Everyone’s condition comes with different costs. To give a clearer picture, let’s break down the costs of a $200,000 portfolio, for example:
With Betterment Digital, you’ll pay a 0.25% management fee, which translates to $500 per year, plus about $100 in ETF fees. If you choose Betterment Premium, which provides access to certified financial planners, the annual management fee drops to 0.65%. This will be expensive $1,300 per year for a $200,000 portfolioover the same $100 in ETF fees. In contrast, Wealthfront charges a low administration fee of 0.25% on all accounts, resulting in $500 per year for the same portfolioand ~$100 in ETF fees.
The cost difference between Betterment Premium and other options is huge. For a $200,000 portfolio, you can pay an additional $800 per year for Premium. These additional costs can be forgiven if you take full advantage of the CFP® access provided by the Premium plan. For example, personal financial guidance for major decisions such as retirement planning, tax planning, or inheritance can save you thousands over the long term. However, if you cannot use these services, the additional cost may not be worth it.
High earners, especially those who live in states with high tax rates like California or New York, may find that Wealthfront’s tax loss harvesting makes up for any financial differences. Its direct targeting feature, available for accounts with $100,000 or more, offers a level of tax optimization that can lead to significant savings for those in the highest tax brackets.
On the other hand, improved tax features may not bring the same benefits to investors in lower tax brackets. In such cases, Betterment Digital’s robust educational resources and easy-to-use tools may be of more value, especially for those who are new to investing or want to better understand the financial decisions they are making.