Schwab Intelligent Portfolios vs. Betterment: Which Is Best?
Tired of navigating the complexities of investing? You’re not alone. The world of automated investing, also known as robo-advisors, has exploded in popularity, offering a hands-off approach to growing your wealth.
Two of the biggest players in this arena are Schwab Intelligent Portfolios and Betterment. Both platforms promise to build and manage a diversified portfolio tailored to your financial goals and risk tolerance. But which one is right for you?
This comparison dives deep into the features, fees, and overall value of Schwab Intelligent Portfolios and Betterment, helping you make an informed decision about where to invest your hard-earned money. We’ll explore everything from investment strategies to account minimums.
Specs at a Glance
| Feature | Schwab Intelligent Portfolios | Betterment |
|---|---|---|
| Account Minimum | $0 | $0 |
| Investment Strategy | Robo-advisor with ETFs | Robo-advisor with ETFs |
| Tax-Loss Harvesting | Yes | Yes |
| Human Advisor Access | Yes, for an additional fee | Yes, with premium plan |
| Rebalancing | Automatic | Automatic |
| Investment Options | ETFs | ETFs |
| Goal Planning | Yes | Yes |
| Mobile App | Yes | Yes |
| Account Types | Taxable, IRA, Trust | Taxable, IRA, Trust |
| Fractional Shares | Yes | Yes |
| Socially Responsible Investing | No | Yes |
| Cash Management Account | Yes | Yes |
Feature-by-Feature Breakdown
Minimum Investment
- Schwab Intelligent Portfolios: Requires a minimum investment of $5,000. This higher barrier to entry can be a drawback for smaller investors but may encourage a more committed approach to investing. The higher minimum also unlocks access to a wider range of investment options.
- Betterment: Has no minimum investment requirement. This makes Betterment accessible to a wider range of investors, including those just starting out or with limited funds. This accessibility is a significant advantage for beginners.
- Winner: Betterment
Management Fees
- Schwab Intelligent Portfolios: Charges no advisory fees, but it holds Schwab ETFs, which have expense ratios. This can make it appear fee-free, but investors still indirectly pay for the underlying investments. The lack of direct advisory fees is attractive.
- Betterment: Charges an annual advisory fee, typically around 0.25% of assets under management. This fee structure is transparent and covers all services, including financial advice and portfolio management.
- Winner: Schwab Intelligent Portfolios (Technically Fee-Free)
Investment Strategy
- Schwab Intelligent Portfolios: Uses a proprietary algorithm to create a diversified portfolio based on your risk tolerance and financial goals, primarily using Schwab ETFs. The portfolio is rebalanced automatically. However, the reliance on Schwab’s ETFs can limit diversification outside of their offerings.
- Betterment: Employs a similar diversified portfolio approach, primarily using ETFs, but with a wider selection of ETFs. It focuses on asset allocation based on risk tolerance and automates rebalancing. Betterment’s approach often involves a slightly more customized portfolio based on individual needs.
- Winner: Betterment
Human Advisor Access
- Schwab Intelligent Portfolios: Does not offer direct access to human financial advisors. The platform is entirely automated. This can be a disadvantage for investors seeking personalized advice.
- Betterment: Offers limited access to financial advisors at an additional cost, depending on the plan chosen. This provides a balance between automated investing and human support.
- Winner: Betterment
Tax-Loss Harvesting
- Schwab Intelligent Portfolios: Offers tax-loss harvesting, which can help minimize tax liabilities. This feature is automatically applied to eligible accounts. It can provide significant tax benefits for taxable accounts.
- Betterment: Provides automated tax-loss harvesting for taxable accounts. This is a key feature for maximizing after-tax returns.
- Winner: Tie
Account Types
- Schwab Intelligent Portfolios: Supports a variety of account types, including taxable accounts, traditional and Roth IRAs, and trusts. This provides flexibility for different investment needs.
- Betterment: Supports taxable accounts, traditional and Roth IRAs, and other account types. The range of options is similar to Schwab.
- Winner: Tie
Investment Options
- Schwab Intelligent Portfolios: Primarily uses Schwab ETFs, which limits the investment universe to Schwab’s offerings. This can be a disadvantage for those seeking broader diversification.
- Betterment: Uses a broader range of ETFs, offering more diversification options, including stocks, bonds, and real estate. This allows for more customization of portfolios.
- Winner: Betterment
Ease of Use
- Schwab Intelligent Portfolios: Schwab’s platform is generally user-friendly, but the initial setup, including answering questions and linking accounts, can be a bit more involved due to the minimum deposit.
- Betterment: Has a simple and intuitive interface, making it very easy for beginners to get started. The setup process is quick and straightforward.
- Winner: Betterment
Winner by Category
| Category | Winner |
|---|---|
| Low Fees | Schwab Intelligent Portfolios |
| User Experience | Betterment |
| Investment Options | Betterment |
| Tax-Loss Harvesting | Betterment |
| Socially Responsible Investing | Betterment |
| Human Advisor Access | Betterment (Premium) |
What They Have in Common
- Automated Investing: Both platforms offer automated investment management, taking the guesswork out of portfolio allocation and rebalancing.
- Diversified Portfolios: Both Schwab Intelligent Portfolios and Betterment build diversified portfolios using a mix of exchange-traded funds (ETFs) to spread risk across various asset classes.
- Goal-Based Investing: Both platforms allow you to set financial goals, such as retirement or a down payment on a home, and tailor your investment strategy accordingly.
- Tax-Loss Harvesting: Both Betterment and Schwab offer tax-loss harvesting, which can help reduce your tax liability by selling losing investments to offset gains.
- Mobile Apps: Both platforms provide mobile apps, allowing you to monitor your investments and manage your account on the go.
- Low Account Minimums: Both platforms have low or no account minimums, making them accessible to a wide range of investors.
Schwab Intelligent Portfolios Vs Betterment Buying Guide
Investment Philosophy
Schwab Intelligent Portfolios uses a passive, index-based investing approach, constructing portfolios primarily with ETFs across various asset classes. The strategy focuses on diversification and low costs, rebalancing periodically to maintain the target asset allocation. Betterment also employs a passive investment strategy, building portfolios with ETFs. However, Betterment incorporates a more sophisticated approach, including tax-loss harvesting and dynamically adjusting portfolios based on market conditions and investor behavior. Schwab’s approach is simpler, while Betterment offers more advanced features.
Fees and Costs
Schwab Intelligent Portfolios initially stood out with its zero-advisory-fee model, but it requires a minimum investment to be eligible. The expense ratios of the ETFs within the portfolios still apply. Betterment charges an annual advisory fee, typically a percentage of assets under management. The fee structure varies depending on the plan chosen. The zero-fee aspect of Schwab can be appealing, but the expense ratios of the underlying ETFs are a factor. Betterment’s fees are transparent, and the value of tax-loss harvesting may offset some of the cost.
Portfolio Construction and Customization
Schwab Intelligent Portfolios’ portfolio construction is based on a questionnaire to assess risk tolerance and investment goals. The portfolios are pre-built and less customizable. Betterment also uses a questionnaire to determine risk tolerance and constructs portfolios based on those answers. Betterment provides a higher degree of customization, allowing users to adjust their asset allocation. Betterment also lets users set financial goals. Schwab offers a more standardized approach. Betterment offers a more personalized experience.
Account Minimums and Accessibility
Schwab Intelligent Portfolios requires a minimum investment to open an account. This can be a barrier to entry for some investors, especially those just starting. Betterment generally has a lower or no minimum investment requirement, making it more accessible to a wider range of investors. Both platforms are easily accessible online and through mobile apps. The lower minimums of Betterment make it a more flexible solution for new investors. Schwab’s higher minimum might deter those with smaller portfolios.
Features and Technology
Schwab Intelligent Portfolios offers robust platform features, with access to Schwab’s research and educational resources. Schwab’s platform is very user-friendly. Betterment offers a user-friendly interface and advanced features like tax-loss harvesting and goal-based investing. Betterment also integrates with external accounts to provide a holistic view of financial health. Both platforms provide excellent mobile apps. Betterment has a slight edge due to its tax-loss harvesting feature.
Customer Support
Schwab, as a large financial institution, provides extensive customer support through various channels, including phone, email, and branch locations. Betterment also offers customer support, primarily through email and phone. Both platforms provide helpful resources, such as FAQs and educational materials. Schwab’s extensive support network is an advantage for investors who prefer in-person assistance. Betterment offers efficient customer support, but with fewer in-person options. Both platforms offer reliable customer support.
Who Should Buy What?
Buy Schwab Intelligent Portfolios If…
- You are a Schwab client and want to consolidate your financial services.
- You prefer a robo-advisor that doesn’t charge advisory fees (though there are ETF expense ratios).
- You want access to a cash management account with competitive interest rates.
- You are comfortable with a more limited set of investment options.
Buy Betterment If…
- You want access to socially responsible investing options.
- You want a platform with a strong focus on user experience and financial advice.
- You are willing to pay a small advisory fee for premium features.
- You value advanced tax-loss harvesting and other tax-efficient strategies.
Frequently Asked Questions
What is Schwab Intelligent Portfolios?
Schwab Intelligent Portfolios is a robo-advisor service offered by Charles Schwab. It constructs and manages diversified investment portfolios using ETFs, with no advisory fees. It uses a questionnaire to assess risk tolerance. It’s designed for investors seeking a hands-off, low-cost approach to investing, with the benefit of Schwab’s resources.
What is Betterment?
Betterment is a robo-advisor platform that offers automated investment management. It builds personalized portfolios using ETFs based on an investor’s risk tolerance, time horizon, and financial goals. Betterment also offers features like tax-loss harvesting and financial planning tools, making it a comprehensive platform.
How do Schwab Intelligent Portfolios and Betterment differ in their fee structures?
Schwab Intelligent Portfolios initially had no advisory fees, but there is a minimum investment to be eligible. Betterment charges an annual advisory fee, a percentage of assets under management, depending on the plan. Both charge the expense ratios of the ETFs. Fees are a critical factor, with Schwab’s zero-fee model being attractive.
Which platform offers better portfolio customization?
Betterment provides more portfolio customization options, allowing users to adjust their asset allocation and set specific financial goals. Schwab Intelligent Portfolios offers pre-built portfolios based on the investor’s risk profile, with less flexibility. Betterment’s flexibility makes it a compelling choice.
What are the account minimums for each platform?
Schwab Intelligent Portfolios requires a minimum investment to get started. Betterment generally has a lower or no minimum investment requirement. These differences in minimums affect accessibility for new investors. Lower minimums make Betterment more accessible to a wider range of investors.
Does either platform offer tax-loss harvesting?
Betterment offers tax-loss harvesting as a standard feature, which can potentially reduce taxable gains. Schwab Intelligent Portfolios does not offer tax-loss harvesting. Tax-loss harvesting is a valuable feature for taxable accounts. Betterment’s tax-loss harvesting is a significant advantage.
Which platform is better for beginners?
Betterment is often considered better for beginners due to its lower or no minimum investment requirements, user-friendly interface, and educational resources. Schwab is very user-friendly but requires a higher investment. Betterment’s ease of use and lower barriers to entry make it a good choice.
Final Verdict
Both Schwab Intelligent Portfolios and Betterment offer valuable robo-advisor services. Schwab’s zero advisory fee model is appealing, but Betterment’s customization options, tax-loss harvesting, and lower minimum investment requirements provide a more comprehensive and flexible experience. Betterment’s additional features and user-friendly interface make it a slightly better choice overall for most investors seeking automated portfolio management.
Winner: Betterment