Updated January, 2018
Okay, now your overall information, how to use your (hard-earned) money wisely. Let’s talk about how to make this money grow. I’ll review Betterment-Vanguard-Wealthfront opportunities for growing your savings.
I’ve been using all of them, so I have a good overview.
The article is about 3,500 words long, so it takes about 8 minutes of smart reading, so grab yourself a tea-coffee or whatever you prefer and let’s get smarter 😀
Years ago, since the beginning of investment and commerce, there were needed people, (all kinds of financial advisors and investment managers and so on) to manage our investment portfolios. And you know what happens? They brought the high fees and benefits low. Also, human can be wrong.
However, with the nascent rise of the robo-advisor, investors can now easily cut human, financial advisors out of the wealth management equation with just a few mouse-clicks.
Robo-advisor? Please Richard, speak in English! Let’s talk about how much trust should the investor place in them and what are some of the best automated wealth management providers?
Let’s talk a few words about the history of robo-advisors. If you already know, scroll down to see Betterment-Vanguard-Wealthfront reviews and rankings below.
Robo Advisors History
At the beginning of the Robo advisors history, if was the use of only professional financial advisors who had the access to the software. This helped financial advisors track and reallocate client assets without micromanaging their client portfolios.
A decade ago, when the Internet’s role started to grow, Robo advisors started to appear on the scene in a direct-to-consumer model. By the 2016 rolled around, there were several companies who had entered into robo market, seeking to automate the management and re-balancing the portfolios of the clients – with lower fees!
In the early days, the software was quite basic and programmed mainly to calculate investment allocations based on user goals and target dates. Still, the software provided an approach to invest and reinvest their assets, according to fluctuating market conditions.
One the early issue of these programs was that they offered only a limited number of asset classes in which users could invest in. However, since it is growing, the past five years have brought a steadily bigger list of automated investment types. This also makes it more attractive to broad investors.
Also, today’s online investing atmosphere is more relaxed than it was 10 years ago. Robo Advisors have grown popularity with the public’s willingness to share personal details on the Internet also.
Robo advisor programs give also information about tax loss harvesting, includes more asset classes, low fees, automated rebalancing and deposits. That’s why it is clear, why it becomes clearer why automated wealth management programs have been on the rise for almost a decade
But that’s enough with the history, I hope I get you a better overview of automated management programs like Robo advisory is. Now let’s start with the reviews, which is the best?
Detailed Betterment, Vanguard and Betterment review for 2018– Is it Legit?
When it comes to comparing three companies it is not as possible as it seems. The three companies serve people in their own way. Every company has set their goals in different patterns for their audience. The services entertain the audience, according to the different needs of the people. Moreover, when we consider the variables, the difference in them affects the ROI of the users in different ways, which is another reason we cannot easily compare the companies.
Here, I will try to focus on the services which are in favor of the individual user. Moreover, if anyone worries about the high fees then he should, not because they are very affordable for a person to pay their. The affordable fees help the users to reach their investment goals.
One of the most important thing in 2018 is that whenever a user is having a difficulty in understanding anything, a customer service is always available to help. So, whenever a user is having any problem, he is given an offer to ask for the customer support instead of disorganizing things on your own. The customer support is provided because when we see “user’s favored approach” we can notice a very remarkable difference between the three companies and user’s account parameters.
Users are always advised to have complete knowledge and information and prioritize their goals so they can choose an advisor according to the preference of their goals. However, there can be many aspects of the three companies which can be compared universally.
The philosophy of Betterment vs Vanguard vs Wealthfront investment
When it comes to the philosophy of the investment. The three companies agree on the same theory to work. Modern Portfolio Theory is the basic theory upon which the advisors of the companies work. Also, the division of the assets is done in a way where they can maximize the risk while having the minimum loss. The assets are divided between a variety of asset classes.
We can simply understand it by saying that when stocks and bonds are divided, they are basically set at the average risk level of 9/10. Moreover, when users are provided with the services, they are also allowed to set their risk tolerance. If they want to set it, they can set this in the coming stages of the process. If we dig out one common thing between the three companies then it would be that they provide Exchange Trade Funds.
However, as I told earlier, these companies have more difference in them than commonalities. When we have a close comparison between the three companies, we get to know that Wealthfront in 2018 does not have any option for U.S bonds whereas the two other companies does have.
However, one plus point which is for Wealthfront is because the company makes use of a municipal bonds ETF.
Differences vs similarities
We will find more differences in the companies than similarities. The difference can be a major type or they can be very little. But anyway, talking about the difference Wealthfront and Betterment are hundred percent automated. But Vanguard wins here because the company offers the users a financial advisor so they can easily share their problems. A human can understand the problem of the other person easily in comparison to robots or any other automated system.
I have personally use it and can only say good words about customer service and the quality of the feedback! So take a contact with Vanguard here.
Investors at Vanguard have the liberty to mechanize their investment experiences. Once when they have done it, the Vanguard’s approach recommends a hybrid, balanced approach between automation-human consultations.
So, this way Vanguard financial advisors help to track asset performance while issuing scheduled portfolio updates to users.
Betterment’s Review and Process
So, let’s talk about the process of the companies. Betterment’s process of signing up is easy and simple. The process is designed for everyone.
What you need to know?
- Retirement status
- Annual income
After that, Betterment provides users with the preview of a list of goals, such as:
- Safety Net
- General Investing
At first, when you want to sign up, you will be expected to enter three things. That is your age, retirement status, and annual income amount. Once you have entered the required information, users are provided with a goals list which includes Safety net, general investing, Retirement.
No matter whichever goal you pick first, every goal is equipped with a dropdown box. The dropdown box helps the users to understand the strategy of Betterment like how the company will achieve the selected goal, including allocation percentages from inception through retirement and beyond.
Users are given the complete authority to set the goals according to their preference. Once when they have done it, the company then provides them with a complete plan of the concerned goal for 2018.
Example of Betterment
To make you better understand it, let’s take an example. Suppose, a user has selected retirement as his first goal. And as mentioned above every goal has a dropdown box which contains a whole plan. So when he select retirement, a dropdown box will uncover a targeted amount which is assumed by the Betterment. The amount is based on the age and income of the user.
Betterment will then average the user’s annual retirement income based on the retirement target amount. Additionally, Betterment will preview the percentage of the allocations between stocks and bonds, the details of which, as mentioned previously, are finalized later in the sign-up process.
Now there are four types of accounts for users so they can reach their target goals. Their names are Regular which is Taxable, Traditional IRA, Roth IRA, and SEP IRA. See my article about Roth (IRA). Users have the right to choose whatever account type they like in order to reach their retirement goals. The target amount and annual retirement income will vary depending upon the user’s account preference, as will the investment allocation percentage between stocks and bonds.
After all the above mentioned process, a user is arrives at a page where the Betterment’s strategy is defined in compact way. Allocations are outlined and can include diversification between U.S. Total Stock Market, U.S. Large Cap Value, Developed Markets, Municipal Bonds, and more.
It is on this page that Betterment’s interface provides max value to the user by detailing all the pertinent features that will help the user accomplish their goals. These include low fees, smart rebalancing, tax loss harvesting, and short-term capital gain avoidance, among others.
Wealthfront’s Investing Process Review
When users open the home page of Wealthfront’s home page it welcomes users with two options: the first option asks the users to enter their personal information and start their investment journey whereas the second option is to watch a brief presentation that affords a thumbnail sketch of Wealthfront’s background along with current statistics about the company.
Talking about the second option, the presentation all the information of the company’s review from the day one. It starts by showing how the company was in December 2011 to its position as of this writing as one of the highest-ranked personal investment robo advisors in the industry.
There you will see a timeline tracker in the upper-right corner. This trackers helps the users to view the progress of the company since the beginning including development, expansion, and services. This feature seems to be very friendly and also it helps the company in gaining the trust of the users. When you show them the history of the company, users trust you more. It satisfies the users (who want to invest). When users are ready to build their portfolios, Wealthfront directs them to a series of single-question pages that gauge their goals.
Here, I am giving another example so you can completely understand it.
For instance, when you open up the first page, you are asked to enlist qualities which he is looking in a financial advisor. Choices include
- creating a diversified portfolio
- saving money on taxes
- using a robo advisor
- or matching/beating market performance.
Once you have made your choice, as mentioned earlier a dropdown box appears. The function of the dropdown box is exactly the same. It will provide you with a very precise but clear information about the way of dealing with your selected goal. The user is not limited to one selection and may choose all that apply.
After this process, Wealthfront collects data to create a risk profile. The risk profile requires biographical info such as age, pre-tax income, and household status (single income, dual income, etc.). They also ask questions that paint a picture of the user’s financial health and goals, including total value of cash and liquid investments, preference toward maximizing gains or minimizing losses, and loss avoidance strategies.
Once a user has provided all the required information, Wealthfront calculates and displays the user’s personalized investment plan. This plan includes a choice between a “Taxable Investment Mix” and a “Retirement Investment Mix.” Rounding out these investment mixes is a single-digit risk tolerance that has been calculated for the user and positioned in the upper-right corner.
Let’s make deeper
To avoid confusion, each investment mix is translated into a horizontal bar graph that shows the user’s asset allocation percentages. Furthermore, you will find a dropdown box beneath each bar which explains why the asset type was chosen along with the rationale for selecting the assets. Users can also manipulate the risk tolerance dial up or down, and Wealthfront will respond by recalibrating the respective investment mixes accordingly.
If the user wants more details concerning Wealthfront’s approach, the investment plan page has a “See More Details” link leading to a page that spells out the asset class, specific investment, allocation percentage, and dollar amounts required to successfully execute the plan.
Wealthfront projects the performance of these investments along with a historical performance metric based on index information and past performance of the particular investments. The right-hand sidebar lists common questions asked by users along with convenient pop-up answers when scrolled-over.
All told, Wealthfront has developed an incredibly practical, empowering interface that better informs the user, emboldens their decision-making, and allows them easier freedom of movement prior to finalizing their account.
Vanguard’s Process (vs. Wealthfront and Betterment)
When it comes to the process of Vanguard, it leads people to one page where they can view many different sites related to the Vanguard including pages for:
- Personal investors
- Retirement plan participants
- Institutional investors
- Financial advisors
- Non-U.S. Investors
When you open the page of Vanguard to sign up, as a user you are expected to provide some basic information like name, SSN, address and bank account to transfer money. If you are a new user, it will only take 10 to 15 minutes for signing up. After this process is complete, new users submit an e-signature to finalize the process. From there, they are directed to sign-up for online access to their Vanguard account.
Upon having a balance in their accounts, new users can begin investing in one of Vanguard’s many options, such as Vanguard mutual funds and ETFs, stocks, bonds, CDs, and non-Vanguard mutual funds.
When we compare the three companies’ sites’ Vanguard’s site is the least intuitive and streamlined of the three. It becomes difficult for a person to read all the information online. They keep scrolling and scrolling down, which seems very bored. Moreover, Vanguard put an oversize load on the users to fill first and then they can see the actual plan. This is one of the reasons why Wealthfront and Betterment take lead in this way.
The list of differences does not end here. When we consider the process of arranging the information, the results are very different. Wealthfront, wins the point here as it displays information in a very condensed form. The information which they provide is in a summarize form, yet it is very easily readable for users. Also, they can easily understand it. An additional method of streamlining involves embedding clear yet non-intrusive links beside graphs, charts, and summaries. Scrolling over the links creates pop-up blurbs that explain the related data pieces in greater detail.
As the largest manager of mutual funds and the second largest ETFs provider in the world, the Vanguard’s site will most likely be considered more extensive, more appealing, and more intuitive to a seasoned investor who doesn’t need to have their hand held through the research and sign-up phase of the process. By comparison, green investors will find the other two companies more newbie-friendly, particularly Betterment.
Features – Wealthfront vs. Betterment vs. Vanguard
Betterment and Wealthfront advertise a very long list of features:
- Accounts ranging from Traditional IRA, Roth IRA, Rollover IRA, SEP IRA, Trusts, Non-profits, Individual, and Joint
- Automatic portfolio rebalancing adjusts the user’s investment allocation any time it moves out of its target allocation range
- Depending on the user’s risk profile and type of account, the user may have the capability to customize their asset allocation
- Tax loss harvesting to minimize taxes
- Money transfer (automatic) into the user’s account on a pre-set schedule
Despite their many similarities, however, there are some substantial differences between Betterment vs. Wealthfront:
- Betterment does not require an initial deposit to open an account
- Wealthfront requires $500 to open an account
- Betterment sports low annual fees no matter the minimum amount in the user’s account, i.e. those with $100 deposited directly per month pay 0.35% of their average balance, while those with $10,000 minimum pay 0.25%, and those with $100,000 pay 0.15%
- Wealthfront will manage the first $10,000 for free
- Betterment’s Smart Deposit features will conduct automatic deposits in the event that the user’s bank balance reaches a predetermined threshold
- Wealthfront’s Tax-Optimized Direct Indexing helps larger taxable accounts avoid further tax losses
- Betterment’s Retire Guide Calculator assists users in planning for retirement based on current savings
Comparing Wealthfront or Betterment to Vanguard
Actually it reveals a host of features that are largely not found in the first two companies, including:
- Vanguard’s Personal Advisor Service can manage individual or joint taxable brokerage accounts along with traditional IRAs, Roth IRAs, SEP IRAs, SIMPLE IRAs, and revocable trusts
- Vanguard accounts are covered by SIPC insurance up to $500,000 and by Lloyd’s of London up to $50,000,000 per account
- Vanguard Brokerage Services uses self-clearing on each trade and transaction
- Vanguard is the most expensive robo advisor of the three, requiring a $50,000 minimum to participate in Vanguard Personal Advisor Services
- In addition to their automated service, Vanguard assigns each account to a live financial advisor
- Vanguard offers all Personal Advisor Services clients access to their Admiral class mutual funds that feature low fees and no minimums
On a final yet significant note, unlike both Betterment and Wealthfront, Vanguard does not offer tax loss harvesting.
Deciding Factors Between Betterment and Wealthfront
When you are deciding to invest, the best thing is to consider the fee structure. You should pick which suits you the best. This is the key factor. Here’s where Wealthfront and Betterment start to differ rather significantly. Here is some detailed analysis of both of the companies and a little information about how the make their money.
- One flat-rate fee of 0.25% of your average balance
- First $10,000 is managed for free
- Builder: 0.35% of average balance, with $100/mo. direct deposit. (If you don’t use direct deposit, you’ll pay a flat $3/month instead of the 0.35% fee.)
- Better: 0.25% of average balance, $10,000 minimum
- Best: 0.15% of average balance, $100,000 minimum
If we talk about Wealthfront first then, we will get to know that the flat-rate fee of 0.25% is low. This is very easy to understand. They also allow the first $10,000 to be managed for free. This is one good new for the starters but also helps is lowering the rate for any other investor. For instance, with the first $10,000 managed for free, my $85,000 would actually be charged an effective rate of about 0.22%.
Considering Betterment’s three-tier fee structure, we get to know that it is also very straightforward. Although their fees for investors with less than $100,000 are slightly higher than Wealthfront’s, their “Best” tier provides the lowest rates in the industry at 0.15% of your average balance. So, while Wealthfront has the edge on fees for beginning investors, Betterment wins out once you crack the $100,000 mark.
Better Business Bureau (BBB)
Every company is supposed to satisfy the goal/needs of its users. If it fails in doing so then it does not go unnoticed at all. The Better Business Bureau (BBB) received two complaints about Betterment within the past year, both of which were resolved to each customer’s satisfaction. Betterment is not BBB accredited and has no ratings or reviews with the BBB at the time of this writing.
Likewise, Wealthfront has no negative customer reviews, but unlike Betterment, Wealthfront has no disputes registered with the BBB, nor do they even have a dedicated page on BBB.org.
However, when we compare Vanguard to Betterment and Wealthfront, it uncovers a total of 60 complaints against Vanguard that have been registered directly with the BBB over the last three years from 2013 to 2016.
The users mostly complained about the “Problem with Product/Services.” Mostly the customers were either not happy the way Vanguard tried to resolve their problems or they were simply were not being happy with their proposal of plans or strategies. All of these disputes have been closed and no disputes are outstanding.
Vanguard is not BBB-accredited and has one negative customer review. Despite the one negative review and the overwhelming number of unsatisfied customer disputes, Vanguard has nevertheless maintained an “A” rating with the BBB.
Conclusion – Vanguard vs. Wealthfront vs. Betterment
Having said that it is very impossible for anyone to rank Betterment vs. Vanguard vs. Wealthfront. We cannot pick one ground where we can easily compare the three companies. Sure, they have some similarities, but they are not enough to play the part. Every company has advisors who have different strategies. They all play accordingly. If we start comparing the companies on this basis, then we will end in nothing.
However, when it comes to price, then Betterments seems a cheap option to those who are new or who wants to invest on little amount.
Experienced users will have no need for the simplified and automated asset allocation, and individuals of higher net worth will want greater flexibility in diversifying their investments.
Wealthfront appears to cover the middle ground of the three, operating a more streamlined interface to help less-experienced investors, but the sophistication of their process, while of definite quality, could prove to be information overload for anything but the intermediate or experienced investor.
Likewise, the Vanguard’s process will appeal to high net-worth individuals and other investors who are likely better-versed in personal investing or who require a human go-between to help maximize ROI.
On the subject of prohibitive costs, Wealthfront wins for affordability in 2018. Their fees are very affordable for anyone also, there is another fact which falls in their favor is that when a user has invested his first $10,000, and he does not have to pay the fee. All these reasons make Wealthfront very economical and affordable for a person and Wealthfront takes the lead at the end.
There are exceptions and like you read, there’s no winner, but there are some things which I can say:
The best Investment company for beginners: Wealthfront
If you’re in investment and want to achieve more: Betterment
Smart choice for high-end investments: Vanguard