Betterment vs. Vanguard

Betterment and Vanguard are two popular investment platforms. Vanguard has been around since 1975, while Betterment is much newer on the scene. If Vanguard has been around that long, it must be doing something right.

So, you might wonder why you should consider Betterment when Vanguard has sufficiently proven itself.

That is the question we'll look to answer in this post. In particular, we will compare Betterment to Vanguard Personal Advisor Services, as these are the most directly comparable services from each company.

So, let's get started and find out which one better suits your needs.

What is Betterment?

Betterment is an investment advisor founded in 2008 and based in New York City. While it doesn't have quite the long legacy that Vanguard has, Betterment has helped change the financial services industry in its own way.

That's because Betterment was the first robo-advisor available to the public. While index funds made investing easier, robo-advisors take things a step further.

Robo-advisors like Betterment are automated, algorithm-driven investment platforms that streamline the entire process. This allows investors to simply transfer money into their account periodically; the algorithm does the rest.

In addition to its investment platform, Betterment offers a cash reserve account, checking account, and 401(k) rollovers.

Robo-advisors like Betterment provide financial advice at a fraction of the cost of human advisor, will providing automation for your investments.

Investing with Betterment

Typically, as with Betterment, users fill out an onboarding questionnaire to understand things like their income, risk tolerance, and years until retirement. Then, it will provide a suggested asset allocation.

For Betterment, it's that simple: what percentage your portfolio is made up of stocks and what percentage is bonds. That's all you have to "tell" the system and it does the rest for you.

After the initial setup, Betterment can manage your investment accounts entirely on its own. Your money is then invested in a Betterment portfolio of 14 different asset classes.

Diversification is key as the stock market can be volatile at times. That's where Betterment's investment strategy gets it right.

Needless to say, this sort of tool is excellent for those of us who lead busy lives and would rather not spend our time researching and rebalancing. Sure, the tool does have a fee, but the fee is reasonable considering how simple it is to use.

Betterment's portfolios automatically rebalance and the platform has tax-loss harvesting.

These tools are very nice to have as the help investors to maximize returns and minimize capital gains tax.

If you need more personalized investment advice, Betterment offers access to financial advisors for a per-session fee. Betterment also has a beautiful mobile app for managing your investment options on the go.

One of Betterment's newer additions is socially-responsible investing, which allow you to invest according to your values.

If you join now, you can get up to one year free with Betterment.

What is Vanguard?

Vanguard is an investment advisor based in Malvern, PA. It was founded in 1975 by Jack Bogle.

The firm became hugely popular for a couple of reasons. First, Bogle is credited with creating the first index fund. He also championed low-cost DIY investing and helped make investing accessible to the average person.

In addition, Vanguard is popular because the company is not owned by a CEO or board of directors. Instead, the company is owned by the funds it manages; this means that the company is indirectly owned by investors.

This structure is key because it inherently keeps Vanguard accountable. Instead of having a goal of paying its executives top dollar, Vanguard is beholden to its investors.

And the model has clearly worked: Vanguard is now the largest provider of mutual funds  and the second-largest provider of exchange-traded funds (ETFs).

Vanguard Personal Advisor Services

In addition to the reasons mentioned above, Vanguard is so popular in part because of its low cost. Before there were zero-percent expense ratio index funds, Vanguard was the low-cost leader with its 0.04% VTSAX.

But with new companies like Betterment offering robo-advisors, Vanguard decided it must up its game. So it decided to introduce Personal Advisor Services (PAS) which is something of a hybrid between a traditional human advisor and a robo-advisor.

The main benefit of doing things this way is you have a real person to help you set up your portfolio. And you have access to that same team any time you have questions.

Vanguard PAS portfolios consist primarily of Vanguard index funds but may also contain individual stocks, fixed income, and other assets. Vanguard's algorithm seeks to meet long-term financial goals, making adjustments as necessary.

Portfolios are rebalanced at regular intervals as opposed to automatic rebalancing. They are rebalanced as needed by an advisor when needed, or if a client requests rebalancing.

In addition, portfolios are rebalanced if target allocation strays by more than 5% for a given asset.

Betterment vs. Vanguard Personal Advisor Services

Management Fees


Minimum Investment


Management Fees


Minimum Investment




Management Fees


Minimum Investment


Vanguard Logo
Management Fees


Minimum Investment




Betterment and Vanguard PAS are both excellent products, but they are suited to decidedly different groups of investors.

Vanguard PAS has a minimum investment of $50,000, while Betterment has no minimum investment. In addition, Vanguard's management fees are slightly higher.

While beginner investors will likely prefer Betterment, PAS is a great option for very wealthy investors. Its fees are slightly higher than Betterment's, but its fees do drop for higher portfolio balances.

For assets of $25 million or more, the fee for Vanguard PAS is just 0.05%.

Again, that is a very high bar, but it will be beneficial for some wealthy investors.

Retirement Planning

If you'd like to invest in your retirement with either Betterment or Vanguard funds, both have options for you. This includes Roth IRA, traditional and SEP IRA, and rollover IRA.

Betterment Retirement Planning

Betterment helps you manage your retirement by tracking a variety of information about your retirement outlook. It offers you an at-a-glance look at all your retirement accounts (if you have multiple), in addition to how much you have saved in total.

Then, it will let you know whether you're on track to save enough for retirement and will offer a savings plan to help you get there. If you're off track, Betterment will recommend changes to help you save.

Also, you can set up a Betterment IRA or a rollover 401k.

Betterment Savings Plan

Vanguard Retirement Planning

One thing Vanguard users have that's a one-up is access to real, human advisors who can answer any questions you have about retirement. Plus, Vanguard has a variety of tools & calculators to help plan for retirement. Featured calculators include:

  • Retirement plan income - what will your retirement income be?
  • Retirement nest egg - how much are you on track to save by the time you retire?
  • Retirement loan plan - what is the cost of taking a loan against your retirement plan?

In addition, Vanguard's library includes free lessons to help you learn the basics of retirement planning and investing.

If you have external accounts, they can be added to your total to help determine whether you're on track for retirement.

Goal Setting

Both Betterment and Vanguard have excellent goal planning to help you meet (and exceed) your financial goals. Let's take a brief look at what each of them offers.

Betterment Goal Setting

Betterment allows you to create several types of goals, including:

The purpose of each of these goals is self-explanatory, but the guidance you receive is specifically tailored to each. Each goal is maintained separately, letting you know if you are on track for different goals.

If you have fallen behind on any of your goals, Betterment will recommend steps to help get you back on track.

Vanguard Goal Setting

Vanguard has its own set of tools to help you meet your financial goals. There, you'll find articles, worksheets, and interactive tools to help you plan.

And because gives you access to real financial planners, you can always call and have someone help you set the right goals for yourself. Those goals may include saving for college, an emergency fund, or other savings goals.

Account Types

Once again, both Betterment and Vanguard have you covered with just about any type of account you may need.

Betterment Account Types

  • Traditional and Roth IRA
  • IRA transfer
  • Rollover 401(k)
  • Taxable brokerage
  • Cash account

Vanguard Account Types

  • Traditional and Roth IRA
  • 529 plans
  • Individual 401(k)
  • 403(b)
  • Annuities
  • Individual & joint taxable accounts


Betterment and Vanguard have different fee structures, with PAS favoring high net-worth clients. Meanwhile, Betterment charges a flat rate for its services.

Bot have low fees, but Vanguard has a lower cost for very high net worth investors.

Betterment Fees

Betterment's basic plan, known as Digital, charges an annual fee equal to 0.25% of your account balance.

If you want the option of professional advice from a CFP while using the Digital plan, there are Advice packages, which range from $199 to $299.

There is also the Premium plan which charges a 0.40% annual fee. The main difference with this plan is that it includes unlimited calls with Betterment's team of Certified Financial Planners (CFP®). However, this plan has a minimum balance of $100,000.

Vanguard Fees

Vanguard PAS has pricing tiers rather than charging a flat rate. The fees start at 0.30% and then decrease based on your portfolio balance:

Portfolio Balance


Up to $5 million


> $5M to $10M


> $10M to $25M


> $25M


Account Security

Both services take security seriously and have put measures in place to ensure your investment portfolio is safe. Here's a brief look at what kind of security tools each uses.

Betterment Account Security

Betterment uses 128-bit SSL to encrypt its website. In addition, all of its data is stored on servers in a secure facility.

It offers fraud protection as well as two-factor authentication. Its feature called App Passwords allows you to use third-party password managers, too.

Vanguard Account Security

Vanguard uses 256-bit SSL to help protect its website, giving you the highest level of encryption currently available. It also offers two-factor authentication to provide an additional layer of security for your account.

It has additional features, too, such as security keys - yet another security measure. There are also text messages to alert you of any potential issues with your account.

Which One is Right For You?

Both Betterment and Vanguard have great products. But if you are just starting out and don't yet have much to invest, Betterment will be your only option.

Thus, your financial situation will largely determine which one makes more sense.

The biggest advantage for Vanguard Personal Advisor Services is baked into its name: access to financial advisors. In addition, Vanguard PAS offers lower fees for portfolios of $5 million or more.

However, you can still gain access to financial advisors through Betterment Digital if you add an Advice package, which costs $199 or $299 per year, depending on the package.

While both are great products, Betterment is the clear winner for anyone who doesn't have a high net worth or doesn't need access to human financial advisors.

If you'd like to get started with Betterment, click for up to one year free.

Bob Haegele

About the Author:

Bob Haegele is a personal finance writer, entrepreneur, and dog walker. He's a money management expert and investing connoisseur. Bob has been writing about personal finance for three years and now manages several personal finance sites, including The Frugal Fellow and Modest Money. You can also find him contributing to popular websites such as GOBankingRates, Bankrate, and You can see more of his work on Muck Rack and Contently, or connect with him on LinkedIn.