It’s no surprise that an increasing number of people are deciding to have their investment portfolios managed by a robo-advisor instead of a human being.
Robo-advisors cost less to use than traditional human advisors and yield similar results.
What’s more, many human advisors now use algorithm-powered applications to help shape their investment recommendations—so why not cut out the middle man?
The increasing popularity of robo-advisors presents consumers with more choices. But these options can be tough to sort through.
They come with a heavy dose of confusing details and investment lingo.
And since the robo-advisor industry is fairly new to the investment world, no companies have an extensive track record on which they can be judged.
Ally vs. Betterment
The robo-advisors offered by these two firms are highly regarded by both consumers and competitors.
They both offer consumer-friendly account features, a reasonable commission and fee structure, and solid customer support. They share a top rating from many observers.
In this comparative analysis, we’ll look at both robo-advisors’ features, management, fees, and customer experience to see how they stack up.
Some companies require investors to maintain a minimum amount in their account in order to use their robo-advisors.
In this regard, Betterment does a better job, especially for people who are just starting out on their investment journey.
Betterment does not require an account minimum. In contrast, Ally requires that investors have a portfolio of at least $2,500 to access its robo-advisor.
This minimum is lower than those required by some of the large investment companies and banks (e.g., Charles Schwab and TD Ameritrade), but may still present a barrier to new investors. Ally may be beyond the reach of these consumers.
Ally and Betterment both offer the usual array of account types.
These include retirement accounts (401ks, IRAs, Roth IRAs, rollover accounts, etc.) as well as individual and joint accounts.
Both firms’ robo-advisors create personalized investment plans that are tailored to the consumer’s goals. Typically, these plans involve ETFs and other broad-based funds.
Betterment, however, can tailor its investment recommendations to an investor’s social and environmental concerns.
For those who prefer to discuss their investment options with a real person, both Ally and Betterment offer a hybrid robo-advisor/human-advisor option. Be aware, though, that these options can cost more money.
Betterment will connect its customers with a Certified Financial Planner for a phone consultation, but the cost is $149 for one 45-minute call and $299 for two.
In contrast, Ally’s robo-advisor is fully automated but human assisted.
Investors who are especially concerned about the tax bite on their accounts should know that Betterment’s robo-advisor includes a tax-loss harvesting feature.
The advisor may sell securities that have lost value to offset the gains made by those that have increased in value, thereby reducing the account’s tax exposure.
Ally does not offer this feature.
In general, Betterment’s fees and commissions are slightly lower than Ally’s. Ally charges an annual account fee of 0.30% of the balance, while Betterment charges 0.25%.
However, for many accounts, the practical difference between these two rates won’t be all that significant.
At these rates, on an account valued at $50,000, Ally would charge $150 while Betterment would charge $125.
Betterment offers a premium account to people whose portfolios are worth at least $100,000 and charges 0.40% on it.
Betterment bills its fees quarterly while Ally bills monthly. Fund-level fees for both firms are around 0.08%.
Because Betterment has only been in business a few years, there isn’t nearly as much information about its customer experience as there is for Ally, which has been in business since 1919.
On the other hand, the customer experience information about Ally can look less than flattering, until you consider the company’s size and years in business.
It’s important to remember that both companies will invest your money in stocks, bonds, and other securities that are not federally insured.
An investor’s experience with any investment company will depend to a great extent on how the overall market performs, rather than on the financial strength of the investment firm.
Ally and Betterment run neck and neck in terms of communication channels, with both offering mobile apps, phone, email, and chat options. Both companies provide basic account help for free.
This assistance includes opening new accounts of all types and help with administrative and technical issues, but does NOT include investment strategy and advice.
Ally vs. Betterment – Which Is Better?
Ally and Betterment are very competitive with each other. Between them there is no clear wrong choice.
However, different types of investors may prefer one to the other.
Investors who have either a very small or very substantial amount of money to invest may be better served by Betterment.
For those who want to begin investing but don’t have much money, Betterment is the only choice, because Ally doesn’t accept accounts of less than $2,500.
At the top end, Betterment offers a premium service to people whose accounts are valued at $100,000 or more.
This service provides access to human advisors who may be better at answering the complex questions that arise in larger portfolios than robo-advisors are.
Investors somewhere in the middle, whose accounts are valued from $2,500 to $100,000, may find Ally to be a better option.
It provides a hybrid account that is centered on robo-advisors but is human-assisted to all its customers.
This means that from time to time, investment advisors rebalance portfolios manually to ensure they have the best possible chance of meeting their objectives.
Although Ally charges slightly more than Betterment, at this level of assets the difference in real terms is not that significant.