Wealthsimple vs. Betterment

Wealthsimple is aiming to put “gotchas” out of business. “Gotchas,” Michael Katchen, the Wealthsimple co-founder and CEO explains, are all those hidden rules and fees that can make traditional banking feel frustrating at best, inaccessible at worst.

The Canadian robo advisor platform is heading forward into traditional banking waters, albeit behind many of its peers, by targeting current and future investment-minded users who may wish to call it quits with traditional banking.

Wealthsimple’s product, a hybrid spend/save package, incorporates a checking account with a trendy Tungsten metal cash card with credit/debit features.

Stateside counterpart Betterment, in the meantime, has been busy launching its own checking and savings account products along with the requisite debit card. While the company experienced a headline-making regulatory hiccup in mid-launch, ultimately the products had a successful rollout and feedback from users has been positive to date.

Which robo advisor platform is the better choice for you? Let’s take a closer look so you can decide.

General Comparison and Overview 🔍

Wealthsimple and Betterment offer a lot of the same features. However, each has certain aspects that make them unique in the industry. For some users, a single feature may be the deciding point to choose one platform over the other.

For Wealthsimple, it is the choice to offer investors a Halal-compliant portfolio that adheres to Shariah law and also to socially responsible investment (SRI) principles. Other than the newly launched Wahed Invest, Wealthsimple has the market literally cornered in this arena.

For Betterment, it is the company’s singular standing as the founder of the robo advisor platform industry itself that sets it apart. What makes Betterment so unique is that the company has never once become complacent, but rather has continued pushing itself to innovate and evolve to serve its user base, including its recent expansion to serve the B2B marketplace with its two new spinoffs, Betterment for Advisors and Betterment for Business.

Like many investors, you may not know that Betterment was the very first robo advisor platform in the industry. In fact, in many ways it created the robo advisor industry. As such, it has also been the first to wave goodbye to its startup days and become fully self-sustaining (i.e. no longer dependent on venture capital partners for funding).

All this to say, both Wealthsimple and Betterment are sitting pretty atop the robo advisor platform heap as of today. And yet both are continually pushing forward with edgy new offerings aimed at helping them remain competitive and relevant to you, the end user.

What is Wealthsimple? 🤔

Wealthsimple is better for:

• ☑️ Investors who want a socially responsible investment portfolio product.
• ☑️ Investors who want a free initial portfolio review.
• ☑️ Investors who want access to free personalized financial guidance from real planners.
• ☑️ Investors who live in Canada or the United States.
• ☑️ Investors who want to be able to invest into UTMA and UGMA accounts for a child’s future higher education.

What is Betterment? 💭

Betterment is better for:

• ☑️ Investors seeking lower account management fees for a hybrid robo advisor platform.
• ☑️ Investors who want access to tax-loss harvesting.
• ☑️ Investors who want a digital algorithm to build a diversified portfolio.
• ☑️ Investors who live in the U.S. and want to invest with a U.S. company
• ☑️ Investors who are primarily interested in investing into ETFs (which is the only asset option with Betterment).

Both Wealthsimple and Betterment offer the following robo advisor features:

• ☑️ Investment into individual or joint taxable accounts.
• ☑️ The option to employ tax loss harvesting where it makes sense.
• ☑️ Support for investing into retirement accounts.
• ☑️ Automatic account rebalancing as needed.
• ☑️ Support for investing into trusts.
• ☑️ Options for socially responsible investing (SRI).
• Ample learning resources for goal setting and future planning (life events, retirement).

Wealthsimple vs Betterment: Fees Compared

In an earlier section here, we referenced the disparity in account management fees between Wealthsimple and Betterment.

While Betterment has come under fire for account management fees ranging from 0.25 to 0.40 percent (based on account value), the platform looks nearly free when compared to Wealthsimple’s starting fee of 0.40 to 0.50 percent (again based on account value).

Let’s take a closer look at how each robo advisor platform’s basic account management fee structure is set up to work:

Wealthsimple Robo-Advisor Experience 🥧

• ☑️ 0.50 percent: for accounts up to $100,000.
• ☑️ 0.40 percent: for accounts starting at $100,000 and up.

Betterment Robo-Advisor Experience 💎

• ☑️ 0.25 percent: for accounts using the Digital passive investing robo advisor plan.
• ☑️ 0.40 percent: for accounts using the Premium hybrid investing Premium plan ($100,000 minimum to join).

What this simple chart doesn’t tell you, however, is how access to human financial and investing advisors works on each platform. It also doesn’t shed any light on the extra fees you might pay for choosing to invest into different ETFs (exchange traded funds).

With Wealthsimple, the account management fee is all-inclusive of the option to talk with expert investment professionals.

With Betterment, only Premium users receive unlimited access to certified financial planners (CFPs). Digital users have the option to pay additional fees to receive individual assistance with investing. Fees range from $199 to $299 per call based on the amount of time needed.

The average ETF fee with Wealthsimple is around 0.15% per fund. For Betterment, the average ETF fee is around 0.08%.

There are robo advisor platforms that do not charge any management fees whatsoever, regardless of account balance. However, these platforms will also assess other fees based on the types of securities that make up your portfolio (ETFs are a good example here since they often incur additional outside fees).

The question to ask yourself when comparing Wealthsimple vs Betterment or either against any other robo advisor platform is if the extra account management fees, if any, provide sufficient extra value to justify paying them.

This is a very personal question which each investor will necessarily answer differently.

Trading Experience: Wealthsimple vs Betterment ⚔️

Wealthsimple and Betterment have each worked hard to differentiate themselves from one another and from the pack of robo advisor platforms now competing with them for online investors.

As a result, each platform has some innovative robo advisor features you might find interesting.

Wealthsimple: A Short History ✍️

Wealthsimple is a Toronto, Canada, robo advisor platform that launched in 2014. The platform currently oversees a reported $4.3 billion in assets and has an overt focus on attracting younger (millennial) users.

In 2016, Wealthsimple made news headlines when it announced a partnership with Mint, the much-lauded personal budgeting tool.

In 2019, Wealthsimple Trade went live. Wealthsimple Trade allows you to trade securities (stocks, ETFs) on the U.S. and Canadian exchanges for zero commission.

In 2020, Wealthsimple Cash launched, with no account fees, a 2.4 percent interest rate and debit card.

Wealthsimple also offers “Roundup,” a popular auto-investing feature that tracks your purchase history and rounds up each purchase to the nearest dollar, investing the difference into your Wealthsimple account on your behalf and according to your set preferences.

Betterment: A Short History 📜

Betterment is where the entire robo platform industry began. When the company launched in 2008, everyone sat up and took notice.

Betterment has continued in its role as industry disrupter and re-shaper ever since, launching one innovative new service and product after another even as the industry itself began to fill up with robo advisor competitors and copycats.

Betterment has not only held on to its market share but has greatly expanded it with the recent moves into the business-to-business and corporate sectors.

Betterment is fueled by the Total Market Portfolio (TMP) approach to investing. This passive investing model relies on the platform’s digital algorithm to allocate account funds based on the user’s risk tolerance and interest in specialty options such as socially responsible investing (SRI).

More recently, Betterment launched its Smart Saver product. Smart Saver is positioned as an alternative to the traditional high-yield savings account. This account automatically invests 80 percent of a user’s account balance with U.S. Treasury bonds and the remaining 20 percent with low volatility corporate bonds. The annual account management fee is 0.25 percent and the average annual yield is around 0.20 percent.

Investment Types: Wealthsimple vs Betterment 🆚

In some ways, Wealthsimple and Betterment are quite similar when it comes to the types of investments you have access to but quite different when it comes to the process of getting started.

Both function primarily through investing into ETFs, or exchange traded funds.

But Wealthsimple has a more involved on-boarding process on the front end. You will be asked to answer a series of questions up front, including questions about your financial and investing goals and history, investing comfort level/expertise, tolerance for risk and other questions. Then it may take up to five business days for your account to be fully ready for use.

Once your account is ready to be funded, you will be presented with a series of suggested portfolio allocations that conform to the data you provided. You can then make your asset and allocation selections.

Betterment, in contrast, gets you up and running in minutes. You don’t have to answer any direct questions about tolerance for risk – rather, you are presented with asset allocation options and can use a slider tool to let Betterment know if more or less risk is desirable.

At your option, you can also connect outside accounts for a full portfolio review (free) and be able to view your complete financial picture from a single online portal.

What Does Wealthsimple Offer? 🥧

• ☑️ U.S. users: all securities are wrapped into ETFs (exchange traded funds).
• ☑️ Canadian users: there is also the option to invest into mutual funds.
• ☑️ 10 different ETF portfolios with their own customized assortment of asset categories.
• ☑️ The Halal-compliant portfolio is comprised of securities independently screened and vetted by a group of Shariah scholars.

What Does Betterment Offer? 💎

• ☑️ U.S. users: all securities are wrapped into ETFs (exchange traded funds).
• ☑️ Five portfolio options are available: a socially responsible investing (SRI) portfolio, a smart beta by Goldman Sachs, an all-bond Black Rock portfolio, a standard portfolio and a flexible ETF portfolio.

The Mobile & App Experience: Wealthsimple vs Betterment 📱

Comparing Wealthsimple and Betterment from a mobile app perspective shows that both platforms are doing something right in this area. All app reviews in both the Apple and Android categories represent the input of thousands of users.

Betterment maintains a slight lead overall, but not a significant one.

Wealthsimple App 🥧

• ☑️ iOS/Apple: 4.5 stars (out of 5)
• ☑️ Android: 4.3 stars (out of 5)

Betterment App 💎

• ☑️ iOS/Apple: 4.8 stars (out of 5)
• ☑️ Android: 4.5 stars (out of 5)

In Summary: Wealthsimple vs Betterment Compared 🎬

As this detailed side-by-side review of Wealthsimple vs Betterment showcases, these are two of the strongest robo advisor platforms operating today.

Both are legal fiduciary agents, which means each has a legal duty to act in your best interests. This is not as common as many people believe, as not all financial advising service providers are required to become registered fiduciary agents.

Both platforms have worked diligently to improve and enhance service and product offerings over the years, in the process developing some truly unique and innovative investing options (Wealthsimple’s Halal-compliant investing and Betterment’s robo advising digital algorithm model itself are two great examples).

There is no doubt that Wealthsimple’s higher account management fees present a barrier to entry for some users. You just need to decide if the value you will receive from choosing Wealthsimple justifies paying 0.40 to 0.50 percent in account management fees alone (remembering these are likely not the only fees you will be required to pay once you begin investing).

Betterment, with its focus towards passive investing for the time-crunched or simply less savvy beginning investor, is going to appeal to younger investors with less to invest and even less time to learn how to invest it. Not everyone is cut out to spend their time studying securities and constructing a sturdy investment portfolio by hand. Betterment’s investing model ensures that if you don’t want to do this, you will never have to.

Where do you fit in? Ultimately, Wealthsimple and Betterment each have a ton to offer depending on where your investing, savings and spending needs may take you today and in the future.