Betterment vs. Empower: Which Is Best For You?

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Two of the most well-known robo advisors are  Betterment and Empower (formally known as Personal Capital. While both incorporate robo-advising features into their services, they have different target markets.

In this article, we’ll compare and contrast the platforms to help you determine which is better for your investing goals.

This article looks at Personal Capital’s wealth management service, which has a $100,000 account minimum. The company also offers a free suite of personal finance tools (including a popular portfolio tracking app, budget tracker, a mutual fund fee analyzer, and a retirement calculator) that are available to all users. You can learn more about how those tools work in our Empower review.

About the Companies

Betterment and Empower are both digital investment platforms, but they aim to serve different types of clients.

Founded in 2008, Betterment aims to make AI-driven robo-advisory services accessible to the ordinary investor. Additionally, it strives to help average investors achieve their goals through passive investing and diversification. It had around $33 billion in assets under management as of Q4 2022.

Empower offers some similar robo-advisory features, but it primarily serves high-net-worth individuals who want full-service financial advising and wealth management. It’s more comparable to a traditional advisory firm, but with remote access to advisers.

While operating as Personal Capital, Empower had $21.9 billion under management as of October 2022 — perhaps owing to a smaller yet more affluent client base.

Empower is one of the largest financial services companies in the U.S., with over $1 trillion of assets under management. 

Betterment vs. Empower: The Basics

Minimum investment:$0 (Betterment Digital); $100,000 (Betterment Premium).$100,000.
Types of accounts:Taxable (individual, joint); IRAs (traditional, Roth, SEP, inherited, rollover); trusts; cash reserve; and checking.Taxable (individual, joint); IRAs (traditional, Roth, SEP, rollover); trusts; and cash reserve.
Fees:$4 per month, or 0.25% with recurring deposits or at least $20,000 across all of your Betterment accounts. Betterment Premium is an additional 0.15% per year.Between 0.49% and 1.50% per year, depending on your plan and account size.
Socially responsible investing:YesYes
Tax-loss harvesting:YesYes
Investment options:ETFs consisting of 14 different asset classes across stocks and bonds; four additional curated portfolio strategies (BlackRock Target Income, Goldman Sachs Smart Beta, Socially Responsible Investing, Crypto).ETFs for Investment Services-tier clients; customizable portfolios for Wealth Management-tier clients and above, with more investments and Smart Weighting; Personal Capital weights by size, style, and sector.

Betterment vs. Empower: Financial Planning

Betterment has two different offerings: Betterment Digital and Betterment Premium.

Betterment’s Digital is a low-fee robo-advisor, meaning it relies mostly on algorithms to manage your portfolio. Human advisors are available with Betterment Digital, but they’re not the core offering.

You can either purchase individual calls with human advisors (starting at $199) or upgrade to Betterment Premium when you reach $100,000 in assets for unlimited access to their team of in-house CFPs® (for a total annual fee of .40%).

Empower, on the other hand, is an online wealth manager. It provides human financial advisors to manage your portfolio, with the assistance of some robo-advisor features.

Empower has three account tiers, with the two highest tiers offering services for other areas of your finances, such as insurance, tax planning, estate planning and more.

However, you need $100,000 in investable assets to use Personal Capital’s wealth management services, and its fees — which start 0.89% for your first million dollars of assets — are higher than Betterment’s.

Our Take

We think Betterment’s Digital plan is a better fit for newer investors, as well as those who don’t have a large portfolio.

Empower and Betterment Premium (Betterment’s financial planning services) are the more closely related services. Between the two, Betterment has a big edge when it comes to cost, charging just .40% of your total assets.

Making a choice between the two comes down to exactly what you’re looking for in your wealth management services.

Betterment aims to help you manage your portfolio needs, such as helping you set goals for retirement or creating a tax-smart withdrawal plan during retirement. On the other hand, Empower offers a broader array of services for their higher fee, including personalized estate, tax and legacy planning.

If you have under $200,000 of assets on Empower, you’ll get access to a team of financial advisers. With over $200,000 of assets, you get access to two dedicated financial advisers that will be your main points of contact and work with you continuously to help you achieve your goals.

Similarities and Differences

Empower and Betterment both use automation to manage your finances and provide you with a hands-off investing experience.

As online investment platforms, they share several core features.

Shared Features

  • Account types: Both offer several types of IRAs and taxable investment accounts.
  • Human advising: Both offer human advising, although Betterment users need to upgrade to Premium (which requires $100,000 in assets) to access this feature.
  • Portfolio rebalancing: Betterment and Personal Capital both adjust your portfolio to maintain your target asset allocation.
  • Socially responsible investing: Both provide socially responsible investment strategies.
  • Tax-focused investing: Both services perform tax-loss harvesting to save you money when you incur capital losses. Additionally, both have options to invest in tax-efficient accounts such as a Roth IRA or SEP IRA.

Empower’s Unique Features

PC’s offerings are geared towards investors with higher net worths who want a more personalized wealth management service.

  • More investments: Empower’s ETFs represent more asset classes than Betterment’s. If you have $200,000 invested with Empower, you can customize your portfolio with individual stocks, and $1 million gains you access to bonds.
  • Smart weighting: Empower weights by size, style and sector to increase your portfolio’s diversification.
  • Portfolio rebalancing with exception reports: Instead of automatically rebalancing, Empower analyzes changes in your portfolio and considers tax implications to determine if rebalancing is a good move.
  • Three tiers of wealth management: Empower’s entry-level advisor tier is called “Investment Services.” At $200,000 in assets is the “Wealth Management” tier, and at $1 million is the “Private Client” tier — both of which offer additional investment choices and services.

Betterment’s Unique Features:

Betterment aims to manage your portfolio for you fully. All you’re responsible for is funding your account and setting your goals.

  • Financial planning packages: You can pay a la carte for calls with human financial advisors to discuss your financial picture, as well as specific topics like college, marriage planning and retirement planning.
  • Fractional shares: You can invest in fractional shares of ETFs even if you don’t have enough cash to buy a whole share.
  • Goal-based investing: Betterment lets you set goals for general investing, retirement savings, retirement income, emergency funds and major purchases. It helps you set these financial goals and keeps you on track to achieving them.
  • No minimum investment: You can open an account with $0, and start investing with $1. This makes it an excellent choice for beginner investors.
  • Two-way sweep: Betterment analyzes your linked accounts and automatically transfers unused cash when its balance is above a certain threshold.

Investment Options and Methodologies

In broad terms, both platforms base their investment methodologies on Modern Portfolio Theory.

MPT assumes investors are risk-averse and attempts to maximize the amount of a portfolio’s return given a certain amount of risk by spreading the portfolio’s holdings across several asset classes.

Betterment’s portfolios consist of highly-liquid, index-tracking ETFs. By following this strategy, Betterment helps its investors maximize their returns at a lower cost while also minimizing taxes.

You can invest in six types of stock ETFs (four domestic and two foreign) and eight types of bond ETFs (six domestic and two foreign).

As someone who invests with Betterment, here’s the exact breakdown of my asset allocation under the 100% stock portfolio.

betterment asset allocaton example
RJ’s Betterment asset allocation.

On Betterment, you can set various goals for which you’d like to invest. It will recommend a portfolio allocation based on the goal, as well as your risk tolerance and time horizon — but you can adjust your allocation based on your preferences.

Furthermore, Betterment offers four additional curated portfolio strategies.

  • BlackRock Target Income: Low-risk, 100% bond ETF portfolio with varying bond yields to earn income and insulate against market volatility.
  • Goldman Sachs Smart Beta: Attempts to earn higher returns while managing risk by picking stocks with strong financials relative to their price, low volatility, and upward momentum.
  • Socially Responsible Investing: Increases weight towards companies that strive to have a positive social impact.
  • Crypto: Four custom crypto portfolios, all targeted towards different sectors.

You can make these strategies either part or all of your portfolio.

Empower also uses ETFs, but they’re spread among six asset classes to increase diversification.

These include:

  • US stocks
  • US bonds
  • International stocks
  • International bonds
  • Cash
  • Alternative investments (REITs, precious metals, energy, etc.)

While I don’t invest with Empower, the company does have a suite of free investment and financial planning tools (including my favorite financial independence calculator) that I find very useful. One feature is an investment checkup, which analyzes your portfolio using Modern Portfolio Theory. Here’s what their model portfolios recommended for me:

Persoanl Capital Asset Allocation
RJ’s target allocation, as recommended by Empower.

In terms of strategy, Empower uses “Smart Weighting” — a method of portfolio allocation that picks assets based on size, sector and style — to minimize overexposure to assets with higher market capitalizations (the total value of all outstanding shares of an asset). 

According to Empower, a capitalization-weighted strategy brings two problems:

  • Buying high and selling low: You will be paying more for overvalued stocks and less for undervalued stocks.
  • Concentration risk: Market capitalization tends to overexpose your portfolio to certain assets or asset classes. As you’re buying based on size, your portfolio is composed of the largest and fastest-growing companies and asset classes. In other words, you’re buying assets simply because they’re already big, which can increase risk.

Empower also uses dynamic asset allocation, meaning it adjusts the weights of your portfolio’s assets as your financial situation changes.

For example, as you approach retirement, Empower might shift your portfolio towards more conservative investments.

Related Reading: How Long Will Your Money Last During Retirement?

Historical Returns

Betterment performed backtesting — reconstructing theoretical past returns based on historical market data, which is also known as a Monte Carlo simulation — to estimate its historical returns.

Its annualized average historical returns based on backtesting range from 1.2% for the most conservative allocation (100% bond ETF portfolio) to 6% for the most aggressive (100% stock ETF portfolio).

Empower calculated its historical returns with five “composite personal strategies” — blends of domestic and international equities, fixed-income investments, and alternative investments (such as real estate and commodities).

Currently, their average annualized historical returns range from 3.9% at the most conservative allocation to 7.8% at the most aggressive.

Fee Comparison

Betterment Digital (which is the plan available to all investors with no minimum account balance) charges 0.25% for assets up to $2 million, then 0.15% on assets exceeding $2 million. If you upgrade to Premium, those fees change to 0.40% and 0.30%, respectively.

Empower charges more for its services at 0.89% of assets under management. Once you have $1 million in assets, you move up to its Private Client tier and pay lower management fees:

  • Your first $3 million: 0.79%
  • Assets from $3 million to $5 million: 0.69%
  • Assets from $5 million to $10 million: 0.59%
  • Assets over $10 million: 0.49%

See Also: Betterment vs. Vanguard.


Both platforms have their place in the digital investment advisor market, as they each serve a different clientele.

Betterment is an excellent platform if you’re new to investing. Its low fees, investment selection and automated features make it easy to jumpstart your investing without a large learning curve.

However, as your wealth grows and your finances become more complicated, you may decide to move to Empower or Betterment Premium.

If most of the advice you’re looking for is investment related, such as setting and managing your retirement portfolio and other savings goals, Betterment Premium is a good option at a fee of only .40% of total assets.

For complex needs, Empower offers more personalized service and more investment options. These come with higher fees.

Also see: The Best Empower Alternatives.

R.J. Weiss
R.J. Weiss, founder of The Ways To Wealth, has been a CERTIFIED FINANCIAL PLANNER™ since 2010. Holding a B.A. in finance and having completed the CFP® certification curriculum at The American College, R.J. combines formal education with a deep commitment to providing unbiased financial insights. Recognized as a trusted authority in the financial realm, his expertise is highlighted in major publications like Business Insider, New York Times, and Forbes.

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