Betterment vs. Charles Schwab vs. Robinhood: 2019 Comparison
Betterment, Charles Schwab and Robinhood are major U.S. brokerages with different products and features that could be a great fit for your needs. Each is known for its own strengths and unique features. None of the three are like the others, beyond a few overlaps in the products they offer. To pick the best one for your needs, you first need to understand exactly what it is you want in a brokerage.
Betterment was the first of the major online robo advisors. When signing up for a new account at Betterment, you’ll complete a survey about your age, investment goals and risk tolerance. Based on those answers, Betterment will assign you to a predesigned portfolio optimized for people like you.
This gives you access to world-class portfolios similar to what you would get with an expensive advisor. However, because thousands of people like you have the same portfolio allocation, you can get it at a fraction of the cost of a traditional advisor. And because it’s managed by computers and highly refined algorithms, Betterment offers advanced features like tax-loss harvesting that were previously available only to high-net-worth investors.
About Charles Schwab
Charles Schwab is one of the biggest discount brokerage firms in the U.S. Schwab offers just about anything you could want from a brokerage. That includes a robo-advisor product similar to what Betterment offers, but Schwab’s version is free of annual fees. It also offers its own mutual funds and exchange traded funds (ETFs) in addition to giving customers access to a massive list of ETFs and mutual funds from other providers.
Schwab offers just about every type of personal, estate planning and business investment account you could want. It also runs its own online bank. Schwab has nearly 350 branches nationwide and supports more than 10 million customers.
Robinhood is a newer entrant to the online investing world than the others, but it also offers a unique feature. Robinhood is free for users with a basic account. You can buy and sell unlimited stocks, ETFs, options and even cryptocurrencies without any trading commissions or fees.
You can pay for a Gold account that includes margin trading and some other added features, but the low costs make it perfect for someone interested in learning how active trading works with a lower risk thanks to no transaction costs. It doesn’t offer many types of accounts or access to all tradable assets, but you can’t beat free.
How Are They the Same?
All three services offer many features. First, let’s take a look at how they’re similar.
None of the three platforms require a minimum investment to get started.
Investment Account Types
All three offer taxable accounts.
All three services allow you to invest in stocks and exchange-traded funds (ETFs).
All three services emphasize investing with an Android or Apple mobile device.
How Are They Different?
The three services have more differences than anything they have in common:
Betterment charges 0.25–0.40%/year; Charles Schwab charges $4.95/trade; Robinhood doesn’t charge any fees.
In addition to stocks and ETFs, both Charles Schwab and Robinhood allow investors to trade options. Charles Schwab will also let you trade mutual funds and bonds. And Robinhood lets you trade cryptocurrencies.
Betterment offers taxable, IRA, trust and savings accounts. Charles Schwab offers all of those but adds custodial, 529, Coverdell and checking accounts to the mix. Robinhood offers only taxable accounts.
Whereas Betterment and Charles Schwab staff the phones, Robinhood’s customer service is email only.
Betterment is unique in that it is nearly a pure robo advisor-driven brokerage. The main account, called Digital, charges a 0.25% annual fee with no minimum balance. It includes things like automatic rebalancing, automatic tax-loss harvesting and a personalized investment strategy based on your needs and goals without having to work with a human at all.
With a $100,000 minimum balance, you can upgrade to Betterment Premium, which charges a 0.40% annual fee. This includes access to a human advisor that can give you hands-on guidance with a holistic look at all of your finances, not just your betterment portfolio.
Schwab is unique in this group because it offers a bit of everything. Traditional brokerage accounts, robo-advising accounts, mutual funds and ETFs and other services are all available at Schwab. Basic stock and ETF trades are just $4.95, tied for the cheapest among industry peers.
Its robo advisor is cheaper than Betterment, but it doesn’t offer quite as many unique features. The robo advisor is free aside from fees charged by the individual ETFs in your account. Stock trades cost more than the free you get at Robinhood, but Schwab also offers a lot more research and better access to advice and support. If you want to handle all of your finances under one roof, banking included, Schwab is the only one on this list that can do it.
At Robinhood, stock trades are free. Options trades are free. Even cryptocurrencies bitcoin and ethereum trade free on Robinhood. Free is something you won’t come across very often in the financial product landscape. That can be a big deal, particularly for new and smaller investors with lower trade amounts.
If you buy one share of a $10 stock with a $5 fee, it needs to double in value just to cover the commissions. At Robinhood, you can buy one share of stock for $10 without having to worry about fees eating up any of your profits. At 100 shares, that $10 combined to buy and sell is less important. But for smaller portfolios, a $5 commission can be very meaningful.
None of the services in this comparison requires a minimum investment to get started.
Winner — With no required minimum investments, all three are winners.
Betterment charges 0.25% per year for a Digital membership and 0.40% for a Premium membership. Charles Schwab doesn’t charge any annual fees, but trading fees start at $4.95 for trade. Robinhood is completely free.
Winner — Robinhood wins for being 100% fee-free.
Betterment’s robo advisor service shines with DIY conveniences like automatic portfolio management, along with tax-loss harvesting, which can save you money at tax time.
Charles Schwab is a major brokerage with lots of products. It also offers a free robo advisor.
Robinhood has made a name for itself with no-cost stock, option, ETF and cryptocurrency trades.
Winner — Tied. It all depends on what you’re looking for from an investment platform.
Betterment offers contact via phone or live chat during regular weekday business hours (with extended chat on Saturday and Sunday).
Charles Schwab shines with 24/7 phone and live chat service.
Good luck if you want to reach a live person at Robinhood. There’s no phone number or live chat option. Your best bet is to email your questions and concerns.
Winnner — Charles Schwab wins for offering some of the best customer care in the industry.
Who Are They Best For?
Betterment is best for people who want their investments handled for them. It’s a pure robo advisor, which means you just set it and forget it. The computer algorithms do all the heavy lifting.
Charles Schwab is best for people who want all of their investments at one brokerage. It offers an excellent selection of account and asset types. You can make it your one-stop shop.
Robinhood is best for free trading. You’ll pay zilch. Nada. Nuthin’. It’s totally free.
Which Is the Best?
If I had to pick a winner out of these three companies, it would be Charles Schwab, thanks to its overall low-fee model and wide range of supported products and services. You can hold your taxable brokerage, retirement accounts, checking and savings accounts at Schwab, as well as get access to world-class research and trading platforms and do everything the others allow.
However, Betterment does a great job at its specialty of robo-advising and tends to lead the industry with cutting-edge features that benefit even users with low balances. And you can’t argue against the no-cost trading at Robinhood. Ultimately, it’s what you need and want in a brokerage that should guide your decision among these excellent brokerage account providers.