Betterment vs. Charles Schwab vs. Robinhood

Daniel Penzing
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About Betterment

If you have enough money in your account to justify annual fees, you may benefit from the services like those provided by Betterment, Charles Schwab, or their competitor Robinhood.

To get started with Betterment, merely sign up and deposit some cash. The money you put in is invested in the diversified ETF portfolio that Betterment has put together for you. Betterment automatically rebalances your portfolio every two weeks to maintain your desired weighting. Betterment also offers other features for their customers.

They offer free credit score monitoring with annual credit report, research, personal advice, mobile application, tax loss harvesting, automated tax-loss harvesting, self-directed account types, tax-optimized account types, retirement cash account, and tax-optimized account types.

Betterment’s state of the art online software makes it easy to place trades and follow your account. You can also access your account on an app provided by Betterment called “Betterment for iOS.”

Charles Schwab offers similar services to Betterment, but is also a full-service bank. Charles Schwab also offers a host of banking products and services.

About Charles Schwab

The Charles Schwab Corporation (doing business as Schwab) is an American Fortune 500 banking and financial services corporation headquartered in San Francisco, California. It provides a range of financial services, including brokerage, banking, money management, and various insurance products. Schwab is considered one of the largest and most successful brokerage firms in the USA by assets.

About Robinhood

Robinhood is the latest fast-growing fintech startup to shake up an industry, launching in the US with the promise of bringing commission-free trading to the masses. It’s a refreshing change from the industry’s usual tendency to nickel and dime its customers, so it’s no surprise that customers have been flocking to the platform. But is Robinhood really meaningfully better than the established players in the online trading space? When it comes to the core functions of a brokerage, the answer is almost certainly no. Specifically, Robinhood lags significantly behind competitors like Charles Schwab and Betterment when it comes to tax-efficient trading and long-term retirement planning. There’s also a bit of a catch with Robinhood: its approach to investing isn’t for everyone. If you’re a seasoned veteran of the stock market looking for premium investment options, you’re far better off with an online broker like Charles Schwab, Merrill Edge, or E*Trade.

How Are They the Same?

All three companies are online brokerages that allow you to buy and sell your own stocks, instead of having a professional broker or financial advisor to do it for you. Their fees are very low, and they have fantastic trading platforms that are easy to use.

All three of these companies are owned by investors and don’t have any advisers who are actively picking stocks. As a result, all of these companies offer very low fees, and they also don’t give free no-commission trades.

The brokerages are owned by companies that have other businesses, so they are “all in one” platforms for people in the market to buy stocks. This means that you can open an account, invest your money, track your stocks, and get investment advice all in a single platform.

How Are They Different?

The first thing that you need to determine is what exactly it is that you are looking for. They all offer a similar investment product, but have different costs, features, and benefits that make them more or less appealing.

Betterment is probably the cheapest option if you don’t want to spend a lot of money. Over time, they have the potential to offer the best return on investment, but it requires more time to see the benefits.

Charles Schwab is the cheaper option when compared to Robinhood. Robinhood is the best option of all if you only trade occasionally. It reduces fees to a minimal amount, and you don’t have to deal with a lot of paperwork. It is the most convenient option of all, but it’s limited to stocks and ETFs.

Unique Features

All three of these companies are online brokerages, meaning they make it easier for you to buy, sell, and manage your investments online.

However, each has slightly different offerings.


Vs. Charles Schwab vs. Robinhood – Asset allocation

The big takeaway here is that all three of these robo-advisors are great and they all have a similar asset allocation strategy. They diversify investors into large Cap stocks, international stocks, and a number of other asset classes.

So they are all good for you if you prefer simplicity.

Small cap stocks are certainly no joke. They are very volatile, but they can give you an incredible return over time. They’re a higher risk asset class, but as you can see from these three charts, there are plenty of other asset classes that can be incorporated into your account to offset that risk.

Because robo-advisors ultimately allocate your money into larger index funds and ETFs, the fees will be low. The fees will vary, but you can expect to pay between 0.15% to 0.50% when you invest with these robo-advisors. Because of the low fees, you don’t have to worry about my downside, at least as far as fees are concerned. They can also be a great way to invest for an emergency fund. You can sign up for each robo-advisor, park your emergency fund in there, and then you don’t have to think about your money for a while.

Charles Schwab

Review: Should You Open an Account?

Closed-End Funds: These are basically mutual funds that were started up years ago. Unfortunately, they're closed to new investors. You can only buy shares on the secondary market. It's worth noting that Schwab gains its own profits from the sale of these shares. That means that it charges a fee when you buy and sell them through Schwab. Current yield: 0.68% Annual fees: 0.55%

ETFs : These are newly created funds that don't have restrictions on who can buy them. You're not limited to shares that are trading on the secondary market. Hence, the fees are a bit higher than closed-end funds, but certainly lower than index mutual funds. Current yield: 0.76% Annual fees: 1.19%

Index Mutual Funds: These funds invest in all the shares in their target index. This means they're more well diversified and don't have risks that single stock mutual funds have. That means you pay lower fees. Current yield: 0.91% Annual fees: 0.39-0.77%


Vs. Betterment Vs. Charles Schwab

What are your investment goals?

There are many excellent online brokers and robo-advisors to choose from, including Betterment and Charles Schwab. We’ll show you who we think is best based on your investment goals. We also’ll show you how you can save with each broker.

Robinhood is an online commission-free brokerage service that is ideal for investors looking to get a jump-start in the financial markets.

They offer low-cost access to a large number of stocks and ETFs. They have a similar offering to other online brokerages, but they have a number of unique selling points too. We’ll take a look at all three options below.

If you are interested in Robinhood, you’ll find a full review here.

Investors should consider carefully whether Robinhood or another online broker is the best choice. All of the following information can help you make that determination.

Minimum Investments


Which is lower?

The fees involved with holding an ETF at each broker are similar, but the Betterment and Robinhood commission fees are a little lower than the Charles Schwab fees. Let’s take a look:

Betterment and Robinhood

With Betterment, there are no commissions from the fund itself. However, you do have to pay a 0.35 percent fee to the exchange-traded fund (ETF) company each year to have access to Betterment’s basket of ETFs.

The biggest upside with Betterment and Charles Schwab is that both companies offer free investment management on ETFs that track U.S.-listed ETF’s. (That is, U.S.-listed index ETF’s.)

Curious what that means? An index is a collection of core holdings in a fund. The index fund actually owns these stocks, and you, the investor, simply get exposure to these companies by buying shares in the fund.

Standout Features

Customer Service

Betterment is the clear winner here. Not only is the customer service available all year round on chat, phone and email, but you can also sign up for a free in depth financial review with a licensed financial planner. You can even ask them questions about your profile from email to phone where other financial advisors typically require you to make an appointment.

Who Are They Best For?

The three companies in question are all low-cost investing platforms, which means they knock a certain percentage off of what the user would pay if they invested directly with an advisor instead of them.

So they are essentially discount brokerages, similar to OptionsHouse, Robinhood, or Motif Investing.

That said, people with fairly simple investment accounts are going to find these platforms very appealing.

Robinhood is more for investors with a large account, while Betterment and Schwab are both more EDU-oriented platforms.

Charles Schwab is for all types of investors, but especially professionals.

Which Is the Best?

Betterment and Schwab are both great investment firms. The have many advantages that favor them over many investment firms. They offer no-fee services that are favored by most individual investors. They have also risen in popularity due to ease of use. After all, being able to open an account, transfer funds, and start investing is much easier than it has ever been.

What you will find when comparing these investment companies is that they each offer a different approach to investing. They focus on different companies. They invest in different industries that may be attractive to different types of investors. A closer look at each of these investment firms will tell you what you need to know about them to make an informed decision.