Banks, clients will not necessarily have deposits allocated in a manner that will provide FDIC insurance above $2,000,000 (or $4,000,000 for joint accounts). The FDIC calculates the insurance limits based on all accounts held in the same insurable capacity at a bank, not just cash in Cash Reserve. Although certain types of accounts, such as trust accounts may be eligible for additional FDIC insurance based on the number of beneficiaries, funds will be allocated to each Program Bank in such a way that provides up to $250,000 of FDIC insurance for individual accounts, $500,000 of FDIC insurance for joint accounts, and $250,000 of FDIC insurance for trust and other corporate account types, in each case per Program Bank. In the event you maintain an individual or joint Cash Reserve account and are a beneficiary of a Cash Reserve trust account, Betterment does not provide FDIC insurance based on your status as a beneficiary. If clients elect to exclude one or more Program Banks from receiving deposits the amount of FDIC insurance available through Cash Reserve may be lower. Clients are responsible for monitoring their total assets at each Program Bank, including existing deposits held at Program Banks outside of Cash Reserve, to ensure FDIC insurance limits are not exceeded, which could result in some funds being uninsured. For more information on FDIC insurance please visit www.FDIC.gov. Deposits held in Program Banks are not protected by SIPC. For more information see the full <a href="https://www.betterment.com/legal/cash-reserve">terms and conditions</a> and <a href="https://betterment-prod-cdn.s3.amazonaws.com/agreements/Betterment_LLC_ADV_2023_09_28.docx.pdf">Betterment LLC's Form ADV Part 2</a>.</p> with a higher-than-average APY and a checking account that can be accessed using a debit card. Projection tools allow you to see whether you’re on track with saving for short-term goals and longer-term ones.

In addition, Betterment offers a rollover option if you want to move money from an existing 401(k) into an IRA. Plus, you can connect external accounts so you can see where you stand and incorporate them into your planning.

You get access to humans who can help you work through specific goals, whether you're saving for college or retirement planning. This financial advice costs extra money, but it’s easy to schedule time with a potential human financial advisor using an online interface. These planning tools are offered for a flat fee.

Pros of Betterment

• Only $10 minimum to invest
• Goal-based tools to help you accomplish your objectives
• Access to human advisors for financial planning help
• Discount for the highest balances

Cons of Betterment

• Limited investment options
• Management fee can be as high as .40% with its premium plan
• No custodial or college savings accounts

3 important differences between Wealthfront and Betterment

When looking at Wealthfront vs. Betterment — or comparing any of the best investment apps — it’s important to understand the differences. By looking at the different features, you can determine which is most likely to meet your particular needs.

1. Features

Both Wealthfront and Betterment are robo-advisors that come with features such as tax-loss harvesting and automatic rebalancing. Both of these robo-advisors help you minimize the taxes you pay when making adjustments to your plan, as well as rebalance when needed. However, there are some different features to be aware of.

First, Wealthfront offers a 529 plan. This is not something a lot of robo-advisors offer, and it sets Wealthfront apart. Betterment doesn’t offer a 529 plan choice, so if you want to save for college, Betterment won’t be much help.

On the other hand, Betterment offers human help with specific financial planning goals. You can sign up — for a flat fee — to get personalized guidance from a certified financial planner with Betterment. Wealthfront instead focuses on the use of Path, its advice engine is designed to help you work through these planning issues on your own. Depending on your situation, you might like the idea of more access to human advice. Indeed, once your balance reaches $100,000, you can decide to pay a higher management fee of .40% and get unlimited access to a human wealth advisor through Betterment.

Wealthfront, however, offers a portfolio line of credit, which allows you to borrow money at a lower rate when you meet certain requirements. Your line of credit is secured by the investments in your portfolio, so it’s possible to get a competitive rate without the need for a high credit score.

2. Fees

When looking at Wealthfront vs. Betterment, fees can make a difference. Wealthfront charges only .25% annually, no matter the size of your account.

Betterment, on the other hand, takes a tiered approach to fees. For many accounts, the advisory fee is .25%. However, once your Betterment account balance reaches $100,000, you can choose to opt for more tailored advice and help by paying a higher management fee of .40%. Betterment also offers a discount for very high balances of $2 million or more. For those higher balances, it’s possible to pay .15% for a basic account and .30% if you want more personalized advice and access to planners.

3. Expense ratios

An expense ratio is a fee charged by a fund. Because both Wealthfront and Betterment use ETFs, expense ratios are part of the cost of using these services. An expense ratio is charged on top of the management fee.

In general, Wealthfront offers funds with fees of between .06% and .13%. Betterment also uses funds with fairly low fees. The ETFs commonly used by Betterment range from .07% to .17% (as of Oct. 12, 2022). However, individual ETFs might have ratios that are higher or lower than that number.

Wealthfront vs. Betterment: which investment app should you choose?

The investment app you choose should depend on your individual needs and circumstances. Both Wealthfront and Betterment have their advantages and disadvantages, so carefully consider these before you make your decision.

If you’d like to use a robo-advisor to help plan for college, and save using a 529, Wealthfront can be a good choice. Additionally, if you want access to a line of credit based on your portfolio, rather than relying on debt from a bank or credit card, Wealthfront can provide you with an alternative way to access capital.

On the other hand, Betterment might work better if you want access to a basic account and goals-based tools supported by the ability to talk to a human financial planner. Betterment offers a variety of tools designed to support goals-based planning, and it’s possible to easily switch your money between accounts. Additionally, Betterment can work well for beginners who don’t have a lot of money to invest initially. With no minimum investment requirement, Betterment is ideal for those who don’t have $500 to get started.

FAQs about Wealthfront vs. Betterment

The bottom line on Betterment vs. Wealthfront

If you’re looking to learn how to invest money, or even just turn your portfolio management over to someone else, both Wealthfront and Betterment can be good choices. Both robo-advisors make use of the principles of modern portfolio theory and use low-cost ETFs to offer diversification and create portfolios designed to help you reach your long-term financial goals. Plus, you benefit from lower fees than what you might see when you invest with a traditional brokerage.

There are some differences in some of the accounts and features offered by Wealthfront vs. Betterment, though. As a result, it’s important to carefully consider the features you’re likely to use and the types of accounts you want to open. You might find other choices, such as Robinhood or Stash, that could work even better for you.