There’s a lot of competition in the robo-advisor game. Earlier this week, the founders of two robo-advisor startups took the stage at TechCrunch Disrupt NY 2016 to discuss how they’re planning on disrupting traditional investment brokerages. While both companies believe in taking the technology institutions are using and making it available to retail investors, their philosophies on what should happen next differ. Robinhood co-founder & co-CEO Vlad Tenev believes in offering a simple and fee-free way for anyone to invest. Betterment co-founder and CEO Jon Stein believes in charging low and highly transparent fees in exchange for investment advice that helps customers reach their goals.
- Review of: Betterment vs Robinhood
- Reviewed by: Janet Berry-Johnson, CPA (Forbes.com Contributor)
Published on: May 14
Last modified: November 22
So head to head, how do the two investing platforms compare?
Both Betterment and Robinhood are firm believers in not charging transaction fees to buy and sell securities.
Betterment charges customers transparent commissions in exchange for advice that helps customers achieve goals such as saving for retirement or building an emergency fund. For accounts of $0 – $10,000, they charge 0.35% with a minimum of $100 per month auto deposit or $3 per month without auto deposit. Commissions drop for larger account balances. Between $10,000 and $100,000, the commission is 0.25%, and for balances greater than $100,000 the commission is 0.15%.
Robinhood generates revenue outside of commissions by collecting interest from customers who choose to upgrade to a margin account (margin accounts are still being tested in beta) and accruing interest from customers’ uninvested cash balances.
Betterment portfolios are composed solely of low-cost ETFs. Asset classes include U.S. Stocks, foreign stocks, emerging markets, TIPS, short-term treasuries, and corporate, municipal, emerging market and foreign bonds.
Robinhood is for U.S. listed stock and ETF investors only.
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Neither Betterment nor Robinhood have account minimums. You can open a betterment account with a $0 and you’ll never be charged a minimum account fee, other than the $3 per month fee for not utilizing the $100 per month auto deposit.
With Robinhood, in order to invest you’ll need to purchase at least one share of a stock or ETF, but that’s a low bar of entry considering many online brokers require a minimum of $1,000 to get started.
Account Options & Features
Betterment offers individual and joint taxable accounts as well as trusts and Traditional, Roth, SEP, and rollover IRAs.
Where Betterment really stands out is its features, including automatic rebalancing, tax-loss harvesting, and goal-based investing. You can also sync outside investment accounts, allowing you to see your total net worth on their dashboard. Using that information, Betterment can offer advice on how much you’re losing to fees and idle cash. Betterment also offers Smart Deposits, allowing Betterment to automatically invest your extra cash.
Robinhood currently supports only individual taxable accounts, although they have plans to add joint accounts, trusts accounts, and IRAs in the future. Without many other features, Robinhood is designed more for the investor that has done their research elsewhere and just wants to execute free trades.
Betterment has apps for both iOS and Android, allowing you to access and manage your account with Touch ID or a secure PIN. You can even view your goals and account details via Apple Watch. With Betterment, you can also access your accounts via the web from anywhere you have internet access.
Robinhood is purposefully simple, with an app-only platform. The app is available for iPhone, iPad, and Apple Watch. They also currently support Android devices running 4.1 Jelly Bean and above.
Protection and Security
Both Betterment and Robinhood are members of the Financial Industry Regulatory Authority (FINRA), and the Securities Investor Protection Corporation (SIPC), which protects securities customers of its members up to $500,000 (including $250,000 for claims for cash). Even if something happened to either Betterment or Robinhood, your securities are protected up to those limits. Of course, the SIPC does not protect against losses due to normal swings in the market.
According to their website, Betterment uses “the strongest browser encryption available, store all of our data on servers in a secure facility, and implements systematic processes and procedures for securing and storing data.”
Robinhood uses bank-level security measures to protect customers’ personal information. Passwords, social security numbers and other sensitive data are encrypted . Mobile and web applications communicate securely using SSL and 128-bit encryption.
Betterment currently operates only in the United States and for regulatory reasons, cannot accept investors residing outside of the country. Customers must have a permanent U.S. address, a U.S. Social Security number, and a checking account from a U.S. bank.
Robinhood is currently available in the U.S. and China and will soon be expanding to Australia. They hope to announce more countries later this year as they begin the regulatory approval process in other countries.
Betterment integrates with TurboTax, TaxAct, and H&R Block tax preparation software to allow automatic import of your tax information.
Robinhood currently integrates only with TurboTax Premier.
Betterment provides customer support Monday through Friday from 9 am to 8 pm, Eastern and Saturday and Sunday from 11am to 6 pm. You can also send support emails or live chat via the website.
Robinhood provides phone and email support during market hours.
The Bottom Line
With zero transaction fees, Betterment significant savings for frequent traders.
Those who also want advice, multiple features, and the ability to view and manage taxable and non-taxable accounts from one dashboard in addition to fee-free trades may be better off paying Betterment’s low commission in exchange for assistance in growing their portfolio and reaching their saving and investing goals.