Finance News

Betterment vs. Fidelity – Changing of the Guard

By Jeremy Biberdorf

Posted on September 23, 2021

Fidelity Investments, better known as simply “Fidelity”, has been in the game a long time. In business since 1946, they’ve been witness to a number of market catastrophes, world order shakeups, and consumer market overhauls while still managing to stay afloat and remain successful. Fidelity organizes a large family of mutual funds, provides fund distribution and investment advice, and gives their clients access to index funds, retirement services, and even cryptocurrencies.

Betterment, on the other hand, is a relative newcomer. Though they can boast the distinction of being the first robo-advisor, they’ve only been in business since 2008. This is not a knock on their mettle, for they have prospered in a modern economic climate where fast and easy access is demanded. Modest Money’s review of Betterment praises the absolute simplicity of the platform, and the company is certainly on the forefront of the democratization of financial markets.

Betterment and Fidelity offer two very similar products. Betterment is a dedicated investment robo-advisor, whereas Fidelity is a traditional broker offering robo-advice. Both offer sound advice driven by artificial intelligence technologies, but which is better for the green investor?

15% of current investors in America have started their journey in 2020. That means there’s a lot of newcomers out there. A robo-advisor service is a great choice for beginner investors because one can essentially put their portfolio on autopilot, sit back, and watch their earnings grow.

Betterment vs. Fidelity – the winner will obviously depend on the individual investor’s needs. This review will dig a little deeper into the similarities and differences between these two reputable services.

Betterment – Bringing Investing Home

Betterment operates by a simple ethos: “We manage people’s financial lives so they can live better”. Founder Jon Stein knew from experience that most people expect investing to be difficult, and that’s why they never get around to putting their money in the market. And to boot, traditional ‘players’, the old guard, had purposely made it confusing to facilitate exclusivity.

That’s why robo-advisors have become so popular with today’s new investors. One only need fill in an onboard questionnaire which covers such things as income, goals, and personal risk tolerance, and Betterment will establish a portfolio allocation that is best suited for that individual. Betterment even gives users the option of manually altering stock and bond allocations.

Betterment Features

Account Types: Betterment offers users a number of account types, including brokerage, savings, checking, trust, Roth IRA, traditional IRA, and SEP IRA.
Specialized Portfolios: Betterment has released several custom tailored portfolios in order to reach and exceed your financial goals. These novel allocations include Goldman Sachs Smart Beta, BlackRock Target Income, Social Impact, and Climate Impact. As you can see, these portfolios range from the cutthroat variety to the ethically progressive, so investors of all stripes and persuasions are covered.
Fees: Betterment keeps things pretty simple when it comes to fees and rates. There’s but a single management fee to consider: 0.25% for Betterment Digital members and 0.40% for Betterment Premium members. There are expense ratios on certain electronically traded funds (ETFs), but they are pretty low compared to industry averages.
Pros and Cons: so, where does Betterment succeed, and where does it falter? To start with, Betterment has very low management fees, available tax-loss harvesting, and automatic portfolio rebalancing. On the flip side, Betterment does lack real estate investing and general customization.

Fidelity Go – In With the New

Fidelity Go is Fidelity Investment’s answer to the growing popularity of robo-advisor services. Having only recently entered the robo-advisor market, there are many questions surrounding the service, but with Fidelity’s historied pedigree, you can rest assured that this is a quality service.

Fidelity Go builds portfolios through its mutual funds, known as Fidelity Flex. Though initial parameters and allocations are managed by robo-advisor technology, a human investment team monitors and rebalances things along the way. In this sense, Fidelity Go combines the best of both worlds.

Fidelity Go Features

Account Types: Fidelity Go offers individual and joint taxable accounts, Roth IRA, Traditional IRA, and Rollover IRA.
Specialized Portfolios: Fidelity Go does not offer specialized portfolios as such, but does give users access to mutual funds in over seven asset classes. This allows one to keep their portfolio diverse and fit.
Fees: Fidelity’s management fees operate on a tiered system which takes your total holdings into account. Investors with less than $10,000 pay nothing in fees, while those with over $50,000 pay $3 per month. Unlike Betterment, there are no expense ratios tied to your ETFs.
Pros and Cons: Fidelity has virtually zero fees if you maintain an account balance of less than $10,000, making it great for the common investor, and comes with human oversight to boot. What it does lack is tax-loss harvesting, and it comes with a $10 minimum account balance.

Betterment vs. Fidelity – Is There a Winner?

Both of these platforms are solid competitors. In terms of sheer performance, we would have to give the edge to Fidelity Go, as it comes with a dedicated human investment team that keeps tabs on your investments daily. This combination of human intuitive and machine knowing gives Fidelity the win.

But, where Betterment shines is in the number of different account types it offers. Along with their many IRA accounts, they give users access to savings and checking accounts, which Fidelity does not.

Also, you can’t discount the benefits of tax-loss harvesting. This can save one a ton of money in the long run, and Betterment facilitates it.

These are two perfectly viable robo-investing options for beginners and advanced investors alike.

Open an account with Betterment or Fidelity today and set yourself on the path to a better life.