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Written by Matthew Cerminaro on April 17, 2021
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Betterment vs Charles Schwab 2021: Best Robo-Advisor?

Many online brokerage services are beginning to include “robo-advisors” to construct effective, automated portfolios for clients. The demand for this service is growing as more investors shift towards a passively managed approach of buying index funds.

The question becomes, how do you know which robo-advisor is best for you? Two services at the forefront of the portfolio automation revolution are Betterment and Charles Schwab’s Intelligent Portfolio. Betterment is a full-blown robo-advisor while Schwab is a brokerage that offers a supplemental robo-advisor feature to investors. 

In this article, we will be comparing Betterment vs Charles Schwab and explaining the different features that each platform offers. 

Charles Schwab vs Betterment: The Basics

Charles Schwab is the leading stock brokerage firm in the US with over $4 trillion in assets under management. The company has built a significant reputation with the public and provides a whole host of services to their clients. One of these is their Schwab Intelligent Portfolios which automates the investing process by building a personalized portfolio for a fee.

Betterment is one of the pioneers in the robo investing market. The service is similar in a lot of ways to Schwab's Intelligent Portfolios, however, because this is the single focus of Betterment, they are able to provide a much more comprehensive robo-advisor to their clients.

The primary difference between the two companies is that Schwab is much more than a robo-advisor. They also offer investors the ability to buy and sell individual stocks and a number of other asset classes. At the same time, Betterment's single focus on their robo-advisor has allowed this platform to thrive.

Product Features Overall Price Buy Now
betterment review

Betterment Review 2021: Is This The Best Robo Advisor?

  • Pricing
  • Assets
  • Account Types
  • Automation Tools
  • Prebuilt Portfolios
  • ETF Expense Ratio
  • Tax Strategy
  • Cash Management
Invest With Betterment
Charles Schawb Review

Charles Schwab Review 2021: Best Brokerage?

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  • Assets
  • Research Tools
  • Robo-advisor
  • User Friendly
Invest With Charles Schwab

Betterment vs Charles Schwab: Summary

  • Both services offer portfolio automation through algorithm-based robo-advisor services.
  • They will each generate a pre-built portfolio for you based on your risk, time horizon, and goals. 
  • Schwab has a $5,000 minimum for its basic Intelligent Portfolio, there are $0 commissions and no portfolio management fees.  
  • Betterment has a $0 minimum and offers investment management for a 0.25% to 0.40% annual fee.
  • Schwab offers Intelligent Portfolios Premium with a $300 initial setup fee and $30 monthly management fee and offers access to financial planners.
  • Betterment offers a Premium plan for a 0.40% annual fee which gives you unlimited access to financial planners.
  • Both services offer various types of accounts, but Schwab offers SEP and Simple IRAs. 
  • Schwab automatically rebalances its client's portfolio instantly. Betterment rebalances when the portfolio drift exceeds a certain threshold. 
  • Both Betterment and Schwab use ETFs to build diversified portfolios and both offer premium plans with access to financial planners. 
FeatureBettermentSchwab Intelligent Portfolios
Minimum Investment$0 ($100,000 Premium)$5,000 ($25,000 Premium)
Fees0.25% Annual FeeNo Management Fee
Premium Fees0.40% Annual Fee$300 One Time Fee + $30/Month
InvestmentsETFsETFs
Average ETF Expense Ratio0.13%0.08% To 0.15%
Best ForLow Minimum InvestmentNo Fees
Account TypesIndividual, Joint, Traditional IRA, Roth IRA, Trust, Cash AccountsIndividual, Joint, Traditional IRA, Roth IRA, Trust, SEP IRA, Simple IRA

Which robo-advisor is the best for you?

Answer a few quick questions and we'll recommend the best advisor for you, based on our objective analysis.

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So-Fi Automated Investing

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Personal Capital

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Betterment

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Fees: 0.25% to 0.40%

Account Minimum: $0

Best For: Full investment automation, access to human advisors

Personal Capital

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Open Account

Fees: 0.49% to 0.89%

Account Minimum: $100,000

Best For: Access to human advisors, larger account balances

Betterment

Read Full Review

Open Account

Fees: 0.25% to 0.40%

Account Minimum: $0

Best For: Full investment automation, access to human advisors

Personal Capital

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Open Account

Fees: 0.49% to 0.89%

Account Minimum: $100,000

Best For: Access to human advisors, larger account balances

Betterment

Read Full Review

Open Account

Fees: 0.25% to 0.40%

Account Minimum: $0

Best For: Full investment automation, access to human advisors

What Is Betterment?

Betterment’s sole purpose is to automate the investment process for its clients. By acting as a bridge between individuals working in the investment services industry and clients who wish to capture similar returns, Betterment is attempting to revolutionize the way we invest. They offer useful services like a robo-investing platform as well as a high yield savings account and checking account.

Betterment Features

Portfolio Automation 

Betterment follows a very similar process compared to Schwab Intelligent Portfolio in the sense that it first requires its clients to answer some very important questions before constructing a portfolio. 

These questions are used to learn more about the client's goals, time horizon, and risk tolerance. Betterment does this to effectively create a portfolio that will work for its client. After this step, the process is entirely automated. You can set up recurring deposits if you wish.

The automation features will take care of rebalancing and changing your asset mix over time. The tax-loss harvesting feature will also kick in to lower your investment taxes.

Robo-Advisors Free Training

We put together a free 30 minute video training that walks you through the entire process, step by step. This training will help you get up and running in no time at all.

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Portfolio Contents

Betterment’s robo-advising system uses exchange-traded funds just like Schwab’s Intelligent Portfolio. The index-tracking funds are chosen depending on the client's investment goals and risk tolerance. 

Betterment offers a wide range of different investments as it acts to satisfy all sorts of investor preferences. Some examples are:

Socially Responsible Investing (SRI) Portfolio

A portfolio that reduces exposure to companies that have potential negative social impacts. 

Target Income Portfolio 

A bond portfolio that is designed to facilitate higher dividend income. This could work, for example, as a low-cost option for retired clients to continue to gain income. 

Quantitative Factor Portfolio 

This portfolio is also called the “Goldman Sachs Smart Beta Portfolio." It automatically invests clients' money in companies that embody four important characteristics. Goldman builds these portfolios with an aim for good value, strong momentum, high quality, and low volatility. 

Betterment Cash Reserve 

This high-yield cash account offered by betterment allows investors the option to keep their money in cash while accruing a higher interest than the normal savings account. This account acts as a risk-free way to earn meaningful interest on your money since you are fully FDIC insured. 

RateAs Of
0.30%04/27/2021

Customer Support 

Their site offers a How-To page and FAQ section as well as customer support available in normal business hours (see Betterment because hours vary). 

Betterment Fees 

Fixed Management Costs 

Depending on account minimums, Betterment offers different fixed rates and benefits. 

Betterment Digital, $0 Minimum (0.25%)

The features of this portfolio include portfolio automation, efficient tax management, investment advice, and top customer support. The fee for this is 0.25% annually. 

Betterment Premium, $100,000 Minimum (0.40%)

All of the Betterment Digital services plus more. Access to the annual call hosted by Betterment’s highly qualified team of financial experts. Increased monitoring of clients' portfolios is also available with this plan. The annual fee for Betterment Premium is 0.40% annually. 

Betterment is a member of SIPC (Securities Investors Protection Corporation) which insures security theft and fraud up to $500,000 in securities and $250,000 in cash per account.

Betterment Pros

  • Hands-off investment process 
  • Questionnaire allows for more accurate portfolio creation
  • Very beginner-friendly 
  • No minimums on Betterment Digital account 
  • Customer Support and extensive FAQ page 
  • Slick app design, more modern and contemporary design 
  • High-yield savings with no minimum
  • Access to financial professionals through Premium

Betterment Cons

  • No individual stocks, prebuilt portfolios only
  • Small fee of 0.25% to 0.40% where others do not charge
  • Stocks and bonds only in ETFs
  • No direct indexing

Charles Schwab logo

What Is Schwab Intelligent Portfolios?

Through their Intelligent Portfolios, Schwab is attempting to revolutionize the way that it manages its clients' money. By introducing this feature in 2015, the brokerage giant was able to increase their offerings.

This robo-advisor aims to automate the investment process and create fully functioning, low-risk, high-return portfolios. As an added benefit, the basic version of this robo-advisor is completely free. The only caveat is the minimum balance is $5,000.

Schwab Features

How Schwab Intelligent Portfolios Work: 

  1. Complete a short questionnaire that outlines your risk tolerance, goals, and investment time horizon. 
  2. Schwab Intelligent Portfolio's robo-advisor will automatically construct a diversified portfolio of ETFs that come from the underlying ideas of experts in the industry. 
  3.  Sit back and watch Schwab Intelligent Portfolio's robo-advisor monitor your portfolio every day. It will automatically rebalance as needed. 

Schwab Diversified Portfolios

Schwab Intelligent Portfolio utilizes the power of Exchange-Traded-Funds (ETFs). ETFs track an underlying basket of different stocks, commodities, or bonds that help to create a well-diversified investment experience and hedge against the risks of individual stock purchasing. 

Schwab graph

Automatic Rebalancing 

Schwab Intelligent Portfolios' high-tech system automatically rebalances your investments. This is accomplished by buying and selling when the percentage of its client's holdings change. This makes sure you stay on track with your target investment allocations. 

Tax Efficiency

Schwab Intelligent Portfolio utilizes tax-incentive practices by harvesting tax losses and helping to offset taxes on capital gains. The process is intricate, but the beauty of automation is Schwab Intelligent Portfolio will do the work for you. 

Customer Support 

24/7 U.S.-based customer service is at clients' disposal. This level of attention to customer service shows that Schwab is committed to its clients and answering their most pressing questions. 

Schwab Account Types

  • Individual
  • Joint
  • Traditional IRA
  • Roth IRA  
  • SEP IRA
  • Simple IRA
  • Trust accounts

Through these different account types, clients can take advantage of a number of tax benefits that retirement accounts have to offer. In the long run, this has the potential to significantly alter investment returns.

Account Minimums

Schwab Intelligent Portfolios: $5,000 

Schwab Intelligent Portfolios Premium: $25,000 

Account Fees

Schwab Intelligent Portfolios: $0 commissions and 0% management fee.

Schwab Intelligent Portfolios Premium: $300 one-time initial planning fee, $30/month management fee.

Pros Of Schwab

  • No fixed management cost, only pay normal operational expenses on ETFs
  • Robo-advising service makes investing hands-off
  • The questionnaire helps to specify the client's goals objectives
  • Offers a well-diversified portfolio that ranges over many asset classes 
  • Offers a variety of accounts 
  • Automatically rebalances clients portfolio 
  • 24/7 customer support 

Cons Of Schwab

  • $5,000 minimum for Intelligent Portfolio accounts 
  • Higher cash allocation at 6% t0 10%
  • No access to environmentally ethical portfolios such as Betterment’s SRI portfolio 

The Verdict: Betterment vs Charles Schwab

So what is the final verdict? Both of these services offer cheap, automated ways for investors to accumulate wealth for their future. 

Schwab Intelligent Portfolio is a good option for the investor who has the $5,000 account minimum.

Betterment has $0 account minimums, so this may be a better option for someone with a smaller account.

Schwab Intelligent Portfolios offer a competitive alternative to Betterment by offering free prebuilt portfolios at their basic tier. Schwab has the upper hand when it comes to fees. 

Betterment offers an easy-to-use platform, with access to financial planners and full-scale investment management. Betterment has the upper hand on features and use-ability.

With this being said, both services have their pros and cons. It is up to you to figure out which service is the best fit, so make sure to do your research and choose the one that fits your specific needs.

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betterment vs charles schwab intelligent portfolios
Article written by Matthew Cerminaro
Matt is currently attending Union College pursuing a Bachelor of Arts in Economics. He participates in the student investment fund and is a member of the Union College football team. Matt runs his own personal finance Instagram page and market-related blog where he writes about economics and general wealth accumulation tips.

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