Betterment vs Vanguard Personal Advisor
Updated on: 2017.05.18
Knowing what to do with your money can be tough, but many new services are popping up to help you manage your investments. One crop of such services is known as robo-advisors, where a computer manages all of your money for you. Another set of services offers a human advisor to help you setup your investments but manages them with a hands off approach. Both Betterment and Vanguard have competing services to help you manage your investments. In the battle of Betterment vs Vanguard, who is the best? Read on to find out.
Vanguard Personal Advisor Services
|Assets Under Management||$7.3 Billion||$51 Billion|
|Tax Loss Harvesting|
Betterment provides a free human advisor for accounts over $500,000
|Single Stock Diversification|
|Roth IRA Accounts|
|SEP IRA Accounts|
|529 Plan Accounts|
|Sign Up||Check out Betterment||Check out Vanguard Personal Advisor Services|
What is Betterment?
Betterment was one of the first robo advisor services, and has grown to be the industry leader. With over $7 billion in assets under management, the service has attracted hundreds of thousands of customers to its low cost investment management service.
For the majority of customers, Betterment’s standard plan is best. This plan offers automatic portfolio management and tax efficient investing features for a 0.25% fee. The fee is charged based on your total assets with Betterment. There is no minimum balance to start and you can close your account at any time.
Betterment’s advanced algorithms invest your dollars to match your investing preference, which you share in a short, simple survey when signing up for a new account. From that point on, Betterment handles everything. There are no trade fees, transfer fees, and Betterment periodically rebalances your portfolio. It is a complete investment autopilot from the moment you finish setting up your profile.
If you want to work with a human investment advisor, Betterment offers several additional options:
- Betterment Plus - For accounts with at least $100,000, you can work with a professional investment advisor through an annual call with a CFP® and ongoing monitoring from a team of investment professionals. This service charges a higher 0.40% fee.
- Betterment Premium - For accounts with at least $250,000 in assets, you can get unlimited calls with Betterment CFP® and licensed experts. This type of account charges a 0.50% fee and comes with additional account monitoring by the Betterment investment team.
- Betterment Advisor Network - If you want to work with a dedicated financial advisor for the duration of the time you have your account, you can get an advisor through the Betterment Advisor Network. This is essentially a referral service to external advisors.
Betterment’s system invests your dollars in a combination of ETFs. For stocks, Betterment exclusively uses Vanguard ETFs. For Bonds, Betterment uses a selection of Vanguard and iShares ETFs.
If this sounds like a great fit for your investment needs, sign up for Betterment today.
What is Vanguard Personal Advisor Services?
If having a robot choose your investments is a little scary for you, don’t fret. There are other options out there, like Vanguard Personal Advisor Services. Vanguard Personal Advisor Services gives you a personal financial advisor to work with to purchase Vanguard funds.
Unlike Betterment, there is no robo advisor component to this service. Every new client meets with a Vanguard advisor to discuss investment goals and an overall strategy. Then the advisor purchases Vanguard funds on your behalf to follow that strategy. One major benefit of this service over buying your own Vanguard funds is the ability to buy Admiral class shares, Vanguard’s lower cost funds typically reserved for those with a $10,000 minimum investment, without any minimum.
This service charges 0.30% of assets annually, slightly more than Betterment’s lowest price. However, because it is managed by a human advisor, you don’t get the tax loss harvesting benefits from Betterment’s automated robo advisor. But getting started with Vanguard Personal Advisor Services requires a $50,000 minimum balance, so the service is not available for everyone.
Where Betterment is Best
In the Betterment vs Vanguard competition, Betterment stands out as the better option for a select group of investors. If this sounds like you, Betterment is the best choice:
- You have less than $50,000 of investments to start.
- You are happy answering questions and trust a computer to handle your investments.
- You want to take advantage of tax loss harvesting to lower your tax liability.
- You prefer a managing your own investments without dealing with someone else.
Betterment certainly makes it easy. Just signup, answer a few questions, fund your account, and you are off and running with little to think or worry about in the future. Betterment takes care of the rest so you don’t have to.Sign up for Betterment today!
Where Vanguard is Best
If you want a little more help and a human set of eyes on your investments, Vanguard is the best option in many cases. Because Betterment uses Vanguard funds for all of its stock investments and many of its bond investments, you might end up with a similar portfolio either way. Here are the situations where Vanguard wins in the Vanguard vs Betterment competition.
- You want to access a human advisor by phone.
- You prefer an investment professional to review your account periodically.
- You have at least $50,000 to invest.
- You want access to lower cost Admiral shares in Vanguard funds.
Does that sound like something you could get on board with? Get started today!
Vanguard vs Betterment: Which is Superior?
Both Betterment and Vanguard are trusted names in personal investing. Both can handle your IRA, Roth IRA, and regular investment accounts. What sets them apart is access to a person, fees (though not by much), how your investments are managed, and the ability to optimize for taxes. Either is a great option for most investors.
The best option depends on your starting investment amount and your personal preference in how your investments are managed. Whichever you choose, you can’t go wrong.