Robinhood vs Betterment


Betterment vs Robinhood for online investing. Compare cost, brokerage fees, IRA accounts, and differences. Which firm is better?



Overview of Betterment and Robinhood


Betterment and Robinhood are different types of brokerage firms. One offers managed accounts, while the other caters to self-directed investors who want ultra-low fees and commissions. Let’s take a detailed look at these two brokers, and see how they compare to each other.


Education and Research


Neither broker offers much in terms of learning materials. Betterment doesn’t offer self-directed accounts, so it doesn’t have much reason to provide the materials. Robinhood accounts are self-directed, but since the company is an ultra-low-cost firm, it doesn’t offer sophisticated education or security research tools on its website.

The Robinhood mobile app does have limited stock research available. There are news articles from Yahoo Finance and The Wall Street Journal. Stats on a stock show various metrics, such as P/E ratio, dividend yield, and 52-week high. Quarterly earnings are shown, along with a paragraph about the company’s operations.

The Betterment website does have information on what types of accounts and services the company offers, such as trusts and retirement plans.


Managed Accounts and Financial Advice


Robinhood does not offer investment advice, nor does it provide managed accounts. On the other hand, Betterment specializes in portfolio management. In fact, it doesn’t offer any self-directed accounts. Betterment offers three managed account packages. One is a robo-only service, while the other two include assistance from human advisors who are Certified Financial Planners. The second plan includes one phone call per year with a CFP, while the most expensive plan has unlimited phone calls with a financial advisor.


Trading Technology


Because Betterment doesn’t offer self-directed services, there is no trading technology for its clients to use. Of course, since it is a robo advisor, there is a computer software program in the background making investment decisions. But customers don’t use this technology.

The Betterment website has a login feature where clients can access account documents and balance information. The company also provides a mobile app that has the same functions, including funds transfer. It is compatible with Apple and Android devices and can be used to increase or decrease an account’s equity/bond allocation.

While Robinhood is a self-directed broker, there isn’t much in terms of trading technology available to its clients. The company has tried to cut overhead as much as possible, and as a result, trading tools are almost non-existent. The broker’s website does not have the ability to trade securities. It is used for account sign up and for hosting information on the company’s services. Trading takes place on the Robinhood mobile app, which runs on Apple and Android. The brokerage firm also provides a platform for Apple Watch.


Pricing


The cost of investing differs between the two firms, because they offer different types of services. Robinhood’s self-directed accounts pay $0 for stock and ETF trades. Yes, they’re completely free. An account has no annual fee, no low-balance fee, and there is no charge to deposit or withdraw funds electronically. The broker does not have a minimum deposit to open an account.

Robinhood traders do have to pay $2 for each mailed trade confirmation and $5 for a hard-copy statement. Electronic documents are always free. The brokerage house also passes on exchange and regulatory fees, but these are small amounts.

Since Betterment doesn’t offer self-directed trading, there are no commissions. The broker does charge an annual asset-based management fee. There are three management plans that Betterment offers, and each one has its own fee.

The lowest cost plan is 0.25% and has no minimum balance. The next plan costs 40 basis points per year, but provides a phone call with a human advisor. It requires $100,000 in assets. The third and final advisory service is half a percentage point annually. It includes unlimited phone conversations with the company’s investment advisors, and like the second plan, requires at least a hundred thousand dollars in assets. All three plans are traded using the company’s software program. There are no commissions on the trades that the robot makes.


Options and Funds


In its robo accounts, Betterment only trades low-cost ETF’s. This means that mutual funds, option contracts, and other products are not available. Although Robinhood provides self-directed accounts, it does not offer mutual funds, option contracts, and several other securities, such as fixed-income. As already noted, the broker does provide access to exchange-traded funds. In fact, Robinhood offers all US-listed ETF’s, which is more than Betterment supplies. Unfortunately, there is not an ETF screener at Robinhood.


Customer Service


Robinhood only provides customer support during market hours. Oddly, its phone number isn’t toll free. There is a method to contact the broker via its mobile app. The firm also has an e-mail address, although it took us 2 days to get a response from a test message.

Customer service is available at Betterment 7 days a week. The hours are from 9 am until 8 pm, EST; although on Friday the broker closes at 6:00. Only chat service is available on the weekend, where hours are from 11 am until 6 pm. On-line chat is also available during the week.

Promotions


Investors who open a Betterment account with at least $10,000 get one month of portfolio management for free. Depositing $50,000 qualifies for a full quarter of free management, while $100,000 earns half a year at no cost. A SEP IRA opened with Betterment comes with 4 months of free management with a $25,000 deposit. A $500,000 deposit with this account type qualifies for a full year of robo service at no cost. Link: Get up to 6 months of Betterment service for free. Robinhood does not currently have any promotions.


Robinhood vs Betterment - Final Thoughts


Betterment (read review) is the better firm for investors who can accept ETF portfolios and don’t have the time or desire to make trading decisions. Since Betterment doesn’t offer stocks, Robinhood (read review) obviously is the better choice for equity traders.


Updated on 6/26/2017.




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