Robo advisors are becoming increasingly popular in the investment community. They can provide an online platform that aims to give you an algorithm-driven financial planning service while staying completely automated.
This has made robo advisors a very popular choice for investors who like to put in their money and forget about it.
There are many of these robo advisors out on the market right now so it can be hard to decide which one is right for you and your money.
This comparison will hope to distinguish between two popular robo advisors; Ellevest and Betterment.
Betterment is a robo advisor that is built on the foundation of saving your money. They have a fairly heavy focus on retirement accounts and have become a favorite among truly hands-off investors.
While being a service that can be completely automated, they have also implemented features that can give you more control over your investments with their multiple portfolio templates.
In addition, Betterment adds a variety of features and is very goal-oriented. This can make it easier to pick up for a beginner and can provide a better-targeted approach than some other platforms.
Betterment takes a four-step approach to their investment service.
First, they have you fill out your information when you sign up for an account and continue to ask you questions about your intentions for investing with them. For example, what you plan on saving for specifically and your overall goals.
Next, you will have a portfolio custom built to the needs that you put into their algorithm in the first step. They will include risk level and an investment mix to suit those goals. They also give you the opportunity to adjust this portfolio at this point.
Third, they will advise you on how much you should put as an initial investment and how much you should set up to be on a deposit schedule. If this is for a retirement account, they will also make suggestions on the type of account you should be using.
Lastly, they will set their algorithm to work. They will continue to monitor and rebalance your portfolio to maintain your preferred levels of risk.
There are two different programs that you can use when investing with the Betterment platform.
The Betterment Digital plan is basic and requires no minimum balance and charges a fee of 0.25% of your assets under management.
The Betterment Premium option has an annual fee of 0.40% and requires that a minimum of $100,000. This tier comes with ongoing access to a financial planner.
Betterment has multiple portfolio options for you to choose from to customize your investments to your needs.
Flexible Portfolio: Allows you to have more control over your investing experience by adjusting the percentage of money in an ETF.
Smart Beta: Smart Beta by Goldman Sachs aims to give you higher risk adjusted returns, by using a set of predetermined parameters to build the portfolio.
Income Portfolio: This portfolio consists of bonds which will provide interest payments as income.
Social Responsibility Portfolio: A portfolio that invests in companies that have connections with certain social causes or follow a more ethical way of doing business.
Betterment does offer financial planning packages. However, these will cost a fee in order to use them.
There are 5 different types of Betterment planning packages. The Getting Started package is $199 and this gets you a 45-minute getting started call to get set up with everything you need to know about Betterment.
The other 4 packages are $299 and cover the topics of general financial health, marriage, retirement and college planning.
Ellevest is a robo advisor made specifically for women with the goal to make it easier to enter the world of investing.
The main purpose of originally building this platform was to address the things that are different for women, like the fact that on average they live longer and their salaries peak earlier.
This means that it is uniquely suited to be a very targeted investment tool for women.
The robo advisor uses a “gender-specific” algorithm when putting together your financial plan.
Similar to Betterment, Ellevest takes a step approach to get you on your way.
You’ll start by signing up for the account and putting in the necessary information, in addition, it will ask you for some details like your salary, location, gender and goals.
Second, you will get a free financial plan that will design a low-cost portfolio in order to reach the goals listed in the first step.
Next, you’ll make a deposit, there is no minimum deposit with Ellevest Digital, and the system will tell you where you are vs where you want to be.
Lastly, you’ll let the algorithm do its work with the knowledge that you can change your settings at any time.
There are three different plans with Ellevest, all of which come with their own features and prices related to them.
Ellevest Digital: The basic plan with an annual fee of 0.25% of the annual amount that you invest.
Ellevest Premium: Their second tier has a minimum balance of $50,000 and an annual fee of 0.50%.
Private Wealth: This is their highest tier plan and you must have a minimum balance of $1,000,000 with them. Their price is not listed on the website and instead says “based on assets under management."
With Ellevest Digital you get access to a free financial plan that is tailored to your needs. But with the premium plan, you will have the opportunity to have one on one sessions with a CERTIFIED FINANCIAL PLANNER™ as well as an executive coach for your career guidance.
With the private wealth option, you will have a dedicated financial advisor that will be working on your finances and creating a bespoke plan.
This is Ellevest’s main selling point if you look on their website.
Everything down to the algorithm that they use is tailor-made to make investing for women easier than ever.
They have set plans that will help with women-specific issues and tackle things that come up that are unique to women.
They claim that women are more hesitant to ask for a raise and have special services in place to guide them in how they should go about their career moves.
Ellevest and Betterment do have a fair amount of overlap in the services they provide. For instance, they are both structured to support both beginners and more advanced investors.
Ellevest comes out ahead with its financial planning options as it offers a free plan with its most basic package.
But Betterment has a cheaper Premium plan at 0.40% versus Ellevest at 0.50% for their plan.
So what does it all boil down to then?
Ellevest is probably going to be the choice for you if you want something that is designed specifically with women in mind. The paths they offer are already formatted and prepared for some of the issues that men are less likely to face.
However, in most cases, I believe that Betterment is going to be the right platform for the majority of people. It offers the most flexibility for investments and has a much better structure to get specific with your financial goals.
If you are concerned about gender-specific issues, then it is possible to plan for this with Betterment by adding in a bit of extra work and tweaking one of the multiple portfolio options in order to meet these goals.
It also has more robust tools that can make it easier when moving from a beginner level to someone who wants to have more control over their investments.