Innovation is a common theme in the 21st century. A business area that has really benefited from such frequent innovation is the financial services sector.
One company that has led the way in unique customer offerings is Betterment. Betterment is an advanced technology-based investment platform. The company was formed in 2008 and now has over $16B in assets under management.
Betterment provides the everyday investor a robo advisor to act as a financial advisor. In the past, financial advisors only offered their expertise to investors with large bank accounts willing to pay large fees.
Since Betterment, all investors have access to a robo advisor to support passive investors in long term investing.
Betterment’s robo advisor uses mathematical rules and advanced algorithms to manage the everyday investors account. This results in lower fees and big cost savings for the investor.
To learn more about all of the advantages of Betterment, head to our Betterment Summary article. While this article will cover some of the advantages of using Betterment, the main purpose is to cover all of the fees associated with the Betterment platform.
According to the official Betterment website, there are three buckets of fees associated with Betterment accounts. Each bucket represents unique and different account offerings. Some accounts have different account minimums that will be explored further in this article. The three high-level buckets are listed below.
The checking and cash reserve accounts that investors are offered are very similar to most checking and saving accounts. Whether you choose a checking or cash reserve account, there is a $0 fee and a $0 account minimum balance requirement.
That means that anyone has access to a checking and cash reserve account.
The checking account proves to be fee free on all accounts. That means that ATM fees, foreign transaction fees, and overdraft fees are all reimbursed or removed. Investors who use Betterment’s checking account will also have access to cash back rewards with brands like Walmart and Adidas.
One final note on the checking account is that your money is FDIC insured for up to $250k. That means you can rest assured that your money is safe in the event of bank failures.
The cash reserves account is a little different than the checking account. One way to think of the difference is that the cash reserve account is more like a typical savings account.
The cash reserves account typically has a higher interest rate offering than the checking account. Additionally, with Betterment’s program banks, your money is FDIC insured for up to $1M.
A few other benefits include bucketing your savings to help save for whatever your life needs are. You can also easily transfer your money from cash reserves to checking to receive all of the benefits of spending.
Just like with the checking account, the cash reserve account is 100% fee free!
The digital investing plan is the base plan for those looking to participate in Betterment’s robo investing. As with the checking and cash reserve accounts, a digital investment account has a $0 minimum account balance.
The annual fees on the digital investing account are 0.25%. That means that for every $1k that Betterment manages, you will be charged $2.50 a year.
It is important to understand that while digital investing plans are offered for most accounts, it is not offered for all. Personal and joint investment accounts, IRAs, and trusts are all accounts that you can create with the digital investing plan.
With this introductory plan, you have access to Betterment’s robo advisor. Remember that the robo advisor uses mathematical rules and advanced algorithms to manage your account.
When you invest in Betterment, your money is going to be invested in index funds or ETFs. You will not be invested in individual stocks or bonds. These funds will be selected and adjusted based on your investing desires and risk preferences.
The digital investing offering not only builds your investment portfolio but also maintains the portfolio. That means that there are automatic features like portfolio rebalancing, dividend reinvestment, and auto-adjust.
Lastly, the digital investing account also provides you with tax saving opportunities. The robo investor algorithm includes tax-saving strategies like tax loss harvesting and asset location.
All of the above benefits are included with the 0.25% annual fee for assets under management. This fee is extremely competitive when compared to similar offerings.
The premium investing plan is the most expensive plan offered, but is only 0.15% more expensive than the digital investing account. However, the account minimum jumps up to $100k rather than $0 with the digital investing plan.
To combine the account minimum and the annual fee of the premium investing account, it costs $400 for every $100k under management. This is an extremely low management fee, and Betterment is able to provide such a low fee because of its robo investing.
With the premium investing plan, you are offered all of the same benefits from the digital investing plan and more. In addition to the digital investing plan benefits, you get unlimited access to Betterment’s team of CFPs. This means you can ask any and every investment question that you have.
Another great benefit of the premium investing plan is that you will have access to advice on investments held outside of Betterment platform from the team of CFPs. This means that you are not only getting advice within your portfolio at Betterment but beyond as well.
For those of you who do not have the $100k minimum account requirement for the premium investing plan, you are probably disappointed that the digital investing plan does not provide access to Betterment’s team of CFPs.
To better serve all customers, Betterment also offers advice packages. These packages are not the free conversations you can have with Betterment experts to help transfer and set up your account. Rather, these advice packages are to help with true financial advice.
The package prices differ depending on the service that you are hoping to receive. The prices range from $299 to $399 for calls that typically last around 45 minutes to an hour. Each advice package includes educational content, a call tailored around your needs, and a personalized action plan.
To learn more about these flat fee advice packages and pricing, head to the official Betterment website.
It is no secret that access to financial advisors and wealth management companies has been limited to the wealthy. It is not uncommon that in order to have access to these services, you must have hundreds of thousands of dollars in your investment accounts.
Betterment has changed the game by offering an investment plan with a $0 account minimum. With this plan (digital investing plan) you have access to a robo investor that creates and adjusts your investment portfolio throughout time. This offering is also offered at an extremely low fee of 0.25% a year.
For those who have more money in your bank accounts, you may have access to the Betterment premium investment plan. This plan requires a minimum balance of $100k but still only costs 0.40% a year. With this plan, you have access to all of the digital investment plan offerings and full access to Betterment’s team of CFPs.
If any of the above plans sound right for you, head over to Betterment to sign up for free today!