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Betterment vs. Fidelity

Low Management FeesTax-loss harvesting availableAutomatic portfolio rebalancing
Low management feesTax-loss harvesting availableAutomatic portfolio re-balancing

Betterment and Fidelity are two similar products. This is a comparison between one of the industry’s first dedicated investment robo-advisors and a traditional broker offering robo-advice. With 15% of current investors having started their journeys in 2020, good advice is essential to making money in the long term.

So, which one should you choose as your robo-advisor of choice? Here is everything you need to know about the similarities and differences between the two.

Betterment Overview

Betterment was launched in 2008, which makes it one of the earliest uses of robo-advisor technology. Millions of investors have taken advantage of Betterment to manage their portfolios of stocks and bonds.

In our Betterment review, we praise the fact that it keeps things simple. Just fill in the initial questionnaire and give some basic details about your income, goals, and risk tolerance. Then, Betterment will automatically suggest some options for building your new investment portfolio.

After you’ve invested in your portfolio, you don’t need to do anything else. Just let it run on autopilot.

Of course, for more confident investors, you can always manually alter your stock/bond allocation. You’re not locked into that first investment.

Betterment Details

Account Minimum

Management Fees

0.25%/0.40%

Account Types

Brokerage, Saving, Checking, Trust, Roth IRA, Traditional IRA, and SEP IRA

Investment Type

Exchange-Traded Funds (ETFs)

The big advantage of Betterment investing is that there are no minimum account balances or minimum investments. This robo-advisor handles all the work of diversifying your portfolio for you by investing broadly in stocks and bonds.

Unlike other robo-advisors, when you sign up with Betterment you have access to all the major account types, such as IRAs and trust accounts. You can even pair it with your checking and savings accounts.

Whether you’re saving for a house deposit or retirement, Betterment is equipped to align your portfolio with your goals.

Betterment has released several specialized portfolios to help you reach your financial goals, including:

Goldman Sachs Smart BetaBlackRock Target IncomeSocial ImpactClimate Impact

Betterment Fees

Since its 2008 launch, this platform has redefined what low-cost investing is all about. There is just a single management fee to take into account: 0.25% for Betterment Digital members and 0.40% for Betterment Premium members.

Note that there are some expense ratios on most ETFs, but these are not fees Betterment charges. Plus, they are are still low at only 0.07% to 0.15%.

Why would you want to pay more for Betterment Premium? The advantage is access to CFP professionals. To qualify for this membership level, you must have invested at least $100,000 on the platform. For Betterment Digital members, you can still book a 45-minute call, but it costs $199.

Betterment Pros

Low management feesTax-loss harvesting availableAutomatic portfolio re-balancing

Betterment Cons

No real estate investmentsLack of customizationExternal accounts struggle with compatibility

Fidelity Overview

Fidelity Go is the full name for Fidelity Investment’s robo-advisor. This is one of the leading names in the world of investing, but only recently has it entered the robo-advisor industry.

It builds portfolios for investors through its mutual funds known as Fidelity Flex. Despite the fact most of the heavy lifting is done through its robo-advisor, a human investment team monitors and rebalances along the way.

Compared to Betterment, Fidelity lacks tax-loss harvesting and charges monthly fees on some accounts. On the other hand, its funds don’t come with any expense ratios.

Fidelity Details

Account Minimum

Management Fees

$0/under $10,000, $3/over $10,000, and 0.35%/over $50,000

Account Types

Individual and joint taxable accounts, Roth IRA, Traditional IRA, and Rollover IRAA

Investment Type

Mutual funds over seven asset classes

So what is the main difference in the debate over Betterment vs. Fidelity? For one, Fidelity has an account minimum of $10 to invest and there are fees on balances over $10,000. Although $3 per month may not sound like much, it’s still money going out of your pocket.

While Fidelity shares many of the same account types as Betterment, Fidelity lacks some account types such as checking and savings.

Although you gain access to mutual funds via Fidelity over seven asset classes, the lack of tax-loss harvesting is a big factor. For smaller investors, tax-loss investing is not a priority, but as your portfolio grows you may be losing significant amounts in taxes annually. While it is possible to do your own tax-loss harvesting, it’s a complex task and not something most investors would be willing to handle on their own.

What we like about Fidelity Go is they always have a human investing team managing the portfolios of its clients and automatically re-balancing their portfolios daily. In the same vein as Betterment, you can leave your portfolio on autopilot if you don’t have the time.

Fidelity Fees

Fidelity’s fees are on a tiered system. Depending on your account balance, you may not have to pay any fees at all.

Investors with less than $10,000 pay nothing in fees, whereas investors with a balance of up to $50,000 will need to pay $3 per month. For bigger investors, a 0.35% management fee will be charged annually.

Unlike Betterment, there are no expense ratios on your investments. These are tied to Fidelity’s management fees.

Fidelity Pros

No fees on balances under $10,000No expense ratiosHuman investment oversight

Fidelity Cons 

$10 minimum account balanceNo tax-loss harvestingNo access to real estate investments

Betterment vs. Fidelity: Comparison

Features 

Betterment

Fidelity

Min. Investment

Management Fees

0.25% (Digital); 0.40% (Premium)

$0 (Under $10,000); $3 per month (Between $10,001 and $49,999); 0.35% per year over $50,000

Avg. ETF Expense Ratio

0.07%-0.15%

Account Types

Brokerage, Saving, Checking, Trust, Roth IRA, Traditional IRA, and SEP IRA

Individual and joint taxable accounts, Roth IRA, Traditional IRA, and Rollover IRA

Tax-Loss Harvesting

Available

Financial Advisor Fee

$199 (Free with Premium)

Best For

Specialized Portfolios

Smaller Investors

Betterment vs. Fidelity: Which One is Right for You?

Both of these platforms have some excellent features. In terms of performance, both robo-advisors perform admirably. The edge likely goes to Fidelity simply due to its dedicated human investment management team that checks on your investments daily. However, the difference in performance is marginal at best.

Fees are comparable, but for larger investors, the 0.35% annual fee can start to bite. Again, there’s little difference between the two.

Where Betterment shines is in the account types it’s compatible with. As well as offering traditional brokerage and IRA accounts, it also provides checking and savings accounts. Fidelity, on the other hand, offers far fewer options.

If you need some specialized financial advice, Betterment is the only option as Fidelity doesn’t offer this type of support.

Finally, Betterment’s approach to tax-loss harvesting is what tips the balance. Investors who fail to optimize their portfolios for tax could lose thousands of dollars unnecessarily. The fact a big name like Fidelity fails to offer this is a major disappointment.

Although both robo-advisors are perfectly viable options for investors, Betterment offers the superior product due to tax-loss harvesting and the chance to book a 45-minute call with a CFP whenever you need to.

If you want to create an account with Betterment, do it through Modest Money. Follow our link and you’ll pay no management fees for the first 12 months.

Open an account now and get one year of no management fees with Betterment.

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