A few years ago I rolled over a small 401k balance from a previous employer to Betterment (robo-advisor). It was a good move at the time, and I still have a high view of Betterment as a solid robo-advisor. If you are unfamiliar with Betterment, check out the Betterment Review from Nerdwallet for a good summary.
Why did I switch?
I decided to transfer my traditional ira to Vanguard (I’m still waiting on things to be finalized). Below are the reasons I switched:
- Betterment raised fees from 0.15% to 0.25% in early 2017. View Betterment’s fees here.
- If I wanted to speak to a real person, I would need to pay an additional 0.15% fee.
- I was concerned about putting future investment funds into a new(ish) service.
- I wanted more options.
- If you are going to solely invest in ETF’s and index funds, why not do it directly and bypass the middleman’s fees?
- Betterment is backed by VC money and could easily change directions that I don’t agree with. This article from Wired describes this issue well.
The 0.25% fee is pretty reasonable compared to competitors, but I’m concerned they might increase fees again in the future. There is also a chance they might not be around in 10 years. Currently, my plan, which might change, is to go with Vanguard Personal Advisor. They charge a 0.30% fee, which is a solid rate for having access to an advisor. It will take some time to qualify for their service ($50k minimum portfolio) after we get out of debt and build an emergency fund. There is a chance I might decide not to go with Vanguard Personal Advisor and manage my portfolio. However, I think going with them might be a solid option and end up saving the fee they charge on tax optimizations.
Why would you want to use Betterment?
Below are a few reasons you might want to consider using Betterment:
- Accessing their goal and planning features.
- If you have after-tax accounts and are actively depositing money, their tax loss harvesting could be beneficial. This “might” end up saving enough to cover their fees.
- You don’t want to spend the time managing your investments.
- You don’t have an extensive portfolio to manage.
At this point, I think Betterment is a good robo-advisor if you don’t want to think about your investments. Their portfolio is very balanced, and their online tools are useful. If you aren’t going to invest a lot of money outside of your 401k, it is a solid option.
Do you use a robo-advisor? Why or why not? What do you think about the Vanguard Personal Advisor service?
Chris Roane is a financial blogger who loves to be transparent about money-related issues. He’s paid off massive amounts of credit card debt and is the blog author of Money Stir. His main focus on Money Stir is talking about how money relates to our relationships, personal development, and how to plan for the future we want. He’s been quoted on Market Watch, The Ladders, and other publications.