Betterment vs Ellevest
The robo-advisor market has exploded over the past few years. From gimmick to a legitimate investment vehicle, there are more than 100 robo-advisors in 15 countries, according to Deloitte.
Betterment is one of the original robo-advisors, but more niche robo-advisors have entered the market over the years. Ellevest is a robo-advisor aimed at reducing the gender gap in the world of investing.
As commendable as Ellevest’s goal is, does it have the features necessary to compete with the likes of Betterment?
Known as the original robo-advisor, Betterment has provided a means for ordinary Americans to invest in the markets since 2008. Boasting more than half a million user accounts, this platform has demonstrated consistent growth over the years.
In our Betterment review, we said we believe that this is one of the best options available to investors who are new to the markets. The simplicity of the platform is what makes it stand out. Create your account, fill in a questionnaire, and Betterment will make suggestions based on your answers.
Based on your goals, income, and personal risk tolerance, Betterment recommends a wide range of portfolios to help you achieve your aims.
Of course, you still have total control over your portfolio. If you want to build your own portfolio from scratch, you are free to make changes. For complete novices and more confident investors, Betterment presents a great product.
|Account Types||Brokerage, Saving, Checking, Trust, Roth IRA, Traditional IRA, and SEP IRA|
|Investment Type||Exchange-Traded Funds (ETFs)|
There’s no minimum amount you need to invest to get started. You’re also under no obligation to maintain a minimum amount after opening your account. Invest whatever you can spare and set your desired portfolio allocations. The automatic rebalancing feature will keep your allocations, so you’re free to put your portfolio on autopilot.
The sheer number of account types, including multiple IRA types, allows it to stand out from more simplistic robo-advisors.
If you’re concerned about what you’re investing in, Betterment has a selection of portfolios that focus on socially responsible investments.
Overall, Betterment is the ideal introduction to the markets. If you want a no-nonsense platform with all the confusing aspects removed, invest your money with Betterment.
Betterment markets itself as one of the few low-cost investment platforms. With no account minimums required, you can get started with as little as $5.
The only fee you will pay as a Betterment Digital user is a 0.25% annual management fee. Betterment Premium members with more than $100,000 invested on the platform will need to pay a 0.40% annual management fee. These fees are still much lower than those levied by traditional brokerages.
Do note that certain ETFs come with expense ratios. Betterment does not levy these but the ETF creators themselves. When purchasing these ETFs, you’ll pay anywhere from 0.07% to 0.15%, which is below the industry average.
Another feature you may decide to pay for is a call with a CFP professional to help you plan out your finances. Betterment charges a $199 fee for each 45-minute call. Betterment Premium members gain access to this service for free.
- Minimal fees
- Portfolio rebalancing
- Tax-loss harvesting
- Limited asset types to invest in
- Lack of customization
- Barebones investment platform
You won’t find lots of advanced features when you invest with Betterment, but for beginners, this is for the best. Learn more from our in-depth review on Betterment to decide if this is the platform for you.
Ellevest offers one of the most unique propositions in the business. Launched by Sallie Krawcheck in 2015, this investing platform targets women. Its gender-specific algorithms seek to help narrow the gender gap within the investing landscape.
With multiple subscription levels tailored to your goals, Ellevest revolves heavily around intelligent goal-setting features.
Like Betterment, you’ll be asked several questions about yourself, such as your income, age, and goals. Based on your answers, you will receive several recommendations to help you manage your money in the best possible way.
Ellevest provides socially responsible investing options. While sustainability and diversity are essential factors in the companies featured within their impact portfolio, they are the only robo-advisor that weights its algorithm toward companies with inspiring women leaders.
This is the robo-advisor designed by women for women, so let’s get into more details about what the platform provides.
|Management Fees||$1, $5, $9 per month|
|Account Types||Individual taxable accounts, Roth IRA, Traditional IRA, and SEP IRA|
|Investment Type||Stocks, bonds, ETFs, and mutual funds|
When comparing Betterment vs Ellevest, one of the glaring issues with the latter is the lack of supported account types. In particular, the fact they don’t offer joint taxable accounts is a fundamental flaw in their business model.
However, users will notice that Ellevest shares many similarities with Betterment. Its approach to automatic portfolio rebalancing is a big plus, and the emphasis is on providing an innovative mobile app to simplify investing.
Take note that its goal-setting procedures tend to be overly aggressive, which often goes against Modern Portfolio Theory (MPT). Ironically, many of their recommendations are based on generalizations and gender stereotypes, which leads to older women being recommended incredibly aggressive investing strategies.
The inconsistency of Ellevest’s recommendations presents a severe problem that could lead to some beginners losing out in the long term.
One of the benefits of using Ellevest is its approach to gender-specific financial advice. With Ellevest Premium, you gain access to one-on-one coaching that goes beyond simple investing advice. These coaches teach their clients how to maximize their income in the real world, such as by educating them on negotiating for a raise at work.
Its socially responsible portfolio will be of particular interest to these types of investors. Focusing on women-led companies, racial justice, and community development, their impact portfolio is not just about ticking boxes.
Ellevest offers a potentially worthwhile proposition for investors who are more conscious about social issues.
Like Betterment, Ellevest charges no account minimums. When it comes to management fees, Ellevest largely mirrors Betterment.
Expect to pay a 0.25% annual management fee per year. If you happen to hold a private wealth plan with the company, fees move to 0.50% per year. However, only clients with more than $1,000,000 invested qualify for the private wealth plan.
Regarding expense ratios, core portfolio ETFs attract a charge of 0.05% to 0.10%, which is slightly lower than what Betterment charges. On the other hand, if you want to add socially responsible ETFs to your portfolio, expense ratios increase to 0.13% – 0.19%.
The added cost of being a socially responsible investor may leave a bad taste in some people’s mouths.
Overall, Ellevest more than matches up with its competitors when it comes to ongoing fees for investors.
- Gender-specific investing algorithm
- No account minimum
- Access to in-depth impact portfolios
- Flawed goal setting
- No tax-loss harvesting
- Higher expense ratios on impact investments
|Min. Investment||0.25% (Digital); 0.40% (Premium)||$1, $5, $9 per month|
|Avg. ETF Expense Ratio||0.07%-0.15%||0.05%-0.10% (core), 0.13%-0.19% (impact)|
|Account Types||Brokerage, Saving, Checking, Trust, Roth IRA, Traditional IRA, and SEP IRA||Individual taxable accounts, Roth IRA, Traditional IRA, and SEP IRA|
|Financial Advisor Fee||$199 (Free with Premium)||Free for private wealth plan members|
|Best For||Specialized Portfolios||Women and Younger Investors|
Betterment vs. Ellevest: Which One is Right for You?
Both Betterment and Ellevest have comparable features in several key areas. The main difference between the two is gender-specific features, such as in the goal-setting and recommended investments areas.
To put it simply, we would always recommend Betterment over Ellevest simply due to the latter’s flawed goal-setting system. Ellevest could cost less knowledgeable investors dearly with its emphasis on aggressive investing.
It’s difficult to see how Ellevest would allow women to perform better in the markets than a platform like Betterment. Sadly, it’s tough to see how its algorithm is no more than a marketing gimmick rather than a genuine intention to close the investing gap between men and women.
Another problem is that being a socially responsible investor with Ellevest will cost you more in expense ratios. There are better propositions for younger and female investors, including Betterment.
That’s not to say that Ellevest doesn’t get the job done. It remains a solid investing platform, but its competitors either match or surpass it in every area. A final red flag should be that while Betterment offers two-factor authentication, the feature isn’t available with Ellevest.
When comparing Betterment vs. Ellevest, Modest Money can only recommend Betterment as the clear winner.
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