Betterment Bank Review

Betterment, also known as Betterment.com, is an online investment company headquartered in New York City, New York. Unlike traditional investing service organizations, Betterment is an entirely automated goal-based investment solution, better known as a robo-advisor.

Betterment was founded in 2008 by a Columbia Business School MBA graduate and an NYU lawyer. Today, Betterment reports over $16.5 billion in assets and has become an industry pioneer of award-winning financial planning and automated investing tools.

Betterment at a glance

Pros
  • Fully transparent investment portfolios
  • No account minimums to start investing
  • Advanced automation and investing intelligence
Cons
  • Spotty customer service
  • Slow trade execution
  • Limited number of investments

What’s interesting about Betterment

Betterment is an extremely flexible robo-advisor that doesn’t require a minimum deposit for its digital offerings. Betterment provides a fully transparent investment portfolio built on modern philosophies of diversification. Investors can choose the most socially responsible portfolio for their financial situation while using different levels of risk tolerance and goal setting intelligence to make smart investment choices. Betterment automatically rebalances investment portfolios based on specific investment rules set by the client, and the company’s technology is designed to audit these needs regularly.

Things to consider

While the technology used to drive Betterment’s automation is quite impressive, the customer service is known to be a bit spotty. In some cases, clients have reported that almost half of their emails go unanswered, and for those that do get a reply, it took a while to get a response. Another issue has to do with Betterment’s inability to execute trades quickly. Betterment seems to throttle the number of trades they make to keep trading costs low, and this can impact customers’ ability to move rapidly on hot investments and take advantage of market swings.

Checking and savings accounts

Although Betterment is beginning to expand its online banking options, its options outside of investment portfolio management are quite limited. That being said, Betterment has introduced Betterment Everyday, a new cash management solution that adds a checking and savings platform for customers to use alongside their investing accounts. While Betterment Everyday Checking is still in development, Everyday Savings accounts offer no minimum balance, no limits on cash withdrawals and no fees on your balance. Customers can also earn 1.85% APY and are FDIC insured up to $1,000,000.

Betterment breaks down its digital investment options into two separate plans:

Betterment Digital: The plan is a legacy offering of the company and features a variety of benefits, including comprehensive tools and digital investment advice. The annual fee for this option is 0.25%.

Betterment Premium: Betterment’s Premium plan grants clients access to a team of certified financial planners with active account management and monitoring. The service has a 0.40% annual fee, but allows unlimited phone calls and emails to their investment management team.

Money market accounts

While Betterment doesn’t offer any money market accounts, it offers several portfolio options that give its customers options to see better returns on their investments.

  • Core Portfolio: This is made up of globally diversified stock and bond ETFs. Clients are able to customize their own investment goals, and Betterment’s automation will go to work executing these individual investment strategies.
  • Flexible Portfolio: With a Flexible portfolio, clients can modify their own allocations and individual asset class weights. The program will still help to assess risks associated with these preferences and continue to help to diversify your changes.

Tax Coordinated Portfolio: Betterment helps customers put their most heavily taxed assets into specific accounts designed to incorporate tax breaks, similar to IRAs.

CDs

Betterment does not offer any CD products, as it is not a traditional banking institution. That being said, Betterment still offers high-yield savings as part of their Everday offerings rollout. Customers are still able to receive promotional interest rates of 2.39% through the end of 2019. Betterment also has incorporated goal-based savings as part of its automation technology. Each savings goal comes with recommended targets for asset allocation and necessary auto-deposits in order to meet the client’s goals.

Credit cards

Betterment does not offer any credit cards for their investment clients. However, the company has listed a variety of preferred credit cards it recommends for clients looking for unique rewards when making their investments.

  • Citi DoubleCash Card: Citibank helps customers earn cash back rewards on every purchase they make. They offer balance transfers at 0% introductory APR for the first 18 months and a variable APR of 15.49%-25.49% after that. There are not purchase categories to track, and cash back rewards are uncapped.
  • Amazon Prime Rewards Visa: Amazon Prime Rewards is exclusively available to Amazon customers with an eligible Prime Membership. Customers receive a $70 Amazon.com Gift card at sign up and a variety of premium perks. Cardholders will enjoy 5% cash back on Amazon Whole Foods purchases, 2% at restaurants, and 1% back on all other purchases.
  • Chase Sapphire Reserve: Chase offers the Sapphire Reserve card as a premium travel rewards solution. Clients receive 50,000 bonus points when they spend $4,000 on purchases in the first three months. The card has a variable APR of 18.74%-25.74% and a $450 annual fee.
  • Capital One Savor Rewards: Savor Reward from Capital One has unlimited 4% cash back on specific dining and entertainment purchases. Customers can earn a one-time $300 cash bonus within the first three months of using their card when they spend $3,000 or more on purchases. The card has no annual for the first year and is only $95 after that. Savor Reards has a variable APR of 16.24%, 21.74%, or 25.24%, based on credit.

Personal loans

Because Betterment focuses on robo-advising and investing, it doesn’t offer personal loans to its customers. For a personal loan to consolidate debt, fund a wedding, pay medical bills or other needs, try an online lender like Best Egg. Best Egg offers customers fixed-rate loans with as little as 5.99% APR — pretty low for a personal loan. However, depending on your creditworthiness, you could end up with a loan of up to 29.99%. As always, it’s important to shop around with personal loans to ensure you’re getting a good rate and can pay off the loan without too much financial hardship.

Mortgage loans

Just like with personal loans, Betterment also doesn’t offer mortgage loans to customers. However, with Betterment’s investing opportunities, you could easily save for a down payment on a house. If you’re looking for a mortgage right now or in the near future, look into Better.com. Better.com is dedicated to providing competitive mortgage rates and products to customers. Because Better.com has streamlined the mortgage application and origination process, it has been able to offer mortgages with no fees or commissions. It’s able to shave off a few tenths of a percentage point on its rates to offer around 3% on mortgages.

Mortgage refinancing

Betterment doesn’t offer mortgage refinancing products, so if you’re on the market for a home loan refi, try looking into Rocket Mortgage by Quicken Loans. Everything can be done online, and since Quicken Loans is the largest mortgage product provider in the country, it has a ton of different options to choose from.

Home equity loans and HELOCs

Betterment doesn’t offer home equity loans or HELOCs, either. If you want to take advantage of your home’s equity, you can look into any of the bigger banks — almost all of them offer either home equity loans or HELOCs — or look into Axos Bank, which will allow you to do all of the work online. It offers competitive rates and terms, so you won’t have to compromise in return for the ease of process.

Car loans

Additionally, Betterment also does not have any sort of car loan product available. If you don’t have great credit but need a car for work, school or family, try MyAutoLoan. This marketplace matches you with up to four lenders that give you offers on loans within minutes. There’s no obligation to apply or sign up for any of these lenders, and looking for rates includes only a soft credit check.

The final word

Betterment is one of the original pioneers of robo-advisors. Betterment is not a traditional banking institution, but rather a digital-only management solution for a variety of investment portfolios. Betterment is progressive in its desire to blend smart investment decisions with sustainable banking practices and is making strides to incorporate checking savings account solutions for its investment clients. As one of the largest independent robo-advisors available, Betterment is a great option for new and experienced investors looking to gain new assets while building a sustainable investment portfolio. If you’re looking for any loans with Betterment, you’re out of luck, as the investment company hasn’t forayed into that realm of financial services quite yet.