Charles Schwab vs. Betterment Introduction
For a complete money-management picture, Betterment and Charles Schwab both offer investing and banking services. Before picking one firm over the other, take a look at the following comparison:
Cost
| Broker Fees |
Stock/ETF
Commission |
Mutual Fund
Commission |
Options
Commission |
Maintenance
Fee |
Annual IRA
Fee |
|
Charles Schwab
|
$0
|
$49.95 ($0 to sell)
|
$0.65 per contract
|
$0
|
$0
|
|
Betterment
|
na
|
na
|
na
|
0.25%
|
0.25%
|
Services
Promotions
Charles Schwab: $0 commissions + satisfaction guarantee at Charles Schwab.
Betterment:
Up to a year managed for free with this promotion.
Investment Services
Schwab clients can choose between self-directed and investment-advisory accounts. The latter program includes both automated and traditional investing. Schwab’s robo program is free. Full-service advisory accounts have a variety of fee schedules that typically are below 1%.
Self-directed customers get a large list of tradable products that includes:
- Stocks
- Foreign stocks
- OTC stocks
- Bonds and other fixed-income assets
- Funds (including mutual, exchange-traded, and closed-end)
- Options
- Futures
Betterment doesn’t have any self-directed accounts, and that’s the first big difference here. Its advisory program also doesn’t have any full-service accounts, although it is possible to consult with a human financial advisor. The company’s robo program costs 0.25% per year or $4 per month, depending on the account balance or if a direct deposit has been established on the account.
Besides ETFs, it’s possible at Betterment to invest in cryptocurrencies. This program costs 1% annually. Unlike the ETF program, this one charges commissions (about 15 basis points per trade).
Winner: Schwab
Cash-Management Services
Investing is only one part of the picture at either firm. Betterment has checking and savings accounts
that come with a variety of perks. The checking account pays no interest but provides a Visa debit card
that delivers cash back at various retailers and unlimited ATM fee refunds. The savings account pays
4.5% APY right now, and because it technically isn’t a savings account, there is no limit on the number of monthly withdrawals.
Schwab has checking and savings accounts, too. Neither pays a yield anywhere close to what Betterment offers, although Schwab does offer bill pay and a free checkbook on its checking account, neither of which are available at Betterment.
Like the Betterment debit card, Schwab’s card comes with unlimited ATM withdrawals at no cost and has a 0% forex fee. To top it all off, Schwab has credit cards from American Express and a home-loan service through Rocket Mortgage®.
Winner: Pretty close overall
PC Software
As an automated-investing firm, Betterment doesn’t have any self-directed trading tools on its website. The site is very minimalistic without any fanfare. Securities have no profiles, for example. There are a few educational resources that beginners can use.
Schwab’s website also has educational materials. Its digital library is much larger than Betterment’s. Plus, the site has extensive security profiles with charts, analyst ratings, and an advanced order ticket.
And the website proper is only the beginning at Schwab. Self-directed accounts can use a variety of other software platforms for charting, research, and order entry. These resources include a desktop platform (thinkorswim) and two web-based platforms (thinkorswim and main app). Combined, these four platforms deliver tons of useful features, including:
- Level II quotes
- Direct-access routing
- Live streaming of CNBC
- Advanced option tools with integrated spreads
Winner: Schwab
Mobile Apps
The mobile scene looks much the same: Betterment emphasizes hands-off investing, while Schwab focuses on both managed and brokerage accounts. During our probing, we found cash-back offers and a refer-a-friend program on the Betterment app.
Schwab actually has two apps. One of them is called thinkorswim Mobile, and it does have a really advanced order ticket on it. For example, contingent on price can be selected, and OTO and OCO make appearances as well. The primary problem we consistently encounter on thinkorswim Mobile is display problems on our iPhone 6. We don’t have these problems on Schwab’s main app, which has trailing and stop orders. It also has mutual-fund and multi-leg option trading.
To complete the picture Schwab’s main app has an Artificial Intelligence, lots of market news, watchlists, analysts’ reports in pdf format, and alerts. Mobile check deposit, which doesn’t appear on Betterment’s app, is icing on the cake.
Winner: Schwab
Margin
At Schwab, brokerage customers can borrow money from the firm to buy more securities. This really nice
service does come at a cost, though. Right now, Schwab charges anywhere from 13.075% to 11.325% for margin debits, depending on the balance. Loans above $500k receive negotiated rates.
Margin requirements vary quite a bit depending on the price and type of security. Shorting is possible, and leverage begins at $5 per share on short positions ($3 per share on long positions).
As a robo firm, Betterment does not offer margin trading.
Winner: Schwab
Find a Financial Advisor
If you are looking for a professional money management service in your area, you can
find a Financial Advisor on the Wiser Advisor
(or read
Wiser Advisor review).
Visit Wiser Advisor
Additional Services
Fully-paid Securities Lending Program: Schwab has it.
Extended Hours: Schwab self-directed clients can trade before the opening bell and after the closing bell.
Automatic Mutual Fund Purchases: Again, only at Schwab.
Dividend Reinvestment Plan: Dividends can be automatically reinvested at Betterment and Schwab.
IRA Service: An Individual Retirement Account can be opened at either firm. Schwab has more IRA types, including the SIMPLE IRA.
Initial Public Offerings: Only at Schwab.
Fractional-share Trading: Available at both firms (self-directed accounts at Schwab are limited to the S&P 500 stocks).
Winner: Schwab
Websites
Charles Schwab: $0 commissions + satisfaction guarantee at Charles Schwab.
Betterment:
Up to a year managed for free with this promotion.
Our Recommendations
Beginning Investors: A good way to begin investing is by opening a managed account. This task can be accomplished at either Betterment or Schwab, and we do suggest adding a human advisor in some capacity.
Frequent Stock Trading: Schwab for obvious reasons. Its stock research on its website combined with one of its desktop platforms would be ideal.
Retirement Planning & Long-Term Investing: Financial planners are available at both firms. Schwab has more self-directed tools on its website, including IRA calculators. It also has more tax-advantaged accounts, including custodial accounts.
Small Accounts: Schwab has no recurring fees and no minimums for self-directed accounts. Its robo service, however, does require $5k to begin. Betterment has no minimum, but its flat fee is bad for small accounts.
Mutual Funds: Schwab is the pick. It does have some really good fund resources.
Charles Schwab vs Betterment: Judgement
Although Betterment may have popularized robo investing, it’s not much of a match today judged against the titan Schwab, who has robo accounts and much more.
|
|
Updated on 10/4/2024.
Chad Morris is a financial writer with more than 20 years experience
as both an English teacher and an avid trader. When he isn’t writing
expert content for Brokerage-Review.com, Chad can usually be found
managing his portfolio or building a new home computer.
|