# Betterment vs. Schwab: No Hidden Costs. No Kickbacks. Complete Transparency.

## Betterment is the original and largest independent robo-advisor.

Five years ago, Betterment invented the automated investing service, becoming the first of its kind, and now it serves more than 145,000 customers. Don't be fooled by others' fine print, especially when it comes to Schwab's new "no advisory fee" robo-advisor offering. Betterment is built to provide customers with reliable customer support, convenience, automation, lower true cost and complete transparency, all combined to do what's right—for you.

Features and Benefits Schwab Intelligent Portfolios

### Only Passive Funds

Studies have shown that passive investors holding just index funds have a higher chance of success. Schwab uses actively managed funds known as "fundamentally weighted." These active funds systematically depart from passive investing and have roughly 4x higher expenses.

Betterment's advanced personalized advice is able to determine if you are on-track to reach investment targets by projecting future investment values, based on your time horizons, portfolio allocations, and deposit/withdrawal choices. We actively provide recommendations for frequency and size of deposits to help you meet your goals. Our dynamic savings tool even allows you to map out your different savings scenarios.

### Lower Taxes from TaxMin Lot Selling

Betterment's TaxMin cost basis accounting method goes beyond the industry standard (FIFO). We sell losses first to minimize capital gains due to unnecessarily selling shares.

Undisclosed

### Tax Impact Preview

See estimates of taxes you will owe in advance, before you adjust investment allocations or make withdrawals, so you always make the most informed decisions.

### Automated, Tax-Efficient Rebalancing

Betterment automatically rebalances your portfolio. We sell losses first, and we rebalance your account with every transaction—including dividend payments—to minimize capital gains due to unnecessarily selling shares. Schwab's rebalancing may trigger short-term capital gains taxes.

### 60-Second Rollover

We have some of the fastest rollovers in the industry, and the process is completely paperless. Schwab's rollovers require a manual process.

### SmartDeposit

Betterment's SmartDeposit feature helps you invest your excess cash automatically — even if you have variable income. Maintain the liquidity you need in your checking account, while making sure that every other dollar is put to work. If you ever need some extra cash, access your money with no withdrawal fees.

### No Credit Inquiry

Hard credit inquiries can lower your credit score and remain on your credit report for two years. Betterment does not run a hard credit check when you open an account.

### Support 7 Days a Week — Live Chat, Phone, and Email

Our investing may be automated, but we’re certainly not. We're here for you via phone, email, and live chat — 7 days a week.

## You're a smart investor. Now you've found an investment solution that's right for you.

##### Disclosures:

Sourced as of 3/23/16 from the below links and is subject to change without notice. Betterment fee accurate as of January 30, 2017.

"No Conflicts of Interest." Betterment LLC has been designed from the ground up to put its clients' interests first. This includes, among other things, no trading costs, unbiased advice, and one simple and transparent way of generating revenue: a low cost advisory fee. For example, we do not receive compensation for our ETF selection, we do not receive compensation for trades, and we do not put a portion of your investment in cash to earn revenue.

1This illustration compares what would happen if an investor fully invested all assets in an investment portfolio in securities as opposed to leaving a portion of those investable assets in cash. A Schwab moderate model portfolio, as provided on the Schwab Intelligent Portfolio FAQ page, holds 61% stock, 5% gold and other precious metals, 23.5% bonds, and 10.5% in cash.

To calculate the potential cash drag in a Schwab portfolio, we studied expected returns for a Betterment portfolio of 74% stocks, 26% bonds. We selected that Betterment portfolio because it maintains that same proportion of stocks to bonds as in the moderate Schwab portfolio described above. In the first scenario we assumed 89.5% of an investors assets are invested in a Betterment portfolio and 10.5% is held in cash. In the second scenario we assumed all of an investor's assets are invested in the Betterment portfolio, none is held in cash. For our analysis, we assume that this 74% stock Betterment portfolio will have an annual return of 5.36% in excess of the risk-free rate (the risk-free rate is typically very close to the interest rate paid on cash in a savings account). We calculated the expected return that could be earned in the 74% stock Betterment portfolio that was instead lost to the drag of holding 10.5% of assets in cash is 0.56% on an annual basis (also above the risk-free rate). This illustration did not include Betterment's advisory fees because a Schwab portfolio does not include advisory fees.

These calculations are hypothetical and for illustrative purposes only. Investing in securities always involves risks, and there is always the potential of losing your principal when you invest in securities. Past performance does not guarantee future results, and the likelihood of investment outcomes are hypothetical in nature.