Not all situations come with the same costs. Let’s break down the costs for a $200,000 portfolio:
With Betterment Digital, you’ll pay a 0.25% management fee, equivalent to $500 per year, along with around $100 in ETF fees. Opting for Betterment Premium, which includes access to certified financial planners, increases the annual management fee to 0.65%. This would amount to $1,300 per year for a $200,000 portfolio, in addition to the same $100 in ETF fees. In contrast, Wealthfront has a flat 0.25% management fee for all accounts, resulting in $500 per year for the same portfolio, plus ~$100 in ETF fees.
The fee difference between Betterment Premium and the other options is significant. For a $200,000 portfolio, you’d pay $800 more annually for Premium. This additional cost could be justified if you take full advantage of the CFP® access provided by the Premium plan. For example, personalized financial guidance for major decisions like retirement planning, tax optimization, or inheritance could save you thousands in the long term. However, if you’re unlikely to use these services, the extra expense might not be worth it.
High-income earners, especially those in states with high tax rates like California or New York, may find that Wealthfront’s tax-loss harvesting offsets any fee differences. Its direct indexing feature, available for accounts with $100,000 or more, offers a level of tax optimization that could result in significant savings for those in higher tax brackets.
On the other hand, advanced tax features may not provide the same benefits for investors in lower tax brackets. In such cases, Betterment Digital’s educational resources and user-friendly tools might be more valuable, especially for those who are new to investing or seeking to better understand the financial decisions they’re making.
