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SmartAsset: Betterment vs. Schwab

Betterment and Charles Schwab are two of investing’s best-known names and their robo-advisor offerings closely resemble each other. Betterment pioneered automated investing technology when it began in 2008 and the company remains tightly focused on robo-advising as the core of its services. Schwab started life as a traditional brokerage in 1971 and today automated investing advice is just a part of its offerings, which include brokerage services, operating as a bank and offering its own exchange-traded funds. As an alternative to a robo-advisor, consider working with a financial advisor.

Betterment vs. Schwab: Overview

As the robo-advisor pioneer, Betterment remains centered on automated investing technology as its core offering. In fact, robo-advising is all it does. Clients supply information about their risk tolerance and investing goals, which the platform uses to automatically construct portfolios made up of low-cost exchange-traded funds (ETFs).

Although it got a late start in robo-advising when compared with Betterment (introducing its robo-advisor in 2014) Schwab actually has a much larger amount of assets under management in its Intelligent Portfolios accounts than Betterment. Unlike Betterment, which is robo-advisor all the time, Schwab has a broad array of other financial services from banking to fund management.

Betterment v. Schwab: Fees

Betterment has two main account options, Betterment Digital and Betterment Premium. For Betterment Digital, its entry-level choice, management fees are 0.25% of assets under management.  Betterment Premium, which comes with additional services, charges 0.4%.

In addition, both types of accounts pay expense ratios to the managers of the ETFs included in its portfolios. For the ETFs Betterment uses, expense ratios range from 0.07% to 0.15%.

With regard to account minimums, there is no minimum to open a Betterment Digital account. Betterment Premium, however, requires a $100,000 minimum balance.

Schwab does not charge any fee for advisory services to clients of its entry-level Intelligent Portfolios robo-advisor. For Intelligent Portfolios Premium, Schwab clients pay flat fees of $300 to enroll and $30 per month, regardless of assets under management.

Clients of both Schwab robo-advisor account types have to cover ETF expense ratios. Unlike Betterment, which doesn’t have its own ETFs and so uses ETFs from other investment firms, Schwab robo-advisor clients can only invest in Schwab ETFs. The expense ratio fees for Schwab ETFs used in its robo-advisor portfolios range from 0.06% to 0.20%.

Schwab has a $5,000 account minimum for Intelligent Portfolios customers. For Intelligent Portfolios Premium, the minimum is $25,000.

Betterment v. Schwab: Services and Features

SmartAsset: Betterment vs. Schwab

Automated portfolio management, including tax-loss harvesting, automated rebalancing and access to telephone customer support are included in Betterment Digital. For an additional cost, Betterment Premium clients can call a certified financial planner for advice from a human. A virtual chat assistant for all clients is available 24/7. Betterment’s approach to tailoring investments to individuals uses investment goals as a starting point. From there, it has more than a half-dozen preset ETF portfolios that its clients can employ.

Betterment’s curated portfolios range from its original Core portfolio emphasizing diversity, low cost and long-term performance to more specialized portfolios focused on stocks or bonds as well as thematic investing portfolios following themes of social and climate impact, innovative technology, income and more. Investors can also customize portfolios with individually selected weights in various asset classes.

Betterment has a cash reserve account for the cash portion of a client’s portfolio. Cash reserve charges no fees and pays a variable APY currently at 1.6%. Betterment supports a comprehensive list of account types, including 401(k), IRA, Roth IRA, SEP-IRA, Rollover IRA, trust and personal savings. The company added 529 college savings plans in 2022.

Automated investment advice and automatic rebalancing are available from Schwab for all Intelligent Portfolio robo-advisor clients. However, only accounts with a balance of at least $50,000 can use the tax-loss harvesting service.

Schwab Intelligent Portfolios Premium customers can talk to human certified financial planners for an additional fee. Both levels of account have access to 24/7 telephone and chat support.

Unusual among robo-advisors, Schwab has a large network of physical branches where robo-advisor clients can go for face-to-face service interactions.

Schwab Intelligent Portfolio clients are required to have a portion of their portfolios in cash, while Betterment clients can opt to invest fully in the market. Like the Schwab ETFs, Schwab deposit rates may not always be the best available on the open market from other banks.

Schwab uses six different risk profiles, from conservative to aggressive growth, to direct clients toward appropriate mixes of assets. There are three available investment strategies — global, U.S.-focused and income focus.

Schwab Intelligent Portfolio clients can have a variety of accounts, including traditional IRA, Roth IRA, SEP-IRAs, SIMPLE IRAs, trusts and general brokerage accounts.

Betterment v. Schwab: Mobile and Online Experience

Since robo-advisor clients mostly interact with firms via websites and apps, the online and app experience is important. Betterment’s user interface is uncluttered and easy to use. Despite its emphasis on streamlining, the interface also allows clients to include outside accounts on Betterment so they can get a fuller picture of their financial situation.

Schwab’s interface is not as stripped-down as Betterment, but navigation is still straightforward. Schwab has a large library of investment education articles, including videos, to help answer general investing questions.

Apple/iOS users rate Betterment’s app 4.7 of five stars, while its Android app gets 4.5 out of five stars. The Schwab Mobile app is rated by Apple/iOS users with 4.8 of five stars but its Android app gets only 3.8 of five stars.

Who Should Use Betterment and Schwab

The robo-advisors from Betterment and Schwab are competitive with the industry and also with each other. Investors who have only a small amount to invest but are willing to pay advisory fees may look to Betterment as a preferable choice. Betterment is also a better choice for people who want a completely hands-free approach to investing. Betterment also is a better option for retirement saving. Those with at least $5,000 to invest and a preference for avoiding advisor fees will likely find Schwab a better fit. Betterment’s apps are generally more highly rated, beginners may find Schwab a more comfortable place to invest, thanks to the option for face-to-face interactions at its physical branches.

Bottom Line

SmartAsset: Betterment vs. Schwab

Betterment and Schwab offer similar robo-advisor solutions. The differences between them are modest, with drawbacks of each balanced by approximately equal advantages. Investors who don’t have much money to start with will enjoy Betterment zero account minimum. Schwab appeals primarily to those who want to keep advisory fees to the bare minimum.

Investing Tips for Beginners

  • If you prefer a hands-on investment approach, a financial advisor could help you create a financial plan for you investment needs and goals. SmartAsset’s free tool matches you with financial advisors in your area in five minutes. If you’re ready to be matched with local advisors who will help you achieve your financial goals, get started now.
  • No matter what your time horizon is, it’s important to know how your investments will stand over time. SmartAsset’s free investment calculator can help you get an estimate.

Photo credit: ©iStock.com/Totojang, ©iStock.com/Milan_Jovic, ©iStock.com/Milko

Mark Henricks Mark Henricks has reported on personal finance, investing, retirement, entrepreneurship and other topics for more than 30 years. His freelance byline has appeared on CNBC.com and in The Wall Street Journal, The New York Times, The Washington Post, Kiplinger’s Personal Finance and other leading publications. Mark has written books including, “Not Just A Living: The Complete Guide to Creating a Business That Gives You A Life.” His favorite reporting is the kind that helps ordinary people increase their personal wealth and life satisfaction. A graduate of the University of Texas journalism program, he lives in Austin, Texas. In his spare time he enjoys reading, volunteering, performing in an acoustic music duo, whitewater kayaking, wilderness backpacking and competing in triathlons.
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