​I invested 50/50 in Betterment and Wealthfront and this is what happened

022312_etfs_front_leadI’ve been hearing a lot of debate between financial “experts” and casual investors around the pros and cons of ETFs and managed VS. unmanaged accounts.  As I mentioned in this posts about “when experts disagree do your own thing” I figured the only way to get a non-bias answer is to spread my investments in them all and see what happens in 30 years. Sure, anything could happen but if nothing else I’ll learn a lot.

​I recently invested 50/50 in Betterment and Wealthfront for my unmanaged ETF test (based on my good friends Daniel Odio’s post) to see how they perform overtime and to compare the results to my fully managed investment account. This won’t be as much of an investigation and extension of any debate but rather a summary of my personal experience with products and services across the board. For this post I will focus on what my initial experience has been between Betterment and Wealthfront so far.

I thought it would take a while to start spooling up some experiences but in the first inning (as a new depositor into both Betterment and Wealthfront accounts. Same amounts, risk settings etc  ) Betterment is definitely ahead, here’s why: the stock market took a plunge these last few weeks and I wanted to  invest in the possible fire sale. Now whether or not that tactic is sound is another story. What matters to me personally is that I was able to invest directly from my bank account into Betterment within 24 hours seamlessly. In addition the site and my app showed me the money was deployed and begun to display gains/loses immediately. Wealthfront took over a week to transfer and although the money shows as being pulled from my bank account there is still no sign of it in the Wealth front app or dashboard. The app has no insight into anything and just shows a list of recently posted blogs by the company.

That lag has already cost me 3% and If the market continues to recover it who knows how much that will mean long term. Of course if the market continues to dip the lag in wealth front will be a lucky break but I don’t use a service hoping it will work poorly so that sways in the market will work in my favor. 

Regarding the apps, Betterment is the winner so far as well. Welathfront may have no more information and graphs once the funds display correctly, but who knows at this point as a new investor – current there is just a 0 on the screen that is not clickable. Betterment lists my pending transaction, as well as current deployed capital broken down by earnings to date. And it’s the same story for the website. From a user experience point of view Welathfront just shows me the same form it showed me when I initiated the bank transfer – no updates or info is accessible for this account with any useful information.

The lack of “warm and fuzzy” information I am getting as a new customer leaves me concerned for what my future experiences will be like with Wealthfront.  It’s far to early to count them out since, if after the funds are deployed, I may get great graphs, information, tax benefits, and more but as a new user the cold hard fact it I am more satisfied with the way Betterment is taking care of me than Wealthfront.

In closing, at this stage of the experiment I:

a) hope that the post-funding user experience at Wealthfront is way better than the ramp up experience.

b) suggest that WealthFront improve upon the points listed above.

I know there may be many features and options that I am missing that both can do but in the initial experience where features are limited as is my expertise with using the systems I can only comment on what I know as a new customer and that is what I have done. Honestly, I win if both do well so I mean it when I say: best of luck to the challengers!

Comments

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10 thoughts on “​I invested 50/50 in Betterment and Wealthfront and this is what happened

  1. That Wealthfront lag affected me as well! My investment horizon is long (ish) so not a big deal in the grand scheme but certainly a 4% swing in a few days was annoying.

  2. Looks like Wealthfront is ready to step up their game: Wealthfront announces $64M in new financing, has over $100M+ in cash on hand to reimagine the future of investing

  3. I am sorting out who to invest a substantial amount of money from my XOM retirement lump sum and 401k. I contacted Betterment via email and had a great subsequent conversation with one of their principals and came away quite satisfied. I posed the same questions to Wealthfront and rather than a phone call, I got an email that essentially said read the FAQ’s. I know who I am using.

  4. Here’s another user experience update. Just got my Betterment tax docs today, Wealthfront says sometime in “mid-feburary” with no specific dates.

  5. Did you enable tax loss harvesting on both accounts? If so, isn’t this going to generate wash sales between betterment and wealth front when they do their own individual tax loss harvesting?

    • Yes for Betterment, no for Wealthfront. Not by a personal choice but based on the minimum account value you must have for the system to implement it. Betterment allows a lower overall account value to enable tax loss harvesting. I think it’s still a fair comparison since the experiment is to see how each account performs given the same allocations.

  6. You should post a follow up to this article. How has it been over time? I’m 8 months into Betterment with 2.9% time weighted returns, with a 90stock/10bond split.

  7. I stumbled through your informative blog through google. If it’s possible, could you post an update on the accounts, and what your risk profiles and exposures were?

    I think that’d be great info on comparing the two.

    Thanks!

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