BETTERMENT REVIEW 2022 Best Robo-Advisor Tool

so in this video today we’re going to be

doing a review of the robo advisor

known as betterment which is essentially

an

automated solution for passively

investing your money

into the market so we’re going to cover

basically what betterment is

what they’re offering what they charge

in fees

and then what may make them unique when

it comes to investing through a robo

advisor

versus just going out there and picking

stocks and bonds

or different funds to invest in yourself

now before we get into that i just want

to mention

two things here number one if you do

decide at the end of the video that you

want to sign up for betterment

i do have an affiliate link down below

if you would like to support the channel

and second of all i’ve actually put

together a completely free

robo advisor comparison table that

essentially takes the top five robo

advisors

out there and makes it very easy to

compare the different features

fees minimums and things like that all

in one place

so if you want that guide completely

free that’s also going to be down

in the description below for your

convenience at the end of this video

so in a nutshell betterment is a robo

advisor which essentially means

rather than having a financial advisor

managing your money and determining what

we call your asset allocation

this is instead handled by a robot or an

algorithm and so essentially in the past

if you were looking to invest

money with a financial advisor you would

have a meeting with them

you would go over you know what are your

goals what is your income and basically

what your whole financial situation is

and then that financial advisor would

figure out this asset mix for you

based on the information provided well

there’s two main problems with that

number one in order to work with a

financial advisor

you would generally need to have

thousands if not tens of thousands of

dollars

to make it worth their while and second

of all when you have this level of human

involvement

in the process it leads to higher fees

paid

to again make it worth their while so

what these

robo advisors did instead is figure out

how to do this with an algorithm

where you basically sign up and fill out

a questionnaire

and they will create the portfolio based

on the answers that you provide

and by doing this they pretty much solve

the two biggest problems

number one they can work with much

smaller accounts because

basically all human involvement has been

taken out of the equation

and number two they were able to

drastically lower the fees

compared to what you might pay to a

traditional financial advisor

again because there is no real human

involvement

now when you invest with betterment your

money is going to be invested in

index funds or exchange traded funds

so essentially they’re going to be

buying funds of

u.s companies as well as international

companies

and mixtures of different bond funds as

well

and based on your goals and risk

tolerance

they’re going to determine what

percentage of your money

is going to go into each fund so for

example a young person

just getting started has more risk

tolerance and so

more of their money would be in stocks

and less would be in bonds

on the other hand if you’re nearing

retirement you’re going to want to have

more of your money in bonds

and less of your money in stocks so when

you start out with betterment

they figure out your target allocations

and they get you set up

however then as you get older and closer

to your goal

they’re going to rebalance this

portfolio automatically

and change your target allocations to

make sure that you stay

on track so now let’s go ahead and talk

about the pricing because there’s

actually two different plans offered by

betterment

first of all you have betterment digital

which is the basic plan

where there is no human involvement and

it’s all handled by the algorithm

and because of that the minimum amount

to get started is

literally zero dollars you can open up

an account with them

with any amount of money that you have

and their annual asset management fee

is 0.25 percent so to put that into

perspective guys

that is two dollars and fifty cents per

every one thousand dollars that they

manage for you

so we’re really not talking about a heck

of a lot of money here

and in exchange for paying that fee

they’re going to basically

manage your portfolio for you rebalance

it as those

numbers change and then as you get

closer to your goals

they’re going to change your target

allocations and there’s also a number of

different features

offered as well one of which is tax loss

harvesting

which we will talk about in a second now

recently betterment rolled out another

plan

which is called betterment premium which

solves the problem

of not having access to a financial

advisor

essentially with betterment premium you

have unlimited access to a team of cfp

professionals

which can give you advice about

investments within your betterment

account

as well as investments outside of

betterment so for those who are looking

to

still reduce what they are paying in

fees but they

also want to be able to call someone up

on the phone to ask questions

that is what betterment premium is

designed to do

now for that reason because of that

human involvement the minimum investment

is one hundred thousand dollars and the

annual asset management fee

is slightly higher at zero point four

percent

so just for example sake here if you had

a hundred thousand dollars invested

with the betterment premium account

you’re paying about four hundred dollars

per year

in asset management fees now the good

news is even if you don’t have a hundred

thousand dollars to

invest and you’re in the digital plan

and you still want to talk to

a financial planner or financial advisor

they offer one-time advice packages that

you can purchase

which will allow you to call somebody up

on the phone and have a discussion about

your finances

you do have to pay for those advice

packages but it is a one-time

payment but if you’re just looking to

call someone up and ask a couple of

questions

that is a service that they provide as

well now another thing you should know

about betterment is that they offer a

wide variety of different account

types which serve a number of different

needs so first of all we have the basic

taxable account which is the one that

most of us are familiar with and then

they have a number of different

retirement accounts

so with betterment they have both the

roth ira

as well as the traditional ira and the

sep ira

for those who are self-employed they

also offer

joint accounts as well as trust accounts

that being said they do not offer the

529s and they do not offer custodial

accounts

either and one other feature i want to

talk about here quick with betterment

is something called tax loss harvesting

and this is one of those things that

makes robo advisors unique

and this is an added value that you

won’t get on your own if you just go out

there and purchase

individual stocks and funds unless you

are consciously doing this on your own

so tax loss harvesting is essentially

where a robo advisor is going to

sell a given asset for a loss

and buy a near identical investment

in order to recognize a loss for tax

purposes

now i know that might be a bit confusing

so i drew a quick diagram here

let’s say both of these right here are

index funds that track the s

p 500 offered by different fund

companies

maybe one is from vanguard and one is

from blackrock or ishares

well earlier this year the s p 500

tanked

during the global pandemic and what tax

loss harvesting allows betterment to do

is they could sell one of these funds

for a loss

and buy back the near identical fund or

completely identical fund

being offered by a different company and

this allows them to capture

what’s kind of an artificial loss and

basically

offset your capital gains or even have a

capital loss

to lower your taxes now the exciting

part about this is that

over the long run betterment from the

research they have done

has found that with this tax loss

harvesting it has boosted returns

in taxable accounts by point seven seven

percent

annually so if you’re investing with

betterment through a taxable account

you’re actually pretty much paying for

that fee

when you account for the added benefit

of tax loss

harvesting now beyond the investment

side of the business

betterment also offers an online savings

account

and an online checking account

essentially they’re looking to become

a well-rounded financial service company

offering

all kinds of different tools for you to

utilize

and manage your money as far as that

betterment checking account goes

they offer full reimbursement of all atm

fees and foreign transaction fees

and in the future they’re also going to

be rolling out joint

checking accounts for those who want to

save together the online savings account

is called betterment

cash reserve the apy of that account

changes quite a bit based on the federal

funds rate

so i’d recommend using the link below to

check the apy

but it is six times higher than the

national average apy

as far as what is paid with an online

savings account

another thing you should be aware of is

that there are unlimited

transfers in and out of that online

savings account whereas many of their

competitors have a limit

on how many transfers you can have per

month so anyways guys

that is the gist of betterment in a

nutshell on the investment side

it is 100 passive long-term investing

for those who want a set it and forget

it type approach

to investing in the stock market and the

bond market

you’re not going to find individual

stocks you’re not going to find real

estate or reits

within betterment they just stick to the

stocks and bonds

and they pretty much do it all for you

if you want to have somebody where you

can

call them up on the phone if you have

the assets available you could

opt in to betterment premium or simply

pay for the one-time advice packages

and if you want to take advantage of the

checking and savings accounts

that’s an option as well and you also

don’t have to use all these things

together

you can pick and choose what components

you want to use

so if you just wanted to have a savings

account through cash reserve

you can do that without having to do the

investing either

so there you have it guys like i said if

you want to check out that free robo

advisor comparison chart

that’s going to be down below as well as

a link to sign up for betterment if you

want to support the channel but thanks

so much for watching this video guys i

hope you enjoyed it

and if you have any questions drop them

down in the comment section below

and i hope to see you in the next video