Betterment vs. Charles Schwab vs. Robinhood

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Betterment, Charles Schwab, and Robinhood are major U.S. brokerages with different products and features that could be an excellent fit for your needs. Each is known for its 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 precisely what it is you want in a brokerage.

HighlightsCharles SchwabRobinhoodBetterment
Rating9/108.5/109/10
Min. Investment$0$0$0
Stock Trades$0/trade$0/trade$/trade
Options Trades$0.65/contract$0
Mutual Funds
Virtual Trading

About Betterment

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 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.


About Robinhood

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.

Minimum Investment None of the three platforms require a minimum investment to get started.
Investment Account Types All three offer taxable accounts.
Investment Types All three services allow you to invest in stocks and exchange-traded funds (ETFs).
Mobile Apps 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:

Fees Betterment charges 0.25–0.40%/year; Charles Schwab is free but has a $0.65 contract fee for options; Robinhood doesn't charge any fees for its basic account.
Investments Offered 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.
Available Accounts 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.
Customer Service Whereas Betterment and Charles Schwab staff the phones, Robinhood's customer service is email only.

Unique Features

Betterment

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. If you want to focus on sustainable investments, you can do with that with their  standard SRI portfolio, or focus on climate or social issues with their new specialized portfolios.

And if you need extra financial advice, you can purchase a themed one-on-one call with a licensed advisor to get input on things like marriage, a general financial checkup, and more.

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.

Charles Schwab

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 free.

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.

Robinhood

If you use Robinhood's basic account, stock trades are free. Options trades are free. Even cryptocurrencies bitcoin and ethereum trading is free with 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 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 significant.


Minimum Investments

None of the services in this comparison requires a minimum investment to get started.

Winner — With no required minimum investments, all three are winners.

Fees

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

Standout Features

Betterment's robo advisor service shines with conveniences like automatic portfolio management, along with tax-loss harvesting, which can save you money at tax time. They also offer a checking and cash reserve account, so you can manage all of your personal finances and investing accounts in one place.

Charles Schwab is a significant 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.

TIE —

Socially Responsible Portfolio

Betterment offers a standard socially responsible portfolio, along with two portfolios focused on either environmental or social issues.  All of its socially responsibly focused portfolios choose ETFs based on specific environment, social and governance criteria.

In addition, the Climate portfolio focuses on mitigating climate change by focusing on companies that reduce their carbon footprint, among other things. The Social Impact portfolio expands the Broad Impact portfolio by also including stocks of companies focused on diversity in the U.S.

Charles Schwab offers a wide-range of low cost SRI options, with over 500 mutual funds and 80 ETFs to choose from.

Robinhood does not offer a specific SRI portfolio, but you can invest in ETFs or stocks that are focused on social and environmental issues. However, you'll have to do the research on the companies yourself.

Winner — Betterment is the winner for the hands-off investor, as they offer SRI focused portfolios. Charles Schwab is best for the more active investor.

Customer Service

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.

Winner — 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 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. It 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 wants in a brokerage that should guide your decision among these excellent brokerage account providers.

Eric Rosenberg

Eric Rosenberg is a finance, travel and technology writer in Ventura, California. He is a former bank manager and corporate finance and accounting professional who left his day job in 2016 to take his online side hustle full-time. He has in-depth experience writing about banking, credit cards, investing and other financial topics and is an avid travel hacker. When away from the keyboard, Eric enjoys exploring the world, flying small airplanes, discovering new craft beers and spending time with his wife and little girls.

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