Everyone’s financial situation involves unique costs, so let’s illustrate this with a $200,000 investment portfolio. For starters, if you’re using Betterment Digital, you’re looking at a management fee of 0.25%, which boils down to $500 a year, plus about $100 for ETF fees. Now, if you decide to upgrade to Betterment Premium, where you gain access to certified financial planners, the management fee spikes to 0.65%. This means you’re spending $1,300 annually on management for that same $200,000 portfolio, with the ETF fees remaining at $100. In contrast, Wealthfront applies a straightforward 0.25% management fee across every account, which costs $500 a year, along with those same approximate $100 in ETF fees.
The price variation between Betterment Premium and the other plans is noticeable, especially for a $200,000 portfolio. You’re looking at an extra $800 each year if you go with Premium. This might be worthwhile if you’re planning to fully engage with the CFP® services provided, such as getting tailored advice on big life decisions like retirement, optimizing your taxes, or managing an inheritance, which could potentially save you thousands over time. That said, if you’re not utilizing these services, that extra cost might not make sense.
For those with higher incomes, particularly if you’re living in high-tax states such as California or New York, Wealthfront’s tax-loss harvesting might make up for any fee disparities. Their direct indexing option, available for accounts with $100,000 or more, can significantly enhance tax savings for investors in higher tax brackets.
Conversely, if you fall into a lower tax bracket, these advanced tax features might not offer the same advantage. In this situation, Betterment Digital’s comprehensive educational content and intuitive tools could be more beneficial, especially if you’re new to investing and keen to deepen your understanding of your financial choices.
