Posted by Betterment vs Vanguard: two of the the best investment management services in 2022 go head-to-head, choose the best for yourself.
Before now, people employed traditional investment management services to help them manage their portfolios and earn more from their investments. But today, these services are being challenged by technologically driven competent advisors. This has seen a sharp increase in intelligent, automated portfolio solutions.
One of such tech smart-advisors is the Betterment platform. Launched in 2010, the platform began with portfolio automation and has grown to diversify its services. Today, it has become one of the most effective investment management services and has included cryptocurrency in its portfolio.
Another primary service like Betterment is Vanguard. While this platform has origins as far back as 1975, it has upgraded its portfolio to meet current-day investment management services. Like its counterpart, Vanguard’s Personal Advisor Services provides an automated solution platform for investors to grow returns.
To make it easy for you to decide, I’ve created the ultimate Betterment vs. Vanguard review. I’ll explore both smart advisors, their strengths and weakness, and let you decide which is best for you.
Betterment Vs Vanguard: 10 factors to choose the best
No doubt, both investment platforms are excellent and exceptional, but what differentiates them from one another. Using ten key metrics, we take a comprehensive look at Betterment vs. Vanguard:
1. Account Setup
Using both platforms requires you to open an account, and this process is quite different for each. Let’s consider the registration process of both platforms:
| Betterment | Vanguard |
| Opening an account on the Betterment platform is a straightforward task. The platform guides you through the process with prompts where necessary. You have to supply regular information about your background, investment knowledge, and personal financial situation. | Like Betterment, getting started with Vanguard follows the same effortless creation style. The primary difference here, however, is that setting up a Vanguard account takes a while. This is because Vanguard PAS favors a much more human financial advice involvement over a purely digital approach. |
| This information is then used to generate a portfolio tailored to your needs. Betterment uses modern portfolio theory (MPT) and passive investing principles to help you create the perfect portfolio. If you are opening multiple accounts, each one can have a different goal and portfolio assignment. This ensures that your allocation is in line with your timeline and risk preferences. | With this approach, you must prepare to answer questions geared towards assessing your readiness for the platform. Questions range from your initial investment amount, the type of financial guidance you’re seeking, and your target and timeline. After this, you’ll be connected to a financial advisor to help further tailor your portfolio’s creation to meet your requirement. |
| After the creation process, you will also be able to verify every piece of information and make changes where necessary. All in all, the entire process takes around a few weeks to complete. The upside, however, is that it follows the platform’s idea of creating a rich blend of digital smart-advisor solutions with human and financial advisor expertise.
However, to use Vanguard PAS, there is a minimum requirement of $50,000. |
Verdict
Without a doubt, Betterment takes advantage of setting up an account. It has a much simpler and faster setup timeline with no minimum charge.
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2. Available Account Types
Both platforms support a wide range of popular account types spread over a wide range of financial goals. That said, you are most likely to find an account type that meets your investment goals on both platforms.
Betterment
On the betterment platform, you have access to several account types. Each account is different from the other, so you must conduct extensive research before making your choice. Betterment account types include:
- Individual taxable
- Joint taxable
- Traditional personal retirement account (IRA)
- Roth IRA
- A simplified employee pension (SEP) IRA
- Rollover IRA
- Trust
- High-interest savings
Vanguard
Vanguard Personal Advisor Services also provides identical account types to Betterment with few exceptions. Here are the accounts available on Vanguard:
- Individual taxable
- Joint taxable
- Traditional IRA
- Roth IRA
- SEP IRA
- Rollover IRA
- SIMPLE IRA
- Trust
Verdict
On this metric, both platforms did enough to be at par. It comes down to what your financial goals and investment plans look like.
3. Account Services
With investment management services, there is more than just choosing your account type. The services attached to each account type are also essential; you should consider this significantly. Here is how both platforms stand:
Betterment
On the Betterment platform, you enjoy easy access to move money into and out of the platform. It allows you to link your bank account directly to the site to begin deposits and withdrawals. Similarly, you can rely on investment account transfers from other institutions without worrying about associated fees.
Also, you have access to using cash management and crypto investing features. This gives you a comprehensive financial service with all your finances having a single location. If you wish to utilize the human, financial advisors service, you have to get your investment up to $100,000 or access it by paying an additional fee.
Vanguard
On Vanguard, you are treated to a smooth experience focusing on managing your investment process and monetary planning abilities. While this might be enviable, it has also resulted in the absence of bank services, margin accounts, and individual stock exchanges.
Connecting your bank for deposits and withdrawals is straightforward. Also, moving external investment accounts over without any expenses is a plus in considering the platform. It goes a step further by providing financial guidance no matter the sum of your investment since all investors have counselor access with a $50,000 deposit.
This is additionally upgraded by a committed planner that is assigned to you once you invest the sum of $500,000. Once you reach the milestone of $5 million investments, a complete wealth management team is given to you.
4. Portfolio Management
Since smart-advisors run on technology, they exhibit one prime advantage over traditional investment platforms with their automatic rebalancing feature. This system assists keep your portfolio on target by not letting you deviate away from your underlying investment distribution as the market moves.
The downside of manual rebalancing is that it can be tedious, expensive, and ineffectual, especially when consistency is lacking. This deficit means the automation method can indeed smooth out your speculation interaction. Both Betterment and Vanguard PAS offer rebalancing abilities; however, they have various methodologies.
Betterment |
Vanguard |
| Betterment automatically rebalances your allocation once your portfolio floats over 3% from the underlying weighting. If you link other investment accounts, you’ll get direction given your complete monetary standing. However, these investments will not be auto-rebalanced for you. | On Vanguard, the platform assesses your portfolio for rebalancing avenues on a quarterly premise. If your target allocation has floated over 5% from the underlying investment, it pushes forward for a rebalancing effect. A similarity with the Betterment platform is that external investment accounts connected to Vanguard PAS will not be auto-rebalanced for you. |
5. Tax-Advantaged Investing
One more basic component worthy of comparison between both platforms is their respective tax optimization features.
Betterment
Consequently, Betterment uses a tax-loss harvesting technique for all taxable account types and investments. This system assists you with balancing gains with losses to lessen potential tax impacts.
Vanguard
On the other hand, Vanguard PAS uses a different strategy instead of a tax-loss harvesting method. What it does is that it channels its effort towards creating a tax-efficient fund within your investment with an objective to limit tax impacts.
6. Fees
One practical aspect of technologically driven competent advisors which has led to their popularity is their ability to keep costs low. Both Betterment and Vanguard PAS display this as they both try to get you to increase your portfolio and investment on each platform.
Betterment
On Betterment, you get to experience different fee structures. Its Digital Investing plan covers digital advice, tax-loss harvesting, and automatic rebalancing. It also provides you with a full suite of accounts and portfolios for a 0.25% annual fee.
Alternatively, you can rely on the Premium Investing plan, which is priced at 0.40% annually, to get you started. It includes the Digital Investing plan features with additional unlimited communication with a Certified Financial Planner.
Vanguard
Many users have likened Vanguard PAS to be more of a hybrid combination of digital investment management and a financial planner. However, the platform provides a low fee charge when compared to other portfolio management solutions at 0.30% of your portfolio balance per year.
Additionally, you get to enjoy tiered management fee discounts as soon as your holdings pass significant thresholds. Basically, there is a drop to 0.20% on investments above $5 million, 0.10% over $10 million, and 0.05% above $25 million.
7. Security
Betterment and Vanguard PAS take the security of their platforms with utmost importance. Both have implemented the industry standard Securities Investor Protection Corporation (SIPC), which provides coverage in case any firms fail. This protection covers up to $500K or $250K of cash in your account.
However, in addition to this, Vanguard provides additional coverage well over the SIPC limits through another insurer. On both platforms, data and account access enjoy protection in various ways. Some of these protection methods include encryption, security questions, fraud detection, and two-factor authentication.
8. User Experience: Desktop
An essential feature of smart advisors is their ease of use. This creates the incredible experience that users feel whenever they are on the platform.
Betterment
Betterment provides a user-friendly experience with its vast array of simple features. With the platform, you can access financial tools, reporting features, calculators, and money movement, all working seamlessly. Additionally, its dashboard functionality, performance, and account details make for a valuable and impactful process. You can also decide to link other financial accounts to monitor all your financial investments with ease.
Vanguard
In terms of user experience, the Vanguard PAS desktop provides adequate intuitiveness. Its dashboard features account balances, reporting options, goal statuses, and a search tab for ease location of other features.
It also has an account syncing feature that provides a detailed and practical overview of your accounts. This gives you a great idea of where you stand financially with your various investments. What’s more, you can count on its suggestion features which prompt you to check in with an advisor if your overall account health has any issues.
9. User experience: Mobile App
Betterment
Regarding user experience on its mobile app, Betterment has an impressive standing with users. The app is richly packed with features available on the desktop version, so there is no need for shuffling between both. This makes the entire process easy, fast, and reliable for anyone that prefers a mobile platform.
These combine to create a versatile experience for iOS and Android users.
Vanguard
With the Vanguard PAS mobile app, you can access an enormous navigational menu. However, the app lacks some functionality that is only available on the site’s desktop version. This means the mobile experience doesn’t exactly give all the users the work area experience.
You will want to explore and find most features that you might need. In general, Vanguard’s mobile application is generally helpful for tracking your goals and reviewing important account information.
10. Customer Service
If you are looking for customer service functionality over the weekend, both platforms fail. However, both platforms provide a broad scope of FAQs that answer virtual inquiries. This can be exceptionally useful if you need fast answers without waiting for customer service agents.
In comparison, Vanguard PAS pushes for a more human encounter by allowing you to connect with guides or advisors via a video chat session. Albeit the two platforms stress strict investment direction, Vanguard PAS tends to take an additional move towards guaranteeing you a seamless and realistic investment portfolio.
Betterment vs Vanguard: Which is best for you?
If you are new to financial investment or are interested in a minimal expense investment platform, Betterment will be the best choice for you. Furthermore, if you need human counsel support, you can either pay for a one-time consultation or get limitless access to expert financial organizers with their premium account.
In any case, where Vanguard Personal Advisor would be best if you are considering having a substantial investment portfolio. So, if your portfolio is in an abundance of $10 million or $25 million, you should consider Vanguard Personal Advisor because of the shallow yearly advisory charges.
Conclusion
Briefly summarize, Betterment claims to create an enabling investment portfolio to help you make healthy profits. It relies on technological innovations to lower your taxes and fees and diversify your portfolio for more efficient and better investor behavior.
Similarly, Vanguard has a rich history of lowering investment fees. According to the platform, the average expense ratio for Vanguard mutual funds and ETFs is 83% less than the industry average. This translates to you holding on to more of your profits.
In the end, Betterment Vs Vanguard comes down to what you need and the strategy that best suits such needs to actualize your financial goals.
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