SoFi Invest vs Betterment: Which Robo Advisor is Right for You?
In the world of robo advisors, both Betterment and SoFi Invest (formerly SoFi Wealth) are heavy hitters. Betterment has a longer track record and more features, but SoFi Invest has no fees, so deciding which is right for you may come down to your financial situation.
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|Invest In||Stocks, ETFs, automated investing||Goal oriented portfolios|
|Minimum Account Balance||$0, one-time deposit of $100 or $20/month auto debit required to start||$0|
|Annual Fees||None||0.25% for Digital plan, 0.40% for Premium plan|
|Investing Features||Investing content, real financial advisors||Trust funds, portfolio rebalancing|
Investing can be as confusing as it is lucrative. There are many who would love to invest but don’t have the time to research stocks, rebalance their portfolios, or assess the long-term viability of their investments.
And although actively managed portfolios can handle a lot of these tasks for you, not everybody wants to pay the exorbitant fees that come with them.
SoFi Invest (Formerly SoFi Wealth) and Betterment are two of the best robo advisors on the market, and both seek to make investing accessible for all by lowering investing fees and building online interfaces that anyone can use. This review will compare how the two platforms stack up and which one makes sense for you.
In this review:
- Which Platform Offers Better Investment Options?
- Financial Guidance
- Tax Loss Harvesting
- Minimum Deposit
- Portfolio Rebalancing
- Customer Support
Which Platform Offers Better Investment Options?
SoFi Invest offers both active and automated investing.
With SoFi Automated Investing, you set your investment goals with their tools, and their robo-advisor will automatically choose exchange-traded funds (ETFs) to help you reach those goals. These ETFs are diversified across more than 20 asset classes to help protect your investments from volatile swings and expose your money to different markets.
SoFi will also strategically reinvest dividends and sell certain shares to keep your investment portfolio in line with the asset allocation your goals require.
On the other hand, SoFi Active Investing leaves the choosing of stocks up to you. It does, however, give you access to human financial advisors, real-time investing news and curated content, and a community of active investors, so you can have the tools you need to invest intelligently.
SoFi Invest allows you to set up the following types of accounts:
- Individual and joint taxable accounts
- high-yield savings account (called SoFi Money
- Roth, traditional, SEP, and rollover IRAs.
Betterment, much like SoFi Invest, uses ETFs in its portfolio management strategy. Betterment primarily uses Vanguard ETFs, which are known for their low expense ratios. The ETFs Betterment invests in also include stocks from all over the world, allowing you to diversify your holdings across many industries and asset classes.
When you set up a new fund with Betterment, the program asks you questions about your goal for that money, how much you need, the amount of time you have to reach that goal, and the level of risk you’re willing to tolerate. It will then give you a recommended allocation of stocks and bonds and manage the investment for you, including services such as daily rebalancing and reinvesting your dividends.
Like SoFi, Betterment offers the full spectrum of individual retirement accounts (IRAs) as well as both individual and joint taxable accounts and a Smart Saver fund which operates like a traditional savings account, but with a much higher APY.
Betterment does not allow you to choose individual stocks, so it has no match for SoFi Active Investing. Where Betterment pulls ahead, however, is in the ability to set up a trust. If you’re looking to set up trusts that you can designate to specific beneficiaries for later in life, Betterment is the winner.
Category Winner: Betterment for people looking to set up a Trust, SoFi Invest for people interested in active trading.
Although most of the financial guidance you’ll need is handled by both platforms’ robo-advisor algorithms, Betterment and SoFi Invest also offer real-life, licensed CFPs to help you make tough decisions and to guide your financial planning.
SoFi offers free and unlimited access to certified financial planners who can help you get set up or advise you along the way. Whether you need to refine your goals, change them completely, or have a totally different money-related concern in mind, SoFi’s experts are on call to help. In fact, they even offer career coaching.
Betterment takes a slightly different approach. If you subscribe to their Digital plan (which comes with a .25% annual fee), you can talk to their customer support team seven days a week. These representatives are responsive and helpful in explaining the more technical aspects of Betterment’s own platform, but they aren’t necessarily licensed CFPs, and they can’t give you direct financial advice.
If you have more than $100,000 in your Betterment account and you subscribe to their Premium plan, you can talk to their CFPs via phone about any financial question you have, whether it pertains to money you have invested with Betterment or outside of it. However, the Premium plan comes with a .40% annual fee.
Category Winner: SoFi Invest
Tax Loss Harvesting
If your investments are appreciating in value, then you’re generating capital gains — and that means taxes. Fortunately, experts have long-since come up with a way to defer capital gains taxes and keep more of your profits invested: tax loss harvesting.
Tax loss harvesting is the strategy of selling securities that have gone down in value to offset the capital gains of other securities that have appreciated. This keeps your net capital gains closer to zero, so you pay less in taxes now, and the money from sold securities is immediately used to purchase comparable funds, so you’re not really losing anything. Tax loss harvesting is a great way for investors to defer capital gains until later in life, so their money has more time to grow.
Betterment offers daily tax loss harvesting on all their taxable accounts, and they also have several tools that will help you minimize your liabilities. Their Tax-Coordinated Portfolio tool automatically allocates all of your investment assets across your accounts to smooth out liabilities. You can also check the projected liability after making any portfolio changes with the Tax Impact Preview tool. In addition, you can donate assets through the Charitable Giving Tool to help make up for any liabilities.
SoFi Invest, on the other hand, doesn’t offer tax loss harvesting at all. SoFi plans to roll out a tax loss harvesting program for all customers later in 2019, but there is currently nothing in place, leaving you open to additional tax liability unless you manually harvest losses yourself at the end of the year — a complicated task better left to professionals.
Category Winner: Betterment
Betterment has a $0 minimum balance for its Digital tier. You can get started in setting up goals depositing a single dime. But if you prefer the company’s top-shelf option, which comes with access to CFPs and in-depth advice on investments outside of Betterment, you’ll need to have at least $100,000 in your account.
With SoFi Invest, your account minimum is either $100 as a one-time deposit, or a $20/month automatic debit that keeps your account funded.
In either case, the minimum amount required is negligible for investors expecting to make any meaningful profits, so we’ll call it a draw.
Category Winner: Tied
What you see is what you get with both platforms. Neither charges hidden fees for things like disbursements or minimum balances.
As we mentioned earlier, SoFi Invest has no fees at all; you just need to open your account with $100 or set up a $20 monthly deposit. If you wanted, you could fund your account with $100 and never add another penny, and you still wouldn’t get charged any fees aside from the expense ratios of the underlying funds you’re invested in. Of course, you wouldn’t make much money taking that approach, either.
Betterment, on the other hand, does charge an annual management fee. Digital plan subscribers will pay .25% annually, and Premium plan subscribers will pay .40% (on top of the ETFs own expense ratios). These fees are automatically deducted from your investment balance, and they’re generously low compared to the management fees most actively managed funds demand from their clients. However, any fee at all is still more than zero, so this point will go to SoFi.
Category Winner: SoFi Invest
Automatic rebalancing is free with both platforms. This means they’ll reinvest the profits from the ETFs that are doing well to buy more of the ones that lost money, so you always stay as close as possible to your planned asset allocation. This keeps your risk level on point.
However, it’s worth pointing out that SoFi Invest rebalances your account quarterly, while Betterment does it on a daily basis (as dividends become available for rebalancing).
Category Winner: Betterment
Betterment’s customers gave them only a 2.5 star rating out of five stars on Consumer Affairs, although that only represented the feedback of a handful customers. Most negative reviews cited ease in moving money into Betterment, but difficulty or delays with moving funds out to other firms. However, our own staff have had only good experiences with Betterment’s customer support staff.
Betterment’s customer service team is available by phone and email from Monday to Friday, 9am to 6pm Eastern Time. Over the weekends, you can email their customer service team from 11am to 6pm Eastern Time.
SoFi has a similar star rating on Consumer Affairs, although it reflects SoFi’s business as a whole, not just their investing branch.
SoFi Invest phone support is available Monday through Thursday, from 7am to midnight Eastern time, and Friday through Sunday 7am to 8pm Eastern Time.
Category Winner: Tie
Bottom Line: Betterment vs SoFi Invest — Which is Right for You?
When deciding between Betterment and SoFi Invest, each company has its positives and negatives to consider. SoFi is better for investors who want to actively play a role in the stocks they invest in, but who need guidance along the way.
SoFi also wins when it comes to cost, since it charges no management fees for its services.
However, those who are serious about investing moderate to large sums of money — but who want to take a hands-off approach — may be better served by Betterment. Thanks to its tax loss harvesting feature and conscientiousness of local tax provisions, Betterment may make up for its management fee in offset capital gains taxes. This is especially true for investors who are not in the lowest tax bracket. Betterment also has a much longer track record of success in managing investments.
Before choosing either service, however, make sure you understand your own financial situation and what facets of investing are important to you.
Author: Jeanette Perez