Betterment vs Wealthsimple
Robo-advisors are not just a U.S. invention. Several robo-advisors have popped up around the world. Within the U.S., 3.5 million adult investors used robo-advisors to create automated portfolios and manage their money. Figures like this have opened up the market and encouraged more brands to offer robo-advisors.
You have more choice from traditional brokerages to next-generation investment platforms than ever before. Betterment and Wealthsimple are two robo-advisors commonly brought up in conversation.
If we compare Betterment vs. Wealthsimple, which one is best suited to managing your investments?
Firstly, we have Betterment, one of the oldest robo-advisors globally. With more than 600,000 active accounts since 2008, Betterment has offered investors the opportunity to build automated portfolios that fit their financial goals.
In our in-depth Betterment review, we focus on the fact that Betterment offers one of the most advanced goal-setting features in the industry. With five potential aims, such as retirement savings and a safety net, you can craft a portfolio that matches up with your goals.
Beginner investors don’t need to know the markets when they create an account with Betterment. The platform asks you several questions about your goals, income, and risk tolerance to craft the portfolio that gives you the highest chance of generating a profit.
Of course, you’re not required to go with Betterment’s recommendations. You’re free to tweak and change your portfolio accordingly if you’re a more confident investor.
For the starter investor, these premade portfolios offer a solid option for getting into the market for the first time.
|Account Types||Brokerage, Saving, Checking, Trust, Roth IRA, Traditional IRA, and SEP IRA|
|Investment Type||Exchange-traded funds (ETFs)|
Like many robo-advisors, Betterment chiefly uses ETFs to enhance your exposure to different market sectors rather than individual stocks. These ETFs come with some small expense ratios to pay, but unlike traditional brokerages, you won’t be losing a chunk of your portfolio to trading fees and commissions.
All you have to do is select your portfolio makeup and Betterment will take care of everything from there. Using its automated portfolio rebalancing function, your portfolio allocation will stay the same no matter how the market moves.
Another excellent feature Betterment has that many other similar platforms don’t is tax-loss harvesting. You can offset your gains with losses by selling unprofitable portions of your portfolio and limiting how much you pay in capital gains taxes.
Finally, if you’re a socially conscious investor, you can invest in Betterment’s broad impact offering. Your portfolio will consist of companies focused on issues like justice, equality, and sustainability.
If you’re searching for a way to invest without the hassle, Betterment offers one of the best investment packages around.
Betterment operates using a low-fee system for its clients. Firstly, you don’t need to make a minimum deposit to get started. If you have $5, you’re as welcome on the platform as someone with $100,000 to invest.
Most members qualify as Betterment Digital members. Betterment Digital is the basic membership level on the site. Under this membership, you pay 0.25% in management fees annually. Investors with more than $100,000 invested in Betterment qualify under the Betterment Premium program.
Betterment Premium members pay 0.40% in annual management fees. In exchange, they gain free access to CFP professionals whenever they need informed, independent advice.
Betterment Digital members can also utilize this feature, but it cost $199 per 45-minute call.
All members must account for ETF expense ratios. These range from 0.07% to 0.15%, a standard charge for ETFs across the industry.
- No minimum deposit requirement
- Automated portfolio rebalancing
- Save taxes with harvesting
- Limited investment options
- No advanced investing features
- Slender customization
Experienced investors looking for advanced platform features won’t find them with Betterment. Beginners and those who want to leave their portfolios on autopilot will find tremendous value from this platform. Find out more by reading our review on Betterment now.
Wealthsimple is so much more than a simple robo-advisor. Aimed at younger investors, Wealthsimple encourages saving and bundling several financial features together by offering reminders and a savings account.
Betterment and Wealthsimple share many similarities in how they work. In particular, Wealthsimple has largely copied Betterment’s approach to initial goal-setting. Users of Betterment will find Wealthsimple to work in much the same way.
Offering just 10 ETFs, Wealthsimple’s limited number of investment options may pose a problem for all but the most inexperienced investors. Plus, the platform provides a minimal amount of customization. While it claims you can alter your allocations and portfolio makeup, the platform actively pushes back if they think you aren’t doing the right thing.
Before you invest with Wealthsimple, remember that this is a generic platform with little in the way of anything advanced or exciting. In terms of a basic investing tutorial, it excels at what it does, but don’t expect much more than that.
|Account Type||Individual, joint, and trust taxable accounts, traditional IRA, Roth IRA, SEP IRA, 401(k) rollovers, high-interest cash accounts, UTMA accounts, and UGMA accounts|
|Investment Type||Exchange-Traded Funds (ETFs)|
If we discuss Betterment vs. Wealthsimple broadly, Betterment is the clear winner. The lack of investment options and the fact the platform actively pushes back against you when you don’t follow its recommendations is a problem. With the robo-advisor market crossing $1 trillion, you should never accept second best.
However, Wealthsimple does offer some unique features of its own. Wealthsimple Save is its investment cash savings account that allows you to invest in an ETF portfolio on autopilot. Take note, the account also possesses an additional 0.25% management fee.
There’s also the Roundup feature offered by many savings apps, which rounds up your purchases and deposits the difference in your investing account. Also, it reimburses all transfer costs up to $5,000 when you open your account.
While these features are great, they are not aimed at the investor but at someone learning how to manage their money. If you don’t need these features, the investing side of things may feel slightly lackluster.
If you want to learn about the markets, Wealthsimple investing has an educational section about essential money management and market concepts.
Although Wealthsimple has several useful features, its status as a robo-advisor is not particularly impressive.
Wealthsimple charges a flat 0.50% annual management fee on all portfolios held on the platform. That puts Wealthsimple among the most expensive robo-advisors on the market.
If you decide to use Wealthsimple Save, you can expect to pay 0.25% on any funds held within your account.
Truthfully, you’re better off opening a savings account with any bank and paying less in fees. There’s little value inherent in this product.
Like Betterment, there’s no minimum deposit required to start investing.
Finally, ETF expense ratios range from 0.12% for core ETFs to 0.5% for Halal ETFs. Socially Responsible Investing (SRI) portfolios cost between 0.21% to 0.23%. Again, this is high for the industry.
- Excellent savings features
- No transfer fees when opening an account
- Halal investing options
- Industry high fees
- Lack of investment options
- No human financial advisors
Wealthsimple has its advantages and drawbacks, but it’s more designed for those who need help managing money rather than pure investors. Look up some Wealthsimple reviews for more information on how it works.
Betterment vs Wealthsimple Comparison
|Management Fees||0.25% (Digital); 0.40% (Premium)||0.50%|
|Avg. ETF Expense Ratio||0.07%-0.15%||0.12%-0.50%|
|Account Types||Brokerage, Saving, Checking, Trust, Roth IRA, Traditional IRA, and SEP IRA||Individual, joint, and taxable trust accounts, traditional IRA, Roth IRA, SEP IRA, 401(k) rollovers, high-interest cash accounts, UTMA accounts, and UGMA accounts>|
|Tax-Loss Harvesting||Available||Available for Wealthsimple Black Customers|
|Financial Advisor Fee||$199 (Free with Premium)||Unavailable|
|Best For||Specialized Portfolios||Beginners|
Betterment vs. Wealthsimple: Which One is Right for You?
In our comparison between Betterment vs. Wealthsimple, Betterment is the clear winner. They offer lower fees, more investment options, and access to financial advisors. While both offer tax-loss harvesting, Wealthsimple only provides this service to investors with more than $100,000 held on their accounts.
Wealthsimple offers several savings features that can help ordinary Americans to save and invest more of their money, but they don’t account for the drawbacks of the rest of the platform.
Considering that Wealthsimple charges some of the highest fees in the business, they offer little that justifies those high fees. Although a couple of percentage points may not sound like this much, fees can put a dent in your portfolio over the years.
The only area where Wealthsimple wins out is the number of account types offered. Again, this will apply exclusively to a small minority of investors. For the vast majority, this is no real advantage at all.
Overall, Betterment simply offers a superior product that fully embraces investing liberty and the low-cost investment model the general public demands today.