Betterment vs. SoFi (2020): Is SoFi Really Free?

Betterment vs. SoFi: In-Depth Comparison

SoFi is known to differentiate itself from other robo-advisors through its no management fee structure. No one likes fees, but is it better to pay for a service if it will bring you greater returns? In this Betterment vs SoFi comparison, we put the two side-by-side to show you which one is best.

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SoFi had a rough and tumble 2019. First, the wealth management giant incurred the wrath of users and made Wall Street Journal headlines when it rolled out two new in-house zero-fee ETFs. Then it essentially forced users to invest in them, triggering year-end capital gains tax fees.

The company says they told users before hand. Users say otherwise. Clearly SoFi is not acquainted with the saying “the customer is always right.

Next, three of its head honchos – executives who had been with SoFi from the start – jumped ship. together. Ouch.

To console itself (and close out the decade on a high note), SoFi raised another $103 million on top of the $1.5 billion it had previously raised.

Then SoFi, which is short for “Social Finance,” waded into 2020 with a new marketing strategy to expand beyond its early focus on an ideal customer persona it nicknamed HENRY (high-income not rich yet) and reach out to a wider user base of “more moderate means.”

As they say in the Deep South, it seems there’s big doing’s ahead for the longtime fintech disruptor who just can’t seem to resist being disruptive.

Betterment, meanwhile, has marched forward into the new decade while navigating some unanticipated regulatory hurdles (prompted by a competitor’s misdeeds, not its own) and mobile growing pains.

But Betterment persevered as it always does. Before 2019 ended, the platform had launched its long-overdue foray into the traditional banking arena with a checking account and high yield savings account/cash management account.

The grandfather of robo advisors and creator of robo advising itself then gave its already popular apps and online platform the full-on spa treatment, rolling out a major upgrade to all in late 2019.

In more recent exciting news, Betterment recently revealed the master plan behind these relatively minor maneuverings – to be a one-stop resource and platform for its users’ personal finance needs.

Betterment Investing Page
Is Betterment better than SoFi? Keep reading to see for yourself.

In the grander scheme of things, this makes sense. Betterment is not a disrupter. It is the founder of the entire industry within which it now must compete for market share. Its commitment to quality personal finance education as well as investing opportunities remains rock solid and relatively un-marred by scandal.

SoFi is a powerhouse, with a neat reported $4.8 billion tucked into its money belt to date. But can it – should it – compete on a level playing field with also robust $18+ billion industry founder Betterment for your business? Let’s find out.

Which is Better? Betterment vs SoFi

Before asking questions like “who does it best?” it can be helpful to do two things:

1. Define what “it” means.
2. Define what “best” means.

What “It” Means (Robo Advising Services in a Nutshell)

For our purposes here, “it” means digital investing with assistance from a robo advisor, an automated algorithm that can be customized via personal data you provide.

Thanks in large part to Betterment, robo advising as a service now has benchmarks by which you can determine whether a robo advisor platform is “doing it right.”

Here are some examples (we will look at more in sections here to come):

  • SIPC or equivalent insurance to protect your investments from catastrophic unforeseen events (such as the robo advisor itself folding and closing its doors with all your assets still locked inside).
  • Robust online security to protect your sensitive data.
  • Transparent operating practices and fee structure right down to the fine print.
  • Stated legal role as a fiduciary to its user base.
  • Intuitive, easy to navigate online platform.
  • Suite of well-designed and integrated mobile apps for both iOS/Apple and Android.
  • Top notch customer support, ideally 24/7 and by phone, email and chat.

In sections here to come, we will take a look at who wins top marks in these important (critical) areas, Betterment vs Sofi.

What “Best” Means (Robo Advising Tailored to Your Needs)

Any search for a robo advisor platform must begin with the elements we just identified above here.

But beyond that, and with more than 200 documented robo advisor platforms all eager to invest your hard-earned savings, it is important to recognize you have no shortage of choices.

So then you have to ask yourself, why choose this or that robo advisor? In the comparison of Betterment vs Sofi, for example, which robo advisor is the best choice for your needs and goals?

We will spend the remainder of this article investigating this question so you can find your own best answer.

To start, let’s take a broad-brush look at the major unique strengths of each robo advisor platform.

SoFi is best for:

  • Investors who have at least $100 to invest with the platform.
  • Investors seeking a robo advisor service with no management fees.
  • Investors who want support for career planning in addition to robo advisor guidance.
  • Investors who want unlimited access to financial planners without having to do an account upgrade or pay extra fees.
  • Investors who don’t need access to support for joint taxable accounts, trusts or rollover IRAs.
  • Investors who are interested in taking a more active role in their investing (in addition to the straight robo advisor algorithm, SoFi also offers a program it calls Active Investing).
  • Investors who do not need tax loss harvesting (Betterment offers this).
  • Investors who want to get involved with cryptocurrency and real estate investing.

Betterment is best for:

  • Investors who have at least $10 to invest (Betterment’s free financial planning tools are available to all – even to those who are not ready to start investing yet).
  • Investors who want a free portfolio analysis inclusive of outside investments.
  • Investors seeking support for traditional banking (checking, cash management, high-yield savings account) in addition to robo advising.
  • Investors who need support for rollover IRAs, trusts and joint taxable accounts (plus, Betterment will advise on but not manage individual 401(k)s).
  • Investors who prefer a more passive role (or even a “set it and forget it” role) in their own investing choices.
  • Investors who want the benefits of tax loss harvesting.
  • Investors who want the assurance of choosing the robo advising platform that invented robo advising and has been in business since 2008.
  • Investors who are not interested in investing in cryptocurrency and real estate assets.

Interested in a Betterment account? Get started here.

Now that you have a better sense of the major strengths and drawbacks of the Betterment vs Sofi question, we will dive into a more detailed comparison of the most important features of each and how they compare.

Differences Between Betterment and SoFi

The question of whether you should even consider any other robo advisor beyond Betterment is a valid one.

After all, we wouldn’t even have robo advising if it wasn’t for Betterment’s pioneering (and initially wildly disruptive) role in the fintech industry it has since helped to shape.

And yet there is also an argument for taking a look at how relative newcomers like SoFi, which is actually one of the longer-term players in the still-new robo advising industry, may have not reinvented but evolved the digital investing wheel.

SoFi Invest Automated Investing
SoFi’s robo advisor enables automated investing with a “hands-off” approach — but human guidance is also available.

In investigating this question, it can help to look at all the benefits that both platforms offer to users.

When comparing Betterment vs Sofi, these are all the benefits you will get by choosing either platform:

  • Access to socially responsible investing
  • Access to highly rated mobile apps for both iOS/Apple and Android
  • Access to a highly rated online platform accessible via web (desktop, laptop) or tablet
  • Support for individual taxable accounts, traditional and Roth IRAs, SEP IRAs
  • Access to financial advisors (albeit the means of access do vary between the two)
  • Ability to invest in fractional shares
  • Access to periodic portfolio rebalancing to account for drift
  • High quality of customer support and access to live human support
  • Strong and stable platform with a number of years of service and history under its belt (Betterment launched in 2008 and SoFi launched in 2011)

Even just with this quick look at the shared strengths of both Betterment and Sofi, it becomes clear we are essentially comparing two strong robo advising services. By this we mean, each platform offers many of the features that mainstream users initially seek out when choosing a robo advisor platform.

But are the two platforms really created equally? To answer this question, it is important to look past surface appearances and features and research how these features are provided to end users.

Are you a fan of automated investing? See our list of the best robo-advisors.

2 Key Ways SoFi Is Different Than Betterment

Another tried and true method for choosing between two inherently able-bodied robo advisors is to look at each platform’s uniqueness – what professionals call the “unique selling proposition” in the marketing world.

All this term really means is how one company chooses to differentiate itself from its competitors.

What is interesting about analyzing one company’s unique selling proposition, or USP for short, versus another company’s USP is that the final outcome doesn’t always equate to “better” or “worse.” Rather, it is simply different. This means some users may find a particular robo advisor to be better suited to their financial and investing needs.

You can see where we are going with this.

Let’s take a look at the two key ways that SoFi is different than Betterment (and then we will flip the perspective in the next section).

1. Does SoFi Charge a Fee?

There is no getting around the fact that some investors cannot resist the “zero fees” structure. SoFi is commonly known as “free” robo advisor. But is SoFi really free?

SoFi Invest Charges No Management Fees
Is SoFi Invest really free?

Lured like moths to the proverbial flame, investors will readily jump on board with a zero-fee structure – in some cases, even if it is at their own expense.

Does SoFi charge a fee? Well, SoFi does not charge any management fees. Yet that doesn’t mean other fees will never be involved.

Here is what we mean by this.

For example, you don’t pay any fees for account management. But, let’s just say your portfolio grows and suddenly you are facing year-end capital gains taxes.

SoFi does not provide tax loss harvesting, which could potentially lower your capital gains tax. According to Betterment, tax loss harvesting has been proven to cut taxable income by as much as $3,000 (it doesn’t give exact parameters for this calculation).

This is not to say SoFi is not the right robo advisor for you. It is just a reminder to encourage you to consider other ways you might save money besides not having to pay fees.

So, is SoFi really free? Well, in terms of account management, yes.

2. SoFi offers unlimited access to live advisors by phone, email or chat.

For many investors with little time to strategize about investing decisions, the appeal of a robo advisor is simply that – it is automated. You don’t have to talk to anyone, ever, unless you want to.

Screenshot of SoFi Wealth Management Page
SoFi Invest offers human financial guidance to all of its clients — regardless of account type or size.

But these days, more and more robo advisor platforms are opening up the phone, email and chat lines to connect users with real live human financial advisors as well. Some are even using this in their marketing as a unique selling proposition. Speaking of which, SoFi has largely based its robo advisor business model on it.

With SoFi’s platform, you can reach out to a financial planner via phone, email or chat at any time regardless of account status or portfolio size.

2 Key Ways Betterment Is Different Than SoFi

Now let’s take a closer look at Betterment’s two most important unique selling propositions – ways in which it differs from SoFi.

1. Betterment has zero barrier to entry for new users.

From the start (back when Betterment was your only choice for a robo advisor platform), Betterment has always been focused on user education.

Betterment Tools and Calculators
Betterment offers a number of tools and calculators to help you financially prepare for your future.

The platform maintains an entire suite of free interactive budgeting, investing and financial planning tools and calculators, including a free comprehensive portfolio analysis, to help investors at all levels understand how to invest to meet their financial needs now and later.

2. Betterment is aiming to become a single-source financial resource to its user base.

As of 2019, Betterment has been working hard to cast a wider net beyond the robo advisor field it launched back in 2008. In recent news, Betterment spoke to its over-arching goal to become (in the platform’s own words) a personal finance “operating system” for its clients.

With a checking account and a high-yield savings account with a cash management feature already available and a debit card soon to follow, Betterment sees its role overall as a lifelong trusted educational partner and financial/investing mentor to its users.

To hear the platform’s executive team tell it, Betterment’s ultimate goal is to help users confidently take charge of their finances by first understanding the impact of their financial choices and then changing their choices in accordance with short and long-term financial goals.

Betterment vs SoFi: Human Financial Advisors

One of the oddest aspects of the robo advisor industry is the recent emphasis on being able to connect with a real live human financial advisor.

After all, this is digital automated investing we are talking about here, not one-on-one sit-downs at brick-and-mortar brokerage houses.

And yet….times change. More robo advisors are launching interactive services, including Betterment, which could be regarded as the original “set it and forget it” investing algorithm.

Some investors still don’t want to speak to a live financial expert and there are a variety of reasons for this ranging from not having any questions to not knowing what questions to ask.

But if you do want to talk to a real live human at either Betterment or SoFi, you can. At Betterment, you can schedule fee-based phone meetings with a Digital (basic) account and have unlimited access via phone or video calls with the Premium ($100,000 minimum) account.

At SoFi you can talk with financial experts by phone, chat or email anytime.

Betterment vs SoFi: Investment Options

Here, you will notice right away that Betterment offers a slightly broader range of support for different investing account options than does SoFi.

Betterment Investment Allocations
Betterment offers a number of investment strategies depending on your specific financial goals.

Plus Betterment also offers traditional banking in the form of its new checking and savings account products (with debit card to come).

SoFi’s Investing Options

  • Individual taxable accounts
  • Traditional and Roth IRAs

Betterment’s Investing Options

  • Individual and joint taxable accounts
  • Traditional and Roth IRAs
  • Trusts
  • Custodial accounts
  • Rollover IRAs
  • 401(k) (advice only)

When it comes to investment classes, both Betterment and SoFi focus heavily on ETFs (exchange traded funds).

But SoFi offers a slightly expanded menu by including cryptocurrency, gig economy, economy and real estate in its “speculative” ETF offerings. Not all users want to invest in these types of higher risk assets, but for those who do, you will not find them with Betterment.

Just getting into investing? See our list of the top stock brokers for beginners.

Betterment vs SoFi Mobile Apps

Betterment Mobile Trading App
Both Betterment and SoFi have positively-reviewed mobile applications.

Both Betterment and SoFi do a great job with their mobile apps. Both offer iOS/Apple and Android apps and both sets of apps are highly rated overall.

Betterment Mobile User Experience

  • iOS/Apple: 4.8 (out of 5 stars)
  • Android: 4.5 (out of 5 stars)

Betterment’s mobile apps together average of 4.65 (out of five stars).

SoFi Mobile User Experience

  • iOS/Apple: 4.8 (out of 5 stars)
  • Android: 4.6 (out of 5 stars)

SoFi’s mobile apps together average 4.7 (out of five stars).

Betterment vs SoFi: Final Thoughts

Now you have a much clearer picture of how Betterment and SoFi are both similar yet different.

With this information in hand, you can do your own side by side comparison of Betterment vs Sofi from the perspective of your investing needs, interests and goals. If you prefer human guidance, have limited funds to invest, SoFi might be the better option. Yet if you want tax loss harvesting, Betterment is the way to go.

Which is better, Betterment of SoFi? The answer depends on your financial needs.

About Author

Tim Fries Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim is also the co-founder of Protective Technologies Capital (