I had been procrastinating on moving our retirement accounts from Betterment to Vanguard. It’s something I’ve been meaning to do since I started learning more about personal finance and financial independence.
You can read more about my experience with Betterment in an old blog post I wrote several months ago. Now don’t get me wrong, I still really like Betterment. It has a great user interface. It makes things simple for the uninformed investor. You select your ratio of stocks to bonds, deposit money, and Betterment does the rest. They do a great job at automating everything, which makes saving easier. So why am I switching from Betterment to Vanguard?
The main reason is fees. Betterment charges an advisory fee of 0.25% for accounts with over $10k. Now I realize this is less than one percent. For an account with $10k in it, the advisory fee is essentially $25/year. Now this $25 fee might be worth it for some people when you consider the automated process and not having to research the specific funds you’re investing in. However, I like learning about this type of stuff. I’ll admit I’m still a novice when it comes to investing, but I want to learn more and do it on my own. $25 in fees can add up in the long run especially if you’re managing a lot more money. For example, a $100,000 balance would incur $250 in fees.
Cutting out the Middle Man
Not to mention, Betterment is basically just a middle man between you and Vanguard. The ETFs they buy for you can be purchased with no costs from Vanguard. So Betterement charges you an advisory fee to buy Vanguard ETFs plus you still have to pay the expenses that the ETF charges. I don’t see the point in paying advisory fees for something that I could easily do on my own.
Keeping Taxable Accounts
However, as the title of this post states I am only moving my retirement accounts over. Why? Well until I figure out how to do tax loss harvesting on my own, I’m willing to pay the advisory fee. Granted we don’t have that much money invested yet, but tax loss harvesting can definitely help offset that advisory fee. Retirement accounts don’t have this benefit because they aren’t taxable. Therefore, even if you were to sell an asset for a loss and buy a similar asset, you wouldn’t get the tax benefit.
I thought the process of transferring funds from Betterment to Vanguard would be difficult. However, Vanguard makes it pretty simple. You basically tell them what type of account you want to move over to them. They ask you what type of assets are currently in the account. You then complete a form that you sign and send to them. They then take care of the process of obtaining the funds from your current brokerage account and adding them to your new Vanguard account. I mean I guess it makes sense that they would want to make the process as easy as possible for you to give them your money.
As of today, Betterment has initiated the transfer to Vanguard. It stated that this could take 12-15 days, but hopefully the transfer completes faster than that.