Why I transferred from Betterment to Vanguard

A few years ago I rolled over a small 401k balance from a previous employer to Betterment (robo-advisor). It was a good move at the time, and I still have a high view of Betterment as a solid robo-advisor. If you are unfamiliar with Betterment, check out the Betterment Review from Nerdwallet for a good summary.

Why did I switch?

I decided to transfer my traditional ira to Vanguard (I'm still waiting on things to be finalized). Below are the reasons I switched:

  • Betterment raised fees from 0.15% to 0.25% in early 2017. View Betterment's fees here.
  • If I wanted to speak to a real person, I would need to pay an additional 0.15% fee.
  • I was concerned about putting future investment funds into a new(ish) service.
  • I wanted more options.
  • If you are going to solely invest in ETF's and index funds, why not do it directly and bypass the middleman's fees?
  • Betterment is backed by VC money and could easily change directions that I don't agree with. This article from Wired describes this issue well.

The 0.25% fee is pretty reasonable compared to competitors, but I'm concerned they might increase fees again in the future. There is also a chance they might not be around in 10 years. Currently, my plan, which might change, is to go with Vanguard Personal Advisor. They charge a 0.30% fee, which is a solid rate for having access to an advisor. It will take some time to qualify for their service ($50k minimum portfolio) after we get out of debt and build an emergency fund. There is a chance I might decide not to go with Vanguard Personal Advisor and manage my portfolio. However, I think going with them might be a solid option and end up saving the fee they charge on tax optimizations.

Why would you want to use Betterment?

Below are a few reasons you might want to consider using Betterment:

  • Accessing their goal and planning features.
  • If you have after-tax accounts and are actively depositing money, their tax loss harvesting could be beneficial. This “might” end up saving enough to cover their fees.
  • You don't want to spend the time managing your investments.
  • You don't have an extensive portfolio to manage.

At this point, I think Betterment is a good robo-advisor if you don't want to think about your investments. Their portfolio is very balanced, and their online tools are useful. If you aren't going to invest a lot of money outside of your 401k, it is a solid option.

Do you use a robo-advisor? Why or why not? What do you think about the Vanguard Personal Advisor service?

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