Betterment vs SoFi Invest

Robo-advisors are an excellent innovation for people who want to avoid the hassle and cost of dealing with human financial advisors and money managers.

While initially marketed as a way for beginner investors to start long-term savings and investment accounts, with trillions now under management, robo-advisers have become the preferred mode of investing for even some higher net-worth individuals.

Betterment is Better for:SoFi Invest is Better for:
Passive InvestorsActive Investors
Tax-Loss HarvestingChoosing Your Own Securities
Retirement AccountsFree Human Advice
Custodial AccountsIPOs
Socially Responsible PortfoliosInsurance
Automated InvestingLoans
Investment and Related ServicesComprehensive Financial Products
Low Management FeesNo Management Fees

Why are robo-advisors so popular in today’s investing world? Because they offer services that compete with and sometimes even exceed those of human financial advisors at a fraction of the cost, usually around 0.25% versus 1% or more for a traditional money manager.

Betterment was the first and remains a premier financial advisor. Jon Stein and Eli Broverman founded the first robo advisor in a dorm room in 2008. Betterment has grown to a respected financial company with billions of assets under management (AUM).

SoFi had similar beginnings as a financial company founded by recent Stanford business school graduates in 2011. SoFi started as an affordable student loan company but has since aggressively expanded into a complete financial service company, including robo-advisory investment services.

If you are seeking to invest your money with a robo-advisor, both Betterment and Robinhood are both excellent SoFi and Betterment alternatives.

Ultimately, Modest Money assesses Betterment maintains a slight edge over SoFi for most people though some younger investors might find SoFi more suited to their needs for multiple financial services.

Let’s look at how they are alike and how they are different:

Betterment Sofi
Management Fees (AUM)

0.25% (0.15% for balances > $2 million); 0.40% AUM (0.30% for balances > $2 million) for Premium

SoFi AUM - 0

Security Types

ETFs

Stocks, ETFs, Crypto

Investment Portfolio Style

Betterment Core
Smart Beta
Innovative Technologies
Broad Impact
Climate Impact
Social Impact
Betterment Cash
BlackRock Target Impact
Flexible Portfolio
Crypto Portfolio

Active or robo advisor accounts, heavily invested in SoFi’s proprietary ETFs with low expense ratios

Active or Passive?

Passive with some customizations in asset classes

Active and Passive

Investment Advice from Traditional Advisors?

Yes, with a Premium subscription or by paying $199/$299

Yes, free

Minimum Investments

$0 ($10 for high-yield cash)

$0, $5 to start investing

Automated Tax-Loss Harvesting

Yes

No

Tax Coordination across Accounts?

Yes

No

Supported Accounts

Traditional, Roth, SEP
Inherited IRA
Individual taxable accounts
Joint taxable accounts with rights of survivorship
Trust accounts
Cash reserve
Checking account

Traditional, Roth, SEP
Inherited IRA
Individual taxable accounts
Joint accounts
Community property accounts
Checking account
Savings account
Credit cards
Loans

Earned APY on Cash Accounts

0.10% on cash reserve

Up to 1% APY on checking and savings accounts

Crypto Investing

Yes, expert-managed crypto portfolios

Yes

Best Use

Tax-advantaged accounts

Trading individual securities

Current Promotion

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Modest Money Overall Rating
4.9 rating based on 5 ratings
4.7 rating based on 5 ratings

Betterment vs SoFi: Determining Factors?

The founders of Betterment and SoFi had similar principles in mind—to make financial services accessible and inexpensive to younger and lower net-worth individuals, who are traditionally under-served by investment companies.

Both do a great job of making low-cost, reasonably advanced financial services available to beginner investors. But which is better?

Modest Money assesses that the SoFi and Betterment robo-advisor are both excellent, Betterment is a superior choice for most investors. On the other hand, some investors might want to go with SoFi Invest because of its availability of other services.

Let’s take a closer look at Betterment vs SoFi to see which is optimal for your situation.

Factor 1: Management Fees

Investment fees might affect your choice of platforms.

SoFi Beats Betterment’s Management Fees

  • Betterment charges a 0.25% annual fee for balances less than $2 million
  • SoFi does not charge management fees
  • SoFi Invest fees are free, which beats Betterment’s low fees, but at a potential cost

Betterment Fees

Betterment’s management fees are 0.25% AUM. So, for every $100 you invest with them, you will pay $.25 for the benefit of having them invest your money in a balanced portfolio, rebalancing as needed to maintain your targeted asset allocations.

This is a good deal. With a human financial advisor, you would pay $1 or more per $100 invested for the same services. Well, almost. At Betterment, a computer algorithm will make your investment decisions. At a traditional advisor, a human will make those decisions at four times the cost.

Which is better? Robo-advisors have only been around for about 15 years, so there isn’t much data on their long-term efficacy.

Unlike most other robo-advisors, you can get a discount if you have deep pockets and invest more than $2 million with Betterment, in which case your management fee will fall to 0.15%.

This is a low fee for a managed account but average for robo-advisors. While not as resource intensive as portfolios managed by human advisors, you are still paying them to make decisions for you. Management fees are the primary source of revenue for Betterment.

Betterment’s tax-loss harvesting might offset some or all these management fees plus some capital gains taxes. Optimal tax-loss harvesting strategies are automated and available at no additional charge when investing with Betterment.

To open a Betterment account with a 0.25% management fee, you can click here to receive current promotions.

SoFi Management Fees

Does SoFi charge fees? With SoFi Invest, you can open an automated investment account and pay no management fees at all. As with Betterment, you also do not pay commission fees on your trades.

So how does SoFi Invest make money?

When you open an automated investment account with them, they will invest your money in diversified exchange-traded funds (ETFs) with low expense ratios. SoFi sponsors some of these ETFs itself.

This presents some conflicts of interest, as SoFi discloses on its website. These conflicts of interest have to do with the fact that SoFi is getting you to invest in its own ETFs instead of others, which may be more liquid and have a longer-performing track record.

So, does that mean you should avoid opening an account managed by the SoFi robo advisor?

Not necessarily. ETFs are built to track larger indices and sectors, so their performance should ultimately track these assets. However, since you aren’t day-trading these ETFs, liquidity is probably not much of an issue.

It is something to be aware of and a good reminder that you should always read any investment prospectus and know your allocations.

If management-free investing sounds good to you, you can click here to open a SoFi account and get up to $120 in current promotions.

SoFi’s Management Fees are Cheaper

While both Betterment and SoFi offer commission-free trading, only SoFi offers an automated investment account with no management fees. So while you will be investing in some of their proprietary ETFs, you will probably not face a financial disadvantage from doing so.

Factor 2: Tax-Loss Harvesting

Tax-loss harvesting is a popular feature of many robo-advisors, allowing investors to realize gains from offsetting taxes. Tax-loss harvesting works by selling an ETF at a loss and using that loss to offset taxes from other gains or management fees.

Betterment Tops SoFi in Tax-Loss Harvesting

  • Betterment offers automated tax-loss harvesting
  • SoFi does not offer tax-loss harvesting
  • Modest Money prefers tax-loss harvesting to not having the option

Betterment Tax-Loss Harvesting

Betterment’s stance is that one of the vital advisory benefits gained from automated investing is tax-loss harvesting. Enabled by computer algorithms, tax-loss harvesting can reduce ordinary taxable income by $3,000 per year. By lowering tax exposure, this strategy can help you increase gains.

The cost of Betterment’s advanced tax-loss harvesting strategies is included with your management fees. To better understand how their tax-optimization strategies work, you can click here.

Betterment notes in its disclosures that tax-loss harvesting may not be ideal for everyone in every circumstance. Here are the groups that might not realize gains through tax-loss harvesting:

  • If you are in a lower income bracket but will advance to a higher bracket in the future
  • If you plan to sell a high percentage of taxable assets in the next 12 months
  • If you or your spouse trade the same or equivalent ETFs in accounts not managed by Betterment

This last grouping is because the IRS’s “wash-sale” rule means that you can’t use tax-loss harvesting if you trade substantially similar securities within 30 days after or before the sale.

You will also not benefit from tax-loss harvesting in nontaxable accounts, such as IRAs and other retirement accounts.

If you fall into one of these categories and do not believe you would benefit from tax-loss harvesting, you can disable the feature. To opt-out of tax-loss harvesting with Betterment, go to your “Settings” page and click on “Accounts” to find the option to turn off tax-loss harvesting.

SoFi Tax-Loss Harvesting

In theory, tax-loss harvesting sounds like a grand scheme: use automated investing to help you make additional money through offsetting taxes. But there are some potential downsides, as SoFi notes on its website, such as not anticipating future gains, which could theoretically wipe out tax-loss harvesting’s benefits.

That’s why SoFi Invest doesn’t offer tax-loss harvesting on its accounts.

This is a drawback of SoFi Invest’s automated investment platform. While the jury may still be out on the overall effectiveness of tax-loss harvesting as an investment strategy, investors should be able to research the practice and figure out if it is appropriate for their own circumstances.

Modest Money Prefers Betterment’s Approach to Tax-Loss Harvesting

SoFi doesn’t give you the option to benefit from tax-loss harvesting. Betterment does.

Even if you don’t fall into a category that would benefit from tax-loss harvesting in your taxable accounts, you should prefer an account where you can benefit from the practice if something changes in the future. This is why Modest Money prefers Betterment’s approach to tax-loss harvesting.

Factor 3: Human Advisors

Not having a certified financial investment advisor help you determine financial strategies and answer key investment questions is a crucial drawback to most robo-advisors.

But do Betterment and SoFi buck the industry trends when it comes to enabling access to human advisors for their investors?

SoFi Has Superior Options for Human Financial Advisors

  • Betterment grants to access to investment advisors at a cost
  • SoFi’s access to financial planners is free
  • Modest Money prefers SoFi’s free access to investment planners

Betterment Human Advisors

Betterment offers investors two routes to speaking with human advisors.

The first route is through opening an account. To access this option, you need to have more than $100,000 AUM with Betterment. You’ll also have to pay a higher management fee of 0.40%, which is discounted to 0.30% for accounts with over $2 million.

The second route is by paying for a package to speak to a certified financial planner. Anyone can access this option, and you don’t have to pay higher management fees. Packages to talk to certified financial planners start at $199.

SoFi Human Advisors

With a SoFi Invest account, you get options not only to its robo-managed smart portfolios, but you can also leverage their credentialed financial planners to help you answer your investment and financial planning questions.

This access is complimentary, and all you need to do is to schedule an appointment through the platform’s online calendar system. This is not a one-time consultation either. You can use the same calendar system to schedule follow up appointments.

SoFi’s Approach to Traditional Advisors is Preferable

Let’s face it: both Betterment and SoFi Invest are standouts for giving clients access to financial planners. SoFi just does a better job of it, giving investors access to financial planners at no cost, and there is no SoFi minimum balance requirement for accounts.

Factor 4: Minimum Account Balance Requirements

Speaking of minimum account balance requirements, what are the account minimum balance requirements for Betterment and SoFi Invest?

Betterment and SoFi Do Not Have Minimums

  • Betterment’s investment accounts do not have account minimums
  • SoFi does not require account minimums
  • Betterment and SoFi are equal in minimum balance requirements

Betterment Minimums

As the first robo-advisor, Betterment was also the first automated advisor to make investing available to all potential investors, requiring no minimum balances to open investment accounts. Unfortunately, many of the robo-advisors that followed in its wake do require account minimums.

But with Betterment’s investment accounts, you don’t have to put a certain amount in to start investing and benefit from one of its eight fully automated investment portfolios with both taxable and retirement accounts.

The one exception to this is Betterment’s cash reserve account. You must deposit at least $10 to open a cash reserve account.

Betterment allows the purchase of fractional shares, meaning that when you open an account with them, you do not need a certain amount to buy a particular security.

SoFi Minimums

SoFi doesn’t have account minimums, though you’ll need at least $5 to start investing. Since 2019, SoFi has enabled fractional investing in both individual stocks and ETFs.

In addition to doing away with account minimums, partial shares are excellent because they allow investors of any net worth to put money in stock regardless of price. With other services, investors might want to purchase a stock like Tesla but be deterred from doing so by its $750 stock price.

No account minimums and fractional investing truly democratize the market for investments, allowing anyone to get in on the ground floor as long as they have access to the Internet and a few dollars to get started.

Betterment and SoFi Minimums

Betterment and SoFi do not significantly vary when it comes to account minimums. Either choice is an excellent entry point for investors of all levels.

Factor 5: Other Services

Sometimes it’s not the investment account itself that matters, but what else you can get with it. For example, investors with families and those working might not have tons of time to dedicate to setting up and supervising multiple accounts across multiple platforms. Sometimes a one-stop-shop works best when hosting your financial and investment accounts.

But which has a better breadth of services, Betterment or SoFi?

Betterment has More Investment-Related Extra Options

Should you choose SoFi or Betterment for extra investment options?

  • Betterment has a deep field of investment-related extra options
  • SoFi has a broader breadth of account options
  • While SoFi has more extra options, Betterment’s are more geared towards investing

Betterment’s Other Options

In addition to its automated investment accounts, both taxable and retirement, Betterment also features the following options:

  • Cash reserve accounts
  • Same-day transfers
  • Tax-loss harvesting
  • Tax coordination
  • Socially responsible investing
  • Charitable giving
  • Human financial advice
  • ACATS transfers
  • Student loan management services
  • Checking accounts
  • Cash rewards
  • Goals tracking
  • Crypto investing

This is a reasonable amount of services for a robo-advising automated investment platform. Despite its other benefits, Betterment remains at heart an investment platform, and every additional service it has enables its core investment business in some way.

For example, its tax coordination is a feature that allows you to weigh tax-disadvantaged accounts more heavily in your tax-advantaged retirement accounts. This allows you the benefit from higher capital gains while paying lower taxes. This way, you can keep your target allocations the same across your portfolio, while Betterment makes sure you have the right kind of asset in the appropriate account.

SoFi’s Other Options

SoFi has the following other account services:

  • Checking accounts
  • High-yield savings accounts
  • Credit-score tracking
  • Credit cards
  • Personal loans
  • Student loan refinancing
  • IPO investing
  • Sofi active investing
  • Crypto investing
  • Home loans
  • Student loans
  • Renters insurance
  • Homeowners insurance
  • Car insurance
  • Life insurance
  • Career counseling
  • Financial counseling
  • Estate planning

SoFi is more comprehensive when it comes to additional account options and services. If you want to manage all your affairs in one place, SoFi is the place to go. You can read more about these additional account services by reading this SoFi review.

A word about its active investing platforms, so far in this comparison, we’ve mainly looked at its automated investment options since that’s how it most closely aligns with Betterment. But it also has an active trading option, which allows you to buy and sell stocks and ETFs, all commission-free.

SoFi vs Betterment: The Bottom Line

Looking at Betterment vs Sofi in terms of automated portfolio investing, Modest Money chooses Betterment as the best option for people who are seeking to maximize long-term investment returns.

SoFi is better for people who need loans and want to house their financial affairs under one roof.

Both are market-leading robo-advisors, and both are geared towards making investing available to all.

Betterment is Better for:SoFi Invest is Better for:
Passive InvestorsActive Investors
Tax-Loss HarvestingChoosing Your Own Securities
Retirement AccountsFree Human Advice
Custodial AccountsIPOs
Socially Responsible PortfoliosInsurance
Automated InvestingLoans
Investment and Related ServicesComprehensive Financial Products
Low Management FeesNo Management Fees

Betterment

Betterment specializes in robo-advising automated investing and related services. If you are looking purely for an option that will maximize your investment returns, then Betterment is optimal for you.

Betterment is a superior choice for many investors because of its tax strategies, including tax-loss harvesting and tax coordination across accounts. In the long run, Modest Money assesses this will save investors more money than would be achieved by not paying a management fee.

Modest Money also believes that investment companies should be focused on investments, not on offering investment platforms as an additional service. While Betterment started as a robo-advisor investment manager, SoFi started as a student loan company.

Many of Betterment’s products are thus loan and debt-related. This approach does nothing fundamentally wrong, but it does not necessarily achieve synergy with achieving your investment goals. Betterment’s additional services are more geared towards investing goals.

Betterment does not have active trading options, but if you are a fan of modern portfolio theory, you probably won’t want to do much of your own trading anyway.

If Betterment’s eight automated portfolio options sound good to you, you can open an account by clicking here.

SoFi

If you have a heavy loan need, maybe because you are getting ready to start college or are already bearing the weight of heavy student debt, plus you want to simplify your life, you should consider going with SoFi.

SoFi provides multiple financial services under one roof. Like their investment accounts, they might not be as competitive as some options, but having one financial services provider is preferable for a lot of people.

Additionally, SoFi Invest is best for actively trading stocks and ETFs. Betterment allows passive investing only. Not to mention, the reviews on SoFi from clients are highly positive, earning it an average of 4.5 stars.

If SoFi’s comprehensive suite of loan, investment, banking, and insurance options sounds good to you, you can click here to open a Sofi Invest account.

Jeremy Biberdorf

About the Author:

Jeremy Biberdorf is the founder of Modest Money. After working many years in the website marketing industry, he decided to take on blogging full time and also get his finances headed in the right direction. Also check out his contributions to Equities.com and Benzinga.