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Here’s Exactly How to Confirm Your Financial Advisor’s Qualifications

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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Hiring a financial advisor can be an excellent way to maximize your financial strategy and ensure you’re doing all you can to meet your money-related goals. A qualified financial professional can set you up for success, whether it’s planning, saving or investing you need help with.

Just one problem: The words “financial advisor” have no official meaning, and there’s no one certification or license that makes someone an advisor. That means it’s buyer beware when you’re in the market for professional advice.

Here’s how to perform an advisor check that’ll help ensure you’re getting your money’s worth. (After all, saving money is the whole point of this endeavor, right?)

A background check is essential when hiring a financial advisor

When you start looking for a financial advisor, you’ll quickly notice a veritable alphabet soup of designations. Your contending confidante may be a CFP, CPA, CLU or FRM — and that’s just the tip of the iceberg. What’s more, not all of those spiffy-sounding titles indicate similar skill sets or educational backgrounds. In fact, some of these so-called qualifications are little more than meaningless name decor.

“Some certifications you don’t even need to [take a] test for,” said Malik S. Lee, founder of Felton & Peel Wealth Management. He’s also a certified financial planner (CFP), and he serves as a member and question writer on the CFP Board’s Council on Examinations.

Certified financial planners, he said, go through a stringent course of study, culminating in a difficult exam; he estimated the pass rate to be just over 60%. And while CFPs certainly aren’t the only qualified professionals on the advisor market, the plethora of options means consumers need to be careful — especially since financial advice is so highly sought-after.

New types of “experts” crop up on the market all the time, Lee said, estimating a current count of about 140 to 150 qualifications to choose from. But many of those designations aren’t accredited or regulated by any kind of governing body, and some “advisors” are little more than insurance salesmen who are looking to make a commission off your purchase of an expensive financial product like life insurance.

“You have to be careful of all certifications,” Lee said, “and you have to make sure you do your due diligence.” Here’s how.

How to check your advisor’s credentials

Whether you’re looking for a financial advisor, investment advisor, planner or broker, the best way to ensure you’re hiring a professional is to delve into what the letters stacked after their name actually mean.

You can start by tracking down the certifying board’s official website, if there is one, and reading more about its requirements and specifications — keeping in mind, of course, that it’s not going to be the most unbiased information available.

But one of the best ways to weed out the bad eggs is to go straight to the Financial Industry Regulatory Authority (FINRA), said Lee.

Choosing an advisor whose designation is accredited by FINRA is a great way to ensure there’s some actual know-how behind those letters. The organization keeps a comprehensive list of professional designations, listing prerequisites, educational requirements, the type of exam students must pass, and information about complaints and accreditation. You can even compare multiple designations at a glance.

Once you feel good about your potential advisor’s designation, you can double down by looking up their specific credentials. For instance, you can ensure that your advisor’s license is current and check to make sure there no bad reviews from previous clients.

A good start is to check out any user reviews that may exist for the firm or broker, either on their Google listing or through a third-party rating site like Yelp. But it’s also a good idea to use a tool like FINRA’s BrokerCheck to get a full report on their employment history, qualifications and disclosure events. Depending on whether the advisor advertises themselves as a broker, investment specialist or insurance agent, there are a variety of different ways to go about the process — both online and over the phone. Check out FINRA’s instructions for full details.

Know before you go: what’s your advisor’s fee structure?

Another shorthand for finding a worthy advisor: Look for a fee-only advisor or fiduciary who earns their keep in exchange for actual management services rather than banking on commissions in exchange for selling you products. Fee-only advisors may charge flat rates for specific services or express their rates as a percentage of assets under management (AUM). There are also fee-based professionals whose compensation structures may combine flat fees, AUM percentages and commissions.

While “fee-only” is good, “fiduciary” is better, said Lee, suggesting consumers look for that term first. Fiduciaries are legally required to act in their advisees’ best interests, regardless of how it affects their paycheck.

What you may want to avoid is an advisor who makes their money exclusively off commissions, as this person may have conflicts of interests if they can earn money selling you a product you may not really need. How exactly a potential advisor is compensated should be one of the first questions you ask in an initial meeting.

If you’re strapped for time or not keen on doing hours of research, certified financial planners and certified public accountants (CPAs) are common designations that serve many investors. According to Lee, these two designations require their members to pass the hardest examinations in the industry, thus indicating a significant, measurable level of financial savvy.

And no matter who you hire, don’t forget: It’s your money. If you find yourself in a professional relationship you’re uncomfortable with, you always have the option of moving on to a different advisor — and it’s an option you should absolutely consider if you have reservations.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Jamie Cattanach
Jamie Cattanach |

Jamie Cattanach is a writer at MagnifyMoney. You can email Jamie here

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Investing

Betterment vs Vanguard: Which Robo-Advisor Is Best for You?

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Investing money with a robo-advisor is one of the easiest ways to grow your wealth in the stock market. Robo-advisors use software algorithms to manage your investment portfolio with minimal input needed from you, and charge ultra low fees. Betterment is one of the most well-known robo-advisors, while Vanguard is among the largest investment firms in the world.

Both Vanguard Personal Advisor Services and Betterment combine access to live investment advisors with automated portfolio management. Betterment is ideally suited for beginning investors with smaller portfolios. Vanguard can work well for a DIY investor who wants guidance from live investment advisors and access to a wider variety of investments, and can meet the high minimum balance required. Read on for a closer look at how Betterment and Vanguard compare.

Betterment vs. Vanguard: Feature comparison

In many ways, Betterment and Vanguard have similar offerings, but there is a big, unavoidable difference between the two: minimum balance requirements. Betterment has no minimum balance requirement, so you can start using their services even if you have very little money earmarked for investing. Vanguard Personal Advisor Services requires a minimum balance of $50,000, which makes their robo-advisor best for investors who’ve already built up a significant nest egg.

BettermentVanguard
Management fee
  • 0.25% (up to $100,000)
  • 0.40% (over $100,000)
  • 0.30%
Average ETF expense ratio0.11%0.11%
Account minimum$0$50,000
Human advisorsHuman assisted for clients with at least $100,000 investedHuman assisted
Fractional sharesYesNo, although you can get them through dividend reinvestment programs
Tax loss harvesting
College savings optionsNoNo
Investment account types
  • Individual and joint taxable
  • IRA (and Roth)
  • Rollover IRA
  • SEP IRA
  • Trust
  • Individual and joint taxable
  • IRA (and Roth)
  • Rollover IRA
  • SEP IRA and SIMPLE IRAs
  • Trust
Savings account optionSmart Saver, 2.14% APY (not FDIC-insured)No
Ease of use
 
 

Betterment vs. Vanguard: Management fees

Betterment and Vanguard Personal Advisor Services have similar management fees, with several tiers based on the size of your investment account balance. Vanguard has three tiers:

  • 0.30% for accounts with assets below $5 million
  • 0.20% for accounts with assets from $5 million to below $10 million
  • 0.10% for accounts with assets from $10 million to below $25 million

Once you surpass the $25 million tier, Vanguard offers more personal options and better pricing.

Betterment has two tiers:

  • 0.25% for accounts under $100,000
  • 0.40% for $100,000 or more

With Betterment, having a higher account balance comes with access to human-assisted management, as well as more customized portfolio options. However, it’s a bit unusual to charge more when the portfolio balance is bigger. If you were to build up a $100,000 balance with Betterment, it might be worth moving to Vanguard Personal Advisor Services because you’ll end up with a lower management fee.

Finally, separate from the management fee is the expense ratio you’ll pay on the funds held in your account. The expense ratio is basically the fee you pay for owning the fund. It covers the cost of running the fund, including administration, legal, accounting and other services. It’s a percentage of the amount you have in the fund.

Both Vanguard and Betterment have an average fund expense ratio of 0.11%. So, if you have $10,000 in a fund, you can expect to pay about $11 a year on top of the management fees. Both management fees and expense ratios are taken out of your fund directly, so you won’t get a bill.

Realize, though, that expense ratios vary by fund, and that 0.11% is only an average of what you can expect on a medium-risk portfolio. Your actual expense ratios will be different, and your portfolio’s average could be higher or lower.

Betterment vs. Vanguard: Special features

Many of the special features offered by Betterment and Vanguard are similar. For example, both companies use a process of smart asset allocation to apportion investments where they are likely to do the most good. If you have a tax-advantaged individual retirement account (IRA) and a taxable investing account, both companies look for an allocation that places assets where they are likely to provide the most benefit, such as putting a municipal bond fund in your IRA.

Both Betterment and Vanguard offer human-assisted help with your portfolio. With Vanguard, you get access to human advisors as soon as you open an account — keep in mind, the minimum balance is $50,000. With Betterment, you only get access to a live human advisor once you have a balance of $100,000.

Another difference is that, even though Vanguard has a wider variety of funds available, it doesn’t offer a specific socially responsible portfolio. So, if you’re interested in a socially responsible portfolio, Betterment might be the better choice.

Both companies offer tax loss harvesting, which helps you minimize losses and maximize gains from tax situations that arise from buying and selling stocks. Betterment uses an algorithm to look for tax loss harvesting opportunities each day. Vanguard performs tax loss harvesting only when it’s called for in your financial plan, or when you make a change to your portfolio.

Rebalancing is used to bring your portfolio back in line with your desired asset allocation. Again, Betterment is more active in its approach, using an algorithm daily to determine whether your asset allocation has strayed out of line, and automatically adjusting. Vanguard rebalances quarterly, or might rebalance less often, depending on what your individualized plan calls for.

Betterment‘s advantages

  • Set up different goals: Rather than just having one account, you can track your progress for different goals. It’s possible to designate different asset allocation mixes, depending on what you want to accomplish and when you need access to the money.
  • Portfolio projection tools: In addition to different goals, you can project possible performance for each goal. This allows you to try different ideas and tweak your regular contributions, based on what you need to do.
  • Optimize your taxes: With the help of Betterment, you can maximize your portfolio’s tax efficiency. Betterment will make sure that the right assets are in tax-advantaged and taxable accounts. Additionally, Betterment will look for chances to harvest your tax losses.
  • Smart Saver: Betterment offers Smart Saver, an account separate from your investment balance that places funds in low-risk bonds to get a return that beats most traditional savings accounts. On top of that, Smart Saver will analyze your bank account to see if you could be putting your money to better use.
  • Sync other investment accounts: If you have other investment accounts and bank accounts outside Betterment, you can sync those up and see them in your account dashboard. Betterment will include those items in its projections and even offer suggestions on management so you’re getting the most out of your money — no matter where it is.
  • Option to get human help: You can also pay to speak with a financial professional to get help planning your portfolio and your financial path. If you have the Premium plan, with more than $100,000, you do have more access to professionals and a greater degree of customization.

Vanguard‘s advantages

  • Human-assisted advising: No matter your portfolio level, Vanguard offers access to advisors. You can make an appointment via phone or online to speak with someone about your planning needs.
  • Investment choices: Because Vanguard puts together its own funds, you have access to a wide variety of options. Plus, you can invest in Vanguard‘s Admiral class funds, without having to meet the minimum, which starts at $3,000 for most index funds. This provides you with a range of low-cost fund options.
  • Low fees: One of the hallmarks of Vanguard is its low fees. The management fee starts at 0.30% when you open an account with a minimum of $50,000. This is in line with many other robo-advisors. While you’ll initially pay less with Betterment, the reality is that once you reach $100,000 in your portfolio, Betterment becomes more expensive.
  • Holistic planning: Vanguard only manages the assets you have in your Personal Advisor Services portfolio on your behalf. However, if you have other accounts, including investment, savings, retirement and trusts elsewhere, Vanguard will take a look at those and incorporate them into planning and how they manage your portfolio.

Betterment vs. Vanguard: Which is best for you?

Both Vanguard and Betterment are strong choices for investors looking for a low-cost robo-advisor with access to human professionals. However, which service you choose depends largely on where you’re at right now, and what type of experience you’re looking for.

Betterment is more automated than Vanguard, so if you’re looking for a place to stick your money and not think about it, Betterment can be the right choice. However, if you want a more personal touch, Vanguard can be the better choice — especially if you can meet the steep $50,000 minimum.

Vanguard also offers more for the DIY investor, providing access to a wider variety of funds, and the ability to personalize a long-term plan, including designating when you want to rebalance. While there are more customization options with Betterment when your portfolio reaches $100,000, Betterment is really better for the hands-off investor.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Miranda Marquit
Miranda Marquit |

Miranda Marquit is a writer at MagnifyMoney. You can email Miranda here

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Betterment vs Wealthfront: Which Robo-Advisor Is Best for You?

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

If you are shopping for a robo-advisor to handle your investing needs, you’ve likely read about Betterment and Wealthfront. These two services are among the most prominent and popular robo-advisors, and both offer a very similar range of features and fees. We have made a side-by-side comparison to help you differentiate between the two apps.

Betterment’s service features a narrower range of investments, but has more control and lower fees for bigger balances. By contrast, Wealthfront offers a broader range of highly-automated investment options, as well as a cash account and college education savings accounts. Read on to get a firmer grasp on the other differences between these two leading robo-advisors.

Betterment vs. Wealthfront: Feature comparison

Investment portfolios at both Wealthfront and Betterment are built from different combinations of exchange-traded funds (ETFs), including both bond and stock funds to better meet differing levels of risk tolerance. Betterment builds customized portfolios of ETFs across 12 different asset classes. Wealthfront features 20 different automated portfolios, and each offers a different mix of ETFs across 11 asset classes. In both cases, the mix of ETFs in each portfolio is altered to satisfy different goals. Both periodically rebalance your portfolios as asset values change and markets fluctuate.

Wealthfront offers a highly-automated process. You answer a short questionnaire to assess your goals and risk tolerance, and the app places your money in one of its 20 portfolios. Betterment offers investors with over $100,000 in their account more control over their investment choices, giving you access to live advisors and letting you adjust the percentage invested in any particular ETFs.

BettermentWealthfront
Management fee
  • 0.25% for basic portfolio
  • 0.40% for premium offering (requires $100,000 minimum balance)
  • For account balances of $2 million or greater, the basic portfolio fee is 0.15%, and the premium offering fee is 0.30%
  • 0.25% annual advisory fee on investments
Average ETF expense ratio0.11%0.09%
Account minimum$0$500
Human advisorsYes, for clients with at least $100,000 investedNo
Fractional sharesYesNo
Tax loss harvesting
College savings optionsNoYes
Investment account types
  • Individual taxable
  • Traditional IRA
  • Roth IRA
  • Joint taxable
  • Roth IRA
  • Rollover Roth IRA
  • SEP IRA
  • Trust
  • Smart Saver
  • Individual taxable
  • Traditional IRA
  • Roth IRA
  • 529 Plan
  • Joint taxable
  • Rollover IRA
  • Rollover Roth IRA
  • SEP IRA
  • Trust
Savings account optionNoEarn 2.51% APY with no fees and FDIC insurance covering up to $1 million
Ease of use
 
 

Betterment vs. Wealthfront: Management fees

In terms of management fees, Betterment and Wealthfront are very similar. Betterment charges an annual fee of 0.25% for investment balances up to $100,000. Wealthfront’s fee is 0.25% regardless of your investment balance. For balances greater than $100,000, Betterment’s premium option provides access to a team of live financial advisors, with a management fee of 0.40%.

If you have a very large balance to invest, Betterment may be a better choice than Wealthfront. When your Betterment account balance exceeds $2 million, your management fee falls to 0.15% for the basic portfolio and 0.30% for premium service.

With both companies, don’t forget ETF expense ratios. The expense ratio is a fee you pay to invest in ETFs to cover the cost of running the fund, including operational and administrative costs. The expense ratio is deducted directly from the fund, and can impact your investment performance. The expense ratio is dependent on your portfolio, but for the sake of comparison, the average expense ratio on a medium-risk portfolio is 0.11% at Betterment. At Wealthfront, it’s 0.09%.

Betterment vs. Wealthfront: Special features

Betterment and Wealthfront both offer the ability to add your outside investment accounts — such as an employer-offered 401(k) — to your account. You can’t manage the outside account from the robo-advisor dashboard, but they let you to view all of your accounts on one site, giving you a complete snapshot of your finances.

Where they differ is in their investment options. Betterment’s investment portfolio is more limited than Wealthfront’s. Wealthfront allows you to invest in some trendier options, including real estate investment trusts and commodities.

While Wealthfront doesn’t offer investing in savings bonds, as they tend to have a low yield, Betterment does allow you to save in bonds through its Smart Saver service, a low-risk investment option that offers more growth than a simple savings account.

Wealthfront’s Path digital financial planning tool stands out from Betterment. It’s designed to adjust along with your finances, helping you plan for long-term goals, like retirement or buying a home.

On the other hand, Betterment’s tax-coordinated portfolios are an asset for investors with large balances. Betterment will spread your investments across multiple accounts. Highly-taxed investments will be invested in IRAs to minimize taxes, and the rest will be invested in taxable accounts. According to the company, this strategy can increase your portfolio value by an estimated 15% over 30 years.

Betterment’s advantages

If you’re new to investing or want more personalized attention, Betterment offers some distinct advantages over Wealthfront.

  1. There’s no account minimum: Unlike Wealthfront, which has a $500 minimum to start investing, there is no account minimum with Betterment. That means beginners can start investing with whatever they can afford. That perk can be especially helpful for people who might otherwise put off saving for retirement.
  2. You can purchase fractional shares: Betterment allows you to buy fractional shares, or portions of a whole share, so the full value of your investment is utilized. Plus, fractional shares allow you to buy shares that would otherwise be too expensive for a new investor to afford.
  3. You can put your money to work with Smart Saver: While Betterment doesn’t offer a savings account, it does have Smart Saver, a low-risk investing account that utilizes short-duration bonds bonds. You could earn 2.14% APY, a significant increase over the 0.10% rate you get with most traditional savings accounts.
  4. You could have access to a human advisor: If you have at least $100,000 invested with Betterment, you can get access to a human advisor to help you with issues like tax management and estate planning. If you have a smaller account, you can still get one-time access to a human advisor by buying planning sessions, which range from $150 to $500.
  5. You can donate to charity: Betterment recently launched Charitable Giving, a service that automates the process of donating appreciated shares to charities. You can determine how much you want to donate and what charity you would like to give money to, and Betterment will calculate your tax impact and will select the investments to donate.

Wealthfront’s advantages

If you’re new to investing or want more personalized attention, Betterment offers some distinct advantages over Wealthfront.

For more seasoned investors, Wealthfront offers some more advanced options to grow your money.

  1. You can take advantage of a high-yield savings account: Wealthfront offers a high-yield savings account so you can grow your money. Offering an APY of 2.57% — about 25x above the national average — the savings account is FDIC insured up to $1 million.
  2. Wealthfront Stock-level Tax-Loss Harvesting: Formerly known as Direct Indexing, Wealthfront’s Stock-level Tax-Loss Harvesting allows you to lower your tax bill even more. Available for investors with taxable accounts balances between $100,000 to $500,000, Wealthfront will buy individual stocks from the S&P 500 index, giving you more opportunities for tax-loss harvesting.
  3. You can save for college: If you want to save for your child’s education, you can open up a 529 plan with Wealthfront. Withdrawals from a 529 plan for qualified education expenses — such as tuition, room and board, and textbooks — aren’t subject to federal income tax, making saving in a 529 plan more advantageous than just investing in an Individual taxable account. With fees of no more than 0.46%, a Wealthfront 529 Plan costs less than many other plans.
  4. You can get access to a Portfolio Line of Credit: If you need cash to pay for a trip or a major purchase, you may qualify for a Portfolio Line of Credit with Wealthfront. With this option, you have access to a line of credit that is secured by your investments. Depending on your account size, you could get an interest rate of 4.70% to 5.95%, which is significantly cheaper than you’d get with a credit card or most personal loans. If you have a Wealthfront individual, trust, or joint investment account with a balance of at least $25,000, you automatically have a line of credit available.
  5. You can easily diversify your investments: With Wealthfront, you can invest in low-cost ETFs, instantly diversifying your portfolio. Investing in ETFs minimizes your investment risk and, over time, can help you grow your money. Wealthfront looks for ETFs with the lowest annual expense ratios that also offer liquidity, so you can access your money to pay for major expenses, like buying a home or paying for college.

Betterment vs. Wealthfront: Which is best for you?

Wealthfront fully embraces the robo in robo-advisor, offering no human interaction and a highly-automated investing service, with no options for picking your own stocks or ETFs. If you’re looking to invest and forget it, then Wealthfront is probably your best bet, especially if you’d like to have a 529 college savings account as well.

Betterment offers a limited range of investable assets, however with enough money you can access human advisors, and also get more meticulous control over which stocks and ETFs you’re investing in. Fractional share investing and the zero account minimum make it a slightly better choice for beginning investors.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Kat Tretina
Kat Tretina |

Kat Tretina is a writer at MagnifyMoney. You can email Kat here

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