Should I leave Betterment?

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CommitmentDevice
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Should I leave Betterment?

Post by CommitmentDevice » Mon Apr 08, 2019 11:18 am

Dear fellow Bogleheads,
I've been happily using Betterment for the past few years. I started reading Bogleheads a few weeks ago and now wonder if I ought to switch to a Three-Fund Portfolio viewtopic.php?p=4472637#p4472637. There have been a lot of good discussion threads on the +/- of Betterment but I'm still wrestling with the trade offs. :confused I'd welcome the community's advice.

I really like Betterment for the following reasons:
  • Convenience - Their website has great user experience design and I can quickly access the functionality I need. For example, I find it easy to set up auto-deposits, pull meaningful reports, submit tax information to TurboTax, etc. The automatic re-balancing and tax-coordination across accounts is also nice.
  • Portfolio - their portfolio composition strategy seems to be grounded in Boglehead-esque investment theories (diversify, keep costs low, take appropriate level of risk vis-a-vis goals/time horizon). I also like that I can enable Socially Responsible Investing filters for certain asset classes. Tax loss harvesting could be useful for me, but most of my money is in tax-exempt accounts. I've attached a screen shot of my Betterment holdings in case this is helpful. https://drive.google.com/file/d/1Mk9oV4 ... sp=sharing
  • Switching costs - I'm already with Betterment so switching would be a hassle. Also, I want to curb my impulse to chase the next shiny thing. Like, I could see myself getting excited about factor investing or Wealthfront or something else every few years and end up not getting the benefits of sticking to a particular investment plan for decades.
I also have reasons why I'm nervous about Betterment:
  • Fees - A 0.25% annual fees seems reasonable and fairly immaterial to me. However, I'm open to being persuaded otherwise.
  • Portfolio - Is there evidence that the Three-Fund Portfolio might be a better composition vis-a-vis Betterment's portfolio?
  • Wash sales - My intuition is that this isn't much of an issue in practice, but I could be wrong
  • What if Betterment goes under? I'm not sure how much risk I'm exposed to vis-a-vis Vanguard
About my household:
  • Us - Late 30s, married filing jointly, one dependent, residence in high cost of living area, 24% federal tax rate, 0% state tax rate. Putting 30% of our monthly budget into paying down debt and investing (focusing on maxing Roth IRAs and building up our Emergency Fund)
  • Assets - Non-taxable: $80K Roth IRA, $10K Traditional IRA (both with Betterment at 90% stocks / 10% bonds), Taxable: $0. $10K in employer 401Ks. Emergency Fund: 1mo.
  • Liabilities - Bad debt: $0. Debt: $95K student loans at 3% and 4.8% interest, $10K auto loan at 0% interest.

Pioneer
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Re: Should I leave Betterment?

Post by Pioneer » Tue Apr 09, 2019 7:00 am

CommitmentDevice wrote:
Mon Apr 08, 2019 11:18 am
[*]Liabilities - Bad debt: $0. Debt: $95K student loans at 3% and 4.8% interest, $10K auto loan at 0% interest.
[/list]
All debt is bad debt. Student loans are the worst debt imaginable. Car loans are ridiculous, it's a depreciating asset. Pay off your debts ASAP.

StopIroningShirts
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Re: Should I leave Betterment?

Post by StopIroningShirts » Tue Apr 09, 2019 7:07 am

I helped a friend out of Betterment. The process to transfer was fairly easy and she was going to Fidelity.

It was more difficult around tax time to reconcile the cost basis. If Betterment does what they say, you might have a tax issue if they won't allow an in-kind transfer of the positions. Feedback on this has been mixed, but in the situation I helped with they transferred all the ETFs over.

You can save money by moving out, I think its a choice of how much work you want to do vs. outsourcing.

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Quercus Palustris
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Re: Should I leave Betterment?

Post by Quercus Palustris » Tue Apr 09, 2019 7:36 am

I switched my IRA from Betterment to Vanguard. I liked Betterment for similar reasons when I was just starting out, but I wanted simplicity, lower fees, and after reading all I could here and some of Bill Bernstein's books I decided to take the plunge.

If you care at all about UX and features, I'd honestly recommend Fidelity over Vanguard. VG's website is... adequate. That's about the nicest thing I can say about it.

If you prefer SRI/ESG investing, you can make a 3-fund portfolio at Fidelity with:
US Sustainability Index Fund (FITLX), US large/mid, 0.11% ER
International Sustainability Index Fund (FNIDX), Int'l, 0.20% ER
Sustainability Bond Index Fund (FNDSX), US bond, 0.10% ER

And that's just the mutual funds which allow automatic investing (if you're contributing throughout the year). Nearly (all?) the iShares ETFs are commission-free at Fidelity now so you can do a similar ETF portfolio as well. Maybe calculate the expense for your desired allocation, and see what the price difference is for moving/staying?

I guess as a point of comparison: My overall expenses for retirement funds (employer 401k @ Schwab, IRAs @ Vanguard) works out to 0.07%. Betterment was 0.25% + whatever the ER of the funds was. Not an amount that will make/break my retirement, but enough to goad me into looking elsewhere.

aristotelian
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Re: Should I leave Betterment?

Post by aristotelian » Tue Apr 09, 2019 7:44 am

If the question was, "Should I move to Betterment?", what would you say? If the answer is No, then the only reason for staying is inertia.

onourway
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Re: Should I leave Betterment?

Post by onourway » Tue Apr 09, 2019 8:04 am

I think you should move for several reasons.

One, Fees. You may not think the 0.25% is that expensive, but have you calculated out the true cost over, say, 20 years? That cost is likely to run into the tens of thousands of dollars. And that's if they don't increase fees any further, which is, IMO, not likely. Like many new tech service offerings they are more than willing to operate at a loss for many years in order to gain market share. At some point, however, they must make themselves profitable, and that's usually at the point when the switching costs have become very high for existing users. They are free to then ratchet up fees considerably. This happens all the time with tech services.

Two. Complexity. There is zero reason that you need to have anywhere near the number of holdings you have now. You gain absolutely nothing from such a portfolio. Worse, if you end up with that kind of portfolio in your taxable account, it can become a real mess to unwind.

Three. Consistency. Services like Betterment are so new and targeting a demographic that is very swayed by the flavor of the month. They are likely to continually alter their investment advice based on what is trendy, not what is stable and consistent for users.

Four. Choosing your own investments is not hard. You could own a single fund in each of your accounts at this point. Or for your entire life.

MotoTrojan
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Re: Should I leave Betterment?

Post by MotoTrojan » Tue Apr 09, 2019 8:17 am

Pioneer wrote:
Tue Apr 09, 2019 7:43 am
MotoTrojan wrote:
Tue Apr 09, 2019 7:18 am
Pioneer wrote:
Tue Apr 09, 2019 7:00 am
CommitmentDevice wrote:
Mon Apr 08, 2019 11:18 am
[*]Liabilities - Bad debt: $0. Debt: $95K student loans at 3% and 4.8% interest, $10K auto loan at 0% interest.
[/list]
All debt is bad debt. Student loans are the worst debt imaginable. Car loans are ridiculous, it's a depreciating asset. Pay off your debts ASAP.
This is a ridiculous reply.

OP it’s a riskier move with taxable as it’s harder to unwind tax-free, but I’d still look to move once you are comfortable with it, and I wouldn’t start taxable investing with them (wash sales alludes to this coming).
It's not ridiculous, it's my opinion. OP asked, and I responded.
Your rationale for a 0% loan being ridiculous with 2%+ risk-free rate would be appreciated.

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Eagle33
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Re: Should I leave Betterment?

Post by Eagle33 » Tue Apr 09, 2019 6:34 pm

CommitmentDevice wrote:
Mon Apr 08, 2019 11:18 am

[*]Fees - A 0.25% annual fees seems reasonable and fairly immaterial to me. However, I'm open to being persuaded otherwise.
You can use this website to compare your current ER before adding the 25bps annual fee to the ER for the second fund to see impact over time.
https://www.begintoinvest.com/expense-ratio-calculator/
Rocket science is not “rocket science” to a rocket scientist, just as personal finance is not “rocket science” to a Boglehead.

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LadyGeek
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Re: Should I leave Betterment?

Post by LadyGeek » Tue Apr 09, 2019 6:58 pm

I removed an off-topic comment and reply. As a reminder, see: General Etiquette
At all times we must conduct ourselves in a respectful manner to other posters.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

michaeljmroger
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Re: Should I leave Betterment?

Post by michaeljmroger » Tue Apr 09, 2019 11:43 pm

If you were starting from scratch, I’d probably recommend Vanguard, but in your case, I honestly wouldn’t switch. You pay a small fee (“immaterial” to you) for a super convenient service, a great portfolio, and a tool that’s a lot nicer to use than Vanguard. Just keep investing and enjoy your life!

CnC
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Re: Should I leave Betterment?

Post by CnC » Wed Apr 10, 2019 7:35 am

Pioneer wrote:
Tue Apr 09, 2019 7:00 am
CommitmentDevice wrote:
Mon Apr 08, 2019 11:18 am
[*]Liabilities - Bad debt: $0. Debt: $95K student loans at 3% and 4.8% interest, $10K auto loan at 0% interest.
[/list]
All debt is bad debt. Student loans are the worst debt imaginable. Car loans are ridiculous, it's a depreciating asset. Pay off your debts ASAP.

Why are car loans ridiculous?

Keeping a 10k auto loan at zero percent is much smarter than paying it off.

rgs92
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Re: Should I leave Betterment?

Post by rgs92 » Wed Apr 10, 2019 8:22 am

Why pay Betterment .25% each year when you can buy VBIAX (vanguard balanced index) .07% a year for (my opinion) likely better results?

Topic Author
CommitmentDevice
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Re: Should I leave Betterment?

Post by CommitmentDevice » Thu Apr 11, 2019 9:23 am

Thanks Bogleheads! Your responses really helped me clarify what I believe are the key differentiators between Betterment and a Three-Fund Portfolio.

The key factors that matter for me are fees and convenience, and it is a direct trade off between the two. As @StopIroningShirts shared, "You can save money by moving out, I think its a choice of how much work you want to do vs. outsourcing."

FEES
@Eagle33 - your calculator was exactly what I needed to see how much an additional .25% in fees actually means compounded over 30 years. Being with Betterment is going to cost me an additional $70K over thirty years (assuming $90K invested now plus $10K/yr over 30 years at a 6% interest rate). $70K in 2049 dollars is roughly $35K in 2019 dollars, so the question is really "would I be comfortable paying $35K today for 30 years of Betterment's services?" Maybe, maybe not. It isn't enough to ""make/break my retirement" as @Quercus Palustris says, but itt certainly isn't "immaterial" like I'd thought.

CONVENIENCE
I now realize that the basics of setting up and running a three-fund portolio are simple. However, Betterment does a bunch of other "makes my life easier" things beyond the selection of the investments. The UX, returns projections based upon goal and risk setting, tax implications, automatic rebalancing, etc. The list here is long. For an amateur investor, Betterment is providing real value.

WHERE I DON'T SEE DIFFERENTIATION
  • Portfolio composition. Many of you might disagree but I see the two portfolios as basically the same in terms of the pre-fees returns I could expect
  • I'm not concerned about Betterment further raising fees. Their business model can do just fine with managing billions of dollars at .25%/y.
VERDICT
I need to sit on this a bit longer. I now have a much better appreciation for how much I'm paying for Betterment's services. A clarifying note is that if I had a big financial windfall and my investment principle were to be 10x larger, would I be comfortable with paying 10x more fees for what I get from Betterment and the answer is no. So some of this is level of convenience vis-a-vis the scale of my investments.

THANK YOU for your sage advice, everyone!

jpark1982
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Re: Should I leave Betterment?

Post by jpark1982 » Thu Apr 11, 2019 10:23 am

If you look at it only from a dollars and cents point of view, then yes paying for Betterment when you could do it yourself might detract from a lot of people here. But then again if we look at it that simply we could cut out a lot of things that we pay for. We could all chose not to pay for any cable TV or streaming. We could all pack ham and cheese sandwiches instead of buying lunch while at work. We could all cook dinner at home instead of getting a steak.

It's all about personal opinion on what goods and services are worth paying for and how big a convenience factor plays in. Myself personally if given the choice would not pay for valet parking if given the option to park the car myself. Plenty of people pull up to the mall, hand the keys over to a valet, and pay $5-10 for them to part the car. It's because they chose (whether smart or not) that the time they spend driving around in circles looking for a spot isn't worth the tradeoff of the convenience of just going in right away.


There's things out there that cost real money that provide a convenience and worth the price to pay, whether justified in the eyes of some people versus. There's a reason why fee based services exist, people make the decision that the price paid is worth it for me. It's almost like these robos that charge a fee (Betterment, Wealthfront, Fidelity Go, etc) are now the dreaded financial advisor in the business suit charging 1-2% AUM of the present age.

hster
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Re: Should I leave Betterment?

Post by hster » Sun May 12, 2019 12:06 am

The main reason I am considering leaving Betterment is so I can control the international/domestic ratio. The Betterment international component is much too high for me personally at 48% not just because Betterment underperformed the record U.S. bull market by 100% in the last 5 years and so I am also contemplating leaving Betterment for a 3 fund where I would keep 20% in international. Growth prospects for Europe and Japan are dim.

plides
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Re: Should I leave Betterment?

Post by plides » Mon May 13, 2019 11:41 pm

Forgive me if I'm mistaken, but wouldn't the "Flexible Portfolio" feature (https://www.betterment.com/resources/fl ... omization/) allow you to reduce your international exposure?

zeal
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Re: Should I leave Betterment?

Post by zeal » Tue May 14, 2019 6:55 am

You could open a new account at another institution without moving your entire portfolio--just stop contributing to Betterment and direct new money into the new institution for a few months to test it out. You can then make your Betterment-or-not decision based on your hands-on experience. If you hate it, you can always transfer back to Betterment.

I opened our Roth IRAs in Jan/Feb and couldn't decide between Fidelity and Vanguard so I opened mine at Fido and wife's at Vanguard (we'd have to have separate accounts anyway, so why not?). After about 2 months managing both, I'd learned that I like Fido's UX way better, but I like Vanguard's principles, costs, and efficiency much more. We'll continue using each for different purposes--Fido for our cash management, my Roth IRA, and my ESPP; Vanguard for her Roth IRA and our taxable account.

strafe
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Re: Should I leave Betterment?

Post by strafe » Tue May 14, 2019 7:16 am

My only concern with Betterment is the possibility of receiving a 1099 hundreds of pages long due to tax loss harvesting. I know it can be imported into tax software, but I value the simplicity of no capital gains transactions.

The aggressive tax loss harvesting is worth the 0.25% management fee for most people. If you only invest in retirement accounts, this doesn't apply.

Exiting Betterment could leave you holding a complicated ETF portfolio. Not the end of the world. Their portfolios are at least sound.

strafe
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Re: Should I leave Betterment?

Post by strafe » Tue May 14, 2019 7:18 am

CommitmentDevice wrote:
Mon Apr 08, 2019 11:18 am

I also have reasons why I'm nervous about Betterment:
  • Wash sales - My intuition is that this isn't much of an issue in practice, but I could be wrong
About my household:
  • Assets - Non-taxable: $80K Roth IRA, $10K Traditional IRA (both with Betterment at 90% stocks / 10% bonds), Taxable: $0. $10K in employer 401Ks. Emergency Fund: 1mo.
Wash sale rules only apply to assets sold at a loss in taxable accounts.

Nummerkins
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Re: Should I leave Betterment?

Post by Nummerkins » Tue May 14, 2019 7:20 am

Check out M1 Finance. It is similar but free and has a few unique features. https://www.m1finance.com/how-it-works/invest

They realized that making a portfolio is not hard and so should not cost customers money.

xavierr
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Re: Should I leave Betterment?

Post by xavierr » Tue May 14, 2019 12:16 pm

I may be missing something, but I agree with the posters who suggest you should pay back your student loans at 3% and 4.8% before allocating any percentage to bonds. You are effectively borrowing at an average rate close to 4% to invest in risk free bonds with rates of less than 3%, and credit risky bonds with an average rate probably close to 4% (ie. you’re taking on credit risk and not getting paid for taking that risk). Eg look at what happened to EM bond ETFs in 2008 — some lost almost 40% of their value...

aristotelian
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Re: Should I leave Betterment?

Post by aristotelian » Tue May 14, 2019 12:30 pm

Pioneer wrote:
Tue Apr 09, 2019 7:00 am
CommitmentDevice wrote:
Mon Apr 08, 2019 11:18 am
[*]Liabilities - Bad debt: $0. Debt: $95K student loans at 3% and 4.8% interest, $10K auto loan at 0% interest.
[/list]
All debt is bad debt. Student loans are the worst debt imaginable. Car loans are ridiculous, it's a depreciating asset. Pay off your debts ASAP.
Student loan debt is nowhere near the worst imaginable. The worst imaginable is gambling debt owed to a loan shark threatening to kill/torture you if you don't pay. Payday loans are slightly better than that, followed by credit card debt. I would strive to avoid any of the above at all costs.

I would put student loan debt in a completely different category of debt that is best to be avoided but sometimes worth taking if the interest rate is reasonable. Car loan would be another example but I would prefer to take on debt for education than for a car.

deikel
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Re: Should I leave Betterment?

Post by deikel » Tue May 14, 2019 3:21 pm

CnC wrote:
Wed Apr 10, 2019 7:35 am
Pioneer wrote:
Tue Apr 09, 2019 7:00 am
CommitmentDevice wrote:
Mon Apr 08, 2019 11:18 am
[*]Liabilities - Bad debt: $0. Debt: $95K student loans at 3% and 4.8% interest, $10K auto loan at 0% interest.
[/list]
All debt is bad debt. Student loans are the worst debt imaginable. Car loans are ridiculous, it's a depreciating asset. Pay off your debts ASAP.

Why are car loans ridiculous?

Keeping a 10k auto loan at zero percent is much smarter than paying it off.
Did you consider the required comprehensive insurance your car loan makes you have (assuming you don't hold it at risk) ? even a 0% car loan does not come at zero cost to you....just saying

I believe the point was that all debt of a depreciating asset is a rather bad idea and just because many people hold that kind of debt, does not make it smart....arguable, education debt is a debt on a depreciating asset as well given human tendency to deteriorate in health over time (human depreciation?)
Everything you read in this post is my personal opinion. If you disagree with this disclaimer, please un-read the text immediately and destroy any copy or remembrance of it.

deikel
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Re: Should I leave Betterment?

Post by deikel » Tue May 14, 2019 3:29 pm

aristotelian wrote:
Tue May 14, 2019 12:30 pm
Pioneer wrote:
Tue Apr 09, 2019 7:00 am
CommitmentDevice wrote:
Mon Apr 08, 2019 11:18 am
[*]Liabilities - Bad debt: $0. Debt: $95K student loans at 3% and 4.8% interest, $10K auto loan at 0% interest.
[/list]
All debt is bad debt. Student loans are the worst debt imaginable. Car loans are ridiculous, it's a depreciating asset. Pay off your debts ASAP.
Student loan debt is nowhere near the worst imaginable. The worst imaginable is gambling debt owed to a loan shark threatening to kill/torture you if you don't pay. Payday loans are slightly better than that, followed by credit card debt. I would strive to avoid any of the above at all costs.

I would put student loan debt in a completely different category of debt that is best to be avoided but sometimes worth taking if the interest rate is reasonable. Car loan would be another example but I would prefer to take on debt for education than for a car.
Consumer debt in general is not great and car loans should fall just shy of that category, but agreed that education and mortgage are further down the ladder of undesirable debts
Everything you read in this post is my personal opinion. If you disagree with this disclaimer, please un-read the text immediately and destroy any copy or remembrance of it.

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Nate79
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Re: Should I leave Betterment?

Post by Nate79 » Tue May 14, 2019 3:49 pm

There is nothing wrong to pay 0.25%-0.3% especially if it keeps you from making behavioral errors that will cost you way more than the annual fee. That and the value of the time savings it might well be worth it. Schwab might be a better choice but regardless we are talking about minimum amount of money for the value they are providing in the grand scheme of things.

And pay off the debt....

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unclescrooge
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Re: Should I leave Betterment?

Post by unclescrooge » Tue May 14, 2019 3:57 pm

Pioneer wrote:
Tue Apr 09, 2019 7:00 am
CommitmentDevice wrote:
Mon Apr 08, 2019 11:18 am
[*]Liabilities - Bad debt: $0. Debt: $95K student loans at 3% and 4.8% interest, $10K auto loan at 0% interest.
[/list]
All debt is bad debt. Student loans are the worst debt imaginable. Car loans are ridiculous, it's a depreciating asset. Pay off your debts ASAP.
All blanket statements are inherently false.

Including the one I just made. :mrgreen:

hster
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Re: Should I leave Betterment?

Post by hster » Thu May 16, 2019 11:49 am

plides wrote:
Mon May 13, 2019 11:41 pm
Forgive me if I'm mistaken, but wouldn't the "Flexible Portfolio" feature (https://www.betterment.com/resources/fl ... omization/) allow you to reduce your international exposure?
Yes I've contemplated rebalancing with that feature before but if I was making such manual allocations, there is zero reason to give betterment a management fee.

tchoupitoulas
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Re: Should I leave Betterment?

Post by tchoupitoulas » Thu May 16, 2019 12:28 pm

I am a Betterment customer and am happy with it. Here are the reasons I think it is worthwhile to pay them a 25 bps management fee:

1) Tax loss harvesting. I realize this isn't super relevant for you since you don't have taxable investments. I've been an investor with them since 2014 and in that time have had tens of thousands in losses that I have been able to use to offset gains when I pay my taxes. The service has more than paid for itself. I know many Bogleheads will say that TLH is "easy" to do yourself. I personally do not want to monitor my investments with the attention and diligence required to recognize and act on loss harvesting opportunities in a disciplined and systematic way. You will also find, despite the claim that it is easy, hundreds of pages of discussion on this site about how best to do it (this is a recurring theme).

2) Rebalancing. Again, something many Bogleheads will claim is easy but something I don't want to have to do. Again, you'll find many threads full of impassioned debate and discussion about the optimal approach. I don't want to have to worry about it.

3) Tilts. Another thing that is hotly debated here. While value and small cap tilts have not been doing Betterment any favors in the past few years, I do believe in them over the long term and am happy to have them. They would be harder to replicate manually.

4) Asset location. If you have savings in roth/traditional/taxable then it makes sense to locate different investments differently across those accounts. For example, certain investments pay larger dividends that would usually be taxed as income, so you'd want to be sure to locate those in one of the tax advantaged accounts. A roth would be the place for high-growth investments like emerging markets. Betterment does all this for me. It's another thing that is relatively tricky to DIY if you're serious about doing it right.

6) Behavioral risk. I find it easy to ignore my Betterment investments. I have another account with a traditional broker where my 401k from an old job is located. With that money I find it hard to resist making changes every few years (including most recently in response to Hedgefundie's excellent adventure). I think set it and forget it has the underappreciated behavioral benefit of taking myself out of the equation.

In general, many Bogleheads will tell you that they do all of this stuff on their own and that it is perfectly easy and straightforward to do. I'm sure there is truth in what they are saying. But I also think that just because you *can* do something yourself for free doesn't mean you *should.* I would rather spend my time and energy on other things.

Topic Author
CommitmentDevice
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Re: Should I leave Betterment?

Post by CommitmentDevice » Thu May 16, 2019 1:14 pm

I'm the original poster and was surprised to see this thread come back to life.

Here is what I've learned in the past month:
  • Increasing household income is the most powerful lever available to my family to increase our long term investment success. My wife and I both have a lot of unrealized upside and so our focus right now should be on increasing our salaries (while holding static our expenditures). This will be way more significant for our long term financial health that further optimizing our asset allocation or moving out of Betterment.
  • As a secondary priority, I want to move from Betterment to the 3-fund portfolio. Those 25 basis points are a reasonable cost for the services rendered, but they add up (or, compound, actually). I'm in line for the Bogleheads 3-fund portfolio book from my local library. Reading that will be my next step.
  • Lastly, as an update, my wife and I budgeted to pay off student debt much faster. We should be debt free in the next 7 years at the latest.
Appreciating this community. Thank you!

Topic Author
CommitmentDevice
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Re: Should I leave Betterment?

Post by CommitmentDevice » Fri May 17, 2019 2:25 pm

Appreciating your well thought-out and well articulated thoughts.
tchoupitoulas wrote:
Thu May 16, 2019 12:28 pm
I am a Betterment customer and am happy with it. Here are the reasons I think it is worthwhile to pay them a 25 bps management fee:

1) Tax loss harvesting. I realize this isn't super relevant for you since you don't have taxable investments. I've been an investor with them since 2014 and in that time have had tens of thousands in losses that I have been able to use to offset gains when I pay my taxes. The service has more than paid for itself. I know many Bogleheads will say that TLH is "easy" to do yourself. I personally do not want to monitor my investments with the attention and diligence required to recognize and act on loss harvesting opportunities in a disciplined and systematic way. You will also find, despite the claim that it is easy, hundreds of pages of discussion on this site about how best to do it (this is a recurring theme).

2) Rebalancing. Again, something many Bogleheads will claim is easy but something I don't want to have to do. Again, you'll find many threads full of impassioned debate and discussion about the optimal approach. I don't want to have to worry about it.

3) Tilts. Another thing that is hotly debated here. While value and small cap tilts have not been doing Betterment any favors in the past few years, I do believe in them over the long term and am happy to have them. They would be harder to replicate manually.

4) Asset location. If you have savings in roth/traditional/taxable then it makes sense to locate different investments differently across those accounts. For example, certain investments pay larger dividends that would usually be taxed as income, so you'd want to be sure to locate those in one of the tax advantaged accounts. A roth would be the place for high-growth investments like emerging markets. Betterment does all this for me. It's another thing that is relatively tricky to DIY if you're serious about doing it right.

6) Behavioral risk. I find it easy to ignore my Betterment investments. I have another account with a traditional broker where my 401k from an old job is located. With that money I find it hard to resist making changes every few years (including most recently in response to Hedgefundie's excellent adventure). I think set it and forget it has the underappreciated behavioral benefit of taking myself out of the equation.

In general, many Bogleheads will tell you that they do all of this stuff on their own and that it is perfectly easy and straightforward to do. I'm sure there is truth in what they are saying. But I also think that just because you *can* do something yourself for free doesn't mean you *should.* I would rather spend my time and energy on other things.

Jeff Albertson
Posts: 690
Joined: Sat Apr 06, 2013 7:11 pm
Location: Springfield

Re: Should I leave Betterment?

Post by Jeff Albertson » Sat Jun 15, 2019 7:07 pm

Betterment founder, Jonathan Stein, is guest on Bloomberg's 'Masters in Business' podcast.
https://ritholtz.com/2019/06/mib-jonath ... um=twitter
This week, we speak with Jonathan Stein, founder and CEO of Betterment, an online automated firm with $16.4 billion dollars under management.

He explains how the industry has changed over time, and how acquisition costs shift as the firm grew. We also discuss the competition and some of their foibles: We discuss Wealthfront’s Risk Parity problem; Schwab portfolio’s outsize cash position, and Vanguard’s Personal Advisor product. Stein’s position is that online advice is built into his firm’s DNA while it is an add-on for all of these other firms.

jimmo
Posts: 97
Joined: Sun Mar 03, 2013 11:49 am

Re: Should I leave Betterment?

Post by jimmo » Sat Jun 15, 2019 8:51 pm

I'm with Betterment (or at least have a large chunk of my portfolio there) and have been planning to switch out. Inertia seems to be the issue. I'm still annoyed with them on the bait and switch on fees. I worked really hard to get my account to 6 figures where the fee dropped to 10 basis points from 25. Shortly thereafter they increased the fee to 25 basis points on everything under some large amount I don't recall off the top of my head. And this is at a time when everyone else is lowering fees. I've also soured on the big selling point of automatic tax loss harvesting. I stopped adding new contributions so less opportunity to TLH, not to mention that TLH is just deferring the taxes to when you do sell with your future tax rate yet unknown...the TLH is likely saving you less than you think over the long run.

In short, I wish I hadn't been seduced to Betterment. That and their significant foreign weighting has certainly tempered my returns during the huge US bull market.

dru808
Posts: 39
Joined: Sat Oct 15, 2011 2:42 pm

Re: Should I leave Betterment?

Post by dru808 » Sat Jun 15, 2019 10:31 pm

michaeljmroger wrote:
Tue Apr 09, 2019 11:43 pm
If you were starting from scratch, I’d probably recommend Vanguard, but in your case, I honestly wouldn’t switch. You pay a small fee (“immaterial” to you) for a super convenient service, a great portfolio, and a tool that’s a lot nicer to use than Vanguard. Just keep investing and enjoy your life!


:sharebeer

bzargarcia
Posts: 91
Joined: Sat Jul 07, 2007 10:40 am
Location: San Antonio, Texas

Re: Should I leave Betterment?

Post by bzargarcia » Sun Jun 16, 2019 12:07 am

Jeff Albertson wrote:
Sat Jun 15, 2019 7:07 pm
Betterment founder, Jonathan Stein, is guest on Bloomberg's 'Masters in Business' podcast.
https://ritholtz.com/2019/06/mib-jonath ... um=twitter
This week, we speak with Jonathan Stein, founder and CEO of Betterment, an online automated firm with $16.4 billion dollars under management.

He explains how the industry has changed over time, and how acquisition costs shift as the firm grew. We also discuss the competition and some of their foibles: We discuss Wealthfront’s Risk Parity problem; Schwab portfolio’s outsize cash position, and Vanguard’s Personal Advisor product. Stein’s position is that online advice is built into his firm’s DNA while it is an add-on for all of these other firms.
Thanks for posting this. Listening to this now. Jon Stein is on the right side of history when it comes to the fiduciary rule.
Bart Garcia

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