Betterment vs. Personal Capital for Socially Responsible (SRI) Investing (Review)

Robo-advisors Personal Capital and Betterment offer socially responsible investing strategies, though the two platforms have different approaches. Having reviewed over 30 robo-advisor portfolios, we will help you compare Betterment and Personal Capital from the environmental, social, and governance standpoint.

SustainFi October 20, 2021

Personal Capital Advisors Corporation (“PCAC”) compensates SustainFi for new leads. SustainFi is not an investment client of PCAC. Some of our posts may contain links from our affiliate partners. However, this does not influence our opinions or ratings. Please read our Terms and Conditions for more information.

At a glance

  • Both Personal Capital and Betterment offer environmental, social, and governance (ESG) investing options that consider carbon emissions, diversity and shareholder rights. But, because their approaches are so different, the best option depends on what you are looking for
  • Best for new investors: Betterment. Betterment is a low-cost, no-minimum robo-advisor. It may be a better option if you don’t have a complex financial life or a lot of assets or are simply looking for the lowest-cost solution
  • Best for high-net-worth investors: Personal Capital. Although Personal Capital’s fees are higher, you get access to dedicated human advisors and advanced tax minimization strategies

Keep reading to learn more.

Minimum investment

 $100,000 ($200,000 for Socially Responsible Investing)

Minimum investment

$0 ($100,000 for Betterment Premium)

Management fee

0.49% - 0.89%

Management fee

0.25% - 0.40%

ESG option

Socially Responsible Personal Strategy

ESG option

Three Impact (SRI) Portfolios

Human advisors

Yes

Human advisors

Yes (extra fee)

Tax-loss harvesting

Yes (stock-level)

Tax-loss harvesting

Yes (fund-level)

What is Betterment?

Founded by Jon Stein in 2008, Betterment is the first and most successful robo-advisor judging by assets under management (which reached $29 billion in early 2021). The robo-advisor uses algorithms based on the Modern Portfolio Theory to create the right portfolio to meet your goals, such as saving for retirement or growing your wealth.

Betterment has two service tiers, Digital and Premium. Betterment Digital charges a 0.25% annual fee, and there is no minimum balance. Betterment Premium charges a 0.40% fee, and you need at least $100,000 to get started. In return, you get access to human financial advisors.

🔔 Check out the full Betterment review.

What is Personal Capital?

Personal Capital is a hybrid advisor that combines a robo-advisor with human professionals. The company likes to call itself a “digital wealth platform.”

Founded in 2009, Personal Capital was acquired by a Canadian insurer, Empower, in the summer of 2020. In September 2021, the company had over $21 billion in assets under management.

Personal Capital has a higher account minimum ($100,000) and charges higher fees (0.49%-0.89%) than most robo-advisors. But it is not a typical robo-advisor, so comparing it to low-cost robo-advisors that don’t provide the same level of service isn’t fair.

With Personal Capital, you get ongoing access to a human financial advisor. He or she can help you with complex financial needs, like optimizing your portfolio for stock option ownership.

In 2018, Personal Capital launched its Socially Responsible Strategy, which reached $1 billion in assets by mid-2020.

🔔 Read the full review of Personal Capital.

Betterment vs. Personal Capital: Account Types

Personal Capital and Betterment both support the following account types:

  • Individual and joint taxable investment accounts
  • Retirement accounts for traditional, SEP, and Roth IRAs, plus rollover 401(k)s
  • Trusts

Personal Capital can also advise you on a 529 college savings plan or your 401(k), though they won’t manage it.

💰 The winner: Tie.

Betterment vs. Personal Capital: Checking accounts

Betterment offers two cash management accounts:

  • Betterment Cash Reserve, a high yield savings account, is FDIC-insured for up to $1 million and pays a 0.10% APY as of October 2021
  • Betterment Checking Account, a no-fee checking account that comes with a Visa debit card. The account is FDIC-insured for up to $250,000 and reimburses all ATM fees. You can get cash back rewards from thousands of brands like Dunkin, adidas and Walmart

Personal Capital lets you open a cash account, which pays a 0.05% APY. The APY goes up to 0.10% if you are a customer of Personal Capital advisory services. (And you probably won’t be opening an account with them if you are not an advisory customer). There are no fees or minimum balance. The account is FDIC-insured. However, you don’t get a debit card, so you can’t withdraw cash at an ATM.

💰 The winner: Betterment. It gives you a choice of two accounts vs. one from Personal Capital. You can also get a debit card that earns rewards.

Betterment vs. Personal Capital: Minimum investment

There is no minimum for the Betterment Digital plan. The premium plan, which gives you access to fiduciary financial advisors, requires a $100,000 investment.

Personal Capital’s minimum investment – $100,000 – is comparable to what many human financial advisors need to work with you. However, you need to invest at least $200,000 to choose the Socially Responsible Strategy.

Here are the Personal Capital service tiers:

  • Investment Services ($100k-$200k investment assets.) You get ongoing access to a financial advisor, and your portfolio is invested in exchange-traded funds (ETFs.) You are not eligible for the Socially Responsible Strategy at this service tier
  • Wealth Management ($200k-$1 million investment assets.) You get ongoing access to two financial advisors. Your portfolio is invested in stocks and funds, which you can customize. You are also eligible for the Socially Responsible Personal Strategy
  • Private Client (over $1 million investment assets.) In addition to two dedicated financial advisors, you get priority access to investment specialists and private equity investments 

💰 The winner: Betterment. A $0 minimum balance clearly makes Betterment more accessible than Personal Capital’s $100,000 minimum ($200,000 if you want to invest sustainably.) However, Betterment Premium also has a $100,000 minimum.

Betterment vs. Personal Capital: Management fees

The more humans are involved, the more expensive it’s going to be. Personal Capital’s fees are closer to financial advisor than robo-advisor fees. A typical financial advisor charges around 1% of assets under management.

For the first $1 million invested with Personal Capital, you pay 0.89%, but that percentage drops to as low as 0.49% for over $10 million invested. Here is the full breakdown:

  • Up to $1 million: 0.89%
  • First $3 million: 0.79%
  • Next $2 million: 0.69%
  • Next $5 million: 0.59%
  • Over $10 million: 0.49%

Betterment’s fully automated service is much cheaper: it charges an annual fee of 0.25% of assets under management. However, Betterment Premium, which also offers financial advisors, costs 0.40%.

Neither Personal Capital nor Betterment charges any account opening fees.

💰 The winner: Betterment. Betterment charges 0.25%-0.40% of assets under management, compared to 0.49%-0.89% for Personal Capital.

Betterment vs. Personal Capital: Socially Responsible (SRI) Portfolio

Both Personal Capital and Betterment offer socially responsible investing options. ESG portfolios score better on environmental, social, and governance metrics like carbon emissions, worker treatment, diversity and governance.

🔔 Read our ESG investing guide to learn more.

Socially Responsible Investing with Betterment

Betterment offers three socially responsible investing options: Broad Impact, Climate Impact, and Social Impact Portfolios. 

Broad Impact Portfolio

Betterment’s general ESG option includes ESG funds for U.S. stocks, emerging and developed markets stocks, and, for non-taxable portfolios, U.S. high-quality bonds. Because of fees or trading limitations, the rest of the portfolio (including U.S. bonds for taxable accounts, international bonds, and emerging markets bonds) is still drawn from conventional ETFs. When tax-loss harvesting is enabled, Betterment adds conventional ETFs for emerging and developed markets stocks. 

The Broad Impact Portfolio includes the following funds:

  • U.S. stocks: iShares ESG Aware MSCI USA ETF (ESGU), iShares MSCI KLD 400 Social ETF (DSI), iShares MSCI USA ESG Select ETF (SUSA)
  • U.S. engagement stocks: Engine No. 1 Transform 500 ETF (VOTE)
  • Emerging markets stocks: iShares ESG Aware MSCI EM ETF (ESGE)
  • Developed markets stocks: iShares ESG Aware MSCI EAFE ETF (ESGD)
  • U.S. bonds: iShares ESG Aware USD Corporate Bond ETF (SUSC), iShares ESG U.S. Aggregate Bond ETF (EAGG) for retirement accounts, iShares National Muni Bond ETF (MUB) for taxable accounts
  • Conventional options for international bonds and emerging markets bonds

The portfolio relies on cheap ESG ETFs from iShares. Betterment uses large ESG ETFs from iShares (BlackRock), especially the iShares ESG Aware MSCI USA ETF (ESGU). While iShares ETFs own fossil fuel companies, they generally contain less energy than conventional alternatives. They also exclude tobacco, thermal coal, and certain weapons manufacturers. 

In July 2021, Betterment added the VOTE ETF, which will try to engage with large U.S. companies to drive change on issues like climate change.

The funds in the Betterment Broad Impact Portfolio cost from 0.05% to 0.39%. The portfolio with 80% in stocks costs 0.17%.

Climate Impact Portfolio

The Climate Impact Portfolio emphasizes the “E” or environmental factors in ESG. This portfolio features a low-carbon footprint stock ETF (CRBN) and ETFs that divest from fossil fuel reserve owners. According to Betterment, carbon emissions per dollar of revenue for the 100% stock Climate Impact Portfolio are half of those of the conventional (Core) Portfolio. The portfolio adds green bonds – bonds that fund environmentally friendly projects – through a green bond ETF. 

To construct this portfolio, Betterment relies on the iShares MSCI ACWI Low-Carbon Target ETF (CRBN). CRBN is an ETF that seeks to include companies with a lower carbon footprint. The ETF provider measures the carbon intensity of each stock by tracking the tons of CO2 emissions per million dollars in sales. (Despite lower carbon intensity, CRBN has energy exposure, including oilfield services provider Schlumberger.)

The remaining half of the stock exposure in the Climate Impact Portfolio is invested in fossil fuel reserve-free ETFs (SPYX for U.S. stocks, EFAX for developed markets stocks, and EEMX for emerging markets stocks). (Despite excluding oil and gas companies with reserves, SPYX includes oilfield services and fossil fuel-powered utilities.)

The Climate Impact Portfolio includes the following funds:

  • Global stocks: iShares MSCI ACWI Low-Carbon Target ETF (CRBN)
  • U.S. stocks: SPDR S&P 500 Fossil Fuel Reserves Free ETF (SPYX)
  • U.S. engagement stocks: Engine No. 1 Transform 500 ETF (VOTE)
  • Emerging markets stocks: SPDR MSCI EAFE Fossil Fuel Reserves Free ETF (EFAX)
  • Developed markets stocks: SPDR MSCI Emerging Markets Fossil Fuel Reserves Free ETF (EEMX)
  • U.S. high-quality and international bonds: iShares Global Green Bond ETF (BGRN)
  • Non-ESG options for other bonds

The Climate Impact Portfolio is not fossil free. Although the Climate Impact Portfolio is not free of fossil fuels, it does have better ESG scores and less exposure to energy than Betterment’s Core Portfolio, particularly for international stocks.

This portfolio doesn’t take into account social or governance factors (the “S” and the “G” in ESG), leading to lower ESG ratings from ESG rating providers Sustainalytics and MSCI than the Broad or Social Impact Portfolios. 

Social Impact Portfolio

The Social Impact Portfolio adds diversity and inclusion funds. The Social Impact Portfolio adds two impact funds that promote gender diversity and ethnic and racial inclusion. These funds are SPDR SSGA Gender Diversity Index ETF (SHE) and Impact Shares NAACP Minority Empowerment ETF (NACP). These two funds add up to around 8% of the portfolio invested 70% in stocks and 30% in bonds.

  • SHE is a U.S. Stock ETF that includes companies with greater gender diversity in senior leadership. Companies are ranked according to the ratio of women in senior leadership positions; the leaders in each sector are added
  • NACP, a U.S. stock ETF from Impact Shares, uses a scoring methodology from the National Association for the Advancement of Colored People (NAACP). The goal is to provide exposure to companies with strong diversity policies

The Social Impact Portfolio includes the following funds:

  • U.S. stocks: iShares ESG Aware MSCI USA ETF (ESGU), Impact Shares NAACP Minority Empowerment ETF (NACP), SPDR SSGA Gender Diversity Index ETF (SHE)
  • U.S. engagement stocks: Engine No. 1 Transform 500 ETF (VOTE)
  • Emerging markets stocks: iShares ESG Aware MSCI EM ETF (ESGE)
  • Developed markets stocks: iShares ESG Aware MSCI EAFE ETF (ESGD)
  • U.S. bonds: iShares ESG Aware U.S. Aggregate Bond ETF (EAGG), iShares National Muni Bond ETF (MUB)
  • Non-ESG options for international bonds, emerging markets bonds, and inflation-protected securities

🔔 Read the full review of the Betterment Impact Portfolios.

Socially Responsible Investing with Personal Capital

Personal Capital offers its ESG option in partnership with Sustainalytics, an ESG rating agency owned by Morningstar. This option is only offered to customers with over $200,000 in their portfolio.

Just like the core, non-ESG portfolio, the Socially Responsible Strategy invests in six types of assets:

  • U.S. stocks
  • International stocks
  • U.S. bonds
  • International bonds
  • Alternatives
  • Cash

The Socially Responsible Portfolio replaces large and mid-cap U.S. and international stocks with ESG stocks and funds. Personal Capital relies on non-ESG funds for other types of investments, like small-cap stocks and bonds.

How Personal Capital selects U.S. stocks for your ESG portfolio

For the U.S. stock component of your ESG portfolio, Personal Capital invests your money in a basket of individual stocks. In contrast, most other robo-advisors invest in exchange-traded funds (ETFs) instead of stocks.

To create the basket of ESG stocks, Personal Capital takes the Russell 3000 index of U.S. stocks, ranks each company using Sustainalytics ESG scores and excludes all stocks rated below their industry average. They aim to invest in the top 10% of stocks in each industry.

They also exclude these industries from ESG client portfolios:

  • Energy (except utilities)
  • Tobacco
  • Adult entertainment
  • Gambling
  • Small arms

The final portfolio includes between 75 and 85 stocks across nine sectors, so that 10-12% of your portfolio is invested in each sector.

60% of the U.S. stock portfolio is in large-cap stocks, and 40% is in mid and small-cap stocks. Small-cap stocks, which are around 20% of the U.S. stock portfolio, are not ESG-optimized.

Personal Capital is one of the few robo-advisors that remove fossil fuels from your U.S. stock investments, except for small-cap stocks. According to Personal Capital, less than 1% of your U.S. stock portfolio will be invested in energy if you choose the ESG portfolio.


For international stocks, including both developed and emerging markets, Personal Capital invests in ESG funds.

The portfolio can be customized for each client, so expense ratio and portfolio construction will vary.

Smart Weighting 

Most robo-advisors invest your money in ETFs that mirror the broad market. But the broad market is generally skewed towards more popular sectors, such as technology. For example, technology stocks are over 30% of the S&P 500 index.

To diversify your investments and protect you from market bubbles, Personal Capital puts your money equally in all sectors (excluding fossil fuels for the Socially Responsible Strategy.) In practice, that means that your U.S. stock exposure to any sector is 10-12%.

The downside to Smart Weighting is that you might miss out on the hot sectors while those are doing well.

Socially Responsible Strategy Performance

Personal Capital is one of the few robo-advisors that publish performance data. Although past performance doesn’t guarantee future performance, according to Personal Capital, the Socially Responsible Strategy has performed in line with the benchmark made up of low-cost non-ESG ETFs from Vanguard and iShares since its inception in 2018. However, a three-year track record is not very long.

Over the past year (through 6/30/2021), the performance of the Socially Responsible Strategy vs. the non-ESG benchmark varied depending on the riskiness of the portfolio. The riskiest, Full Growth, Socially Responsible Portfolio returned slightly less than the non-ESG benchmark. But the least risky portfolio beat the non-ESG benchmark by 0.5%. All in, it doesn’t look like the performance of the Socially Responsible Strategy is very different.

🔔 Read the full review of Personal Capital’s Socially Responsible Strategy.

💰 The winner: Tie. Betterment and Personal Capital have different approaches to selecting ESG portfolios. Betterment will put your money in a few low-cost ESG funds. Personal Capital puts your money in a basket of individual U.S. stocks and several ESG ETFs.

Betterment vs. Personal Capital : Tax-loss harvesting

Tax-loss harvesting is a tax reduction strategy that involves selling a fund or stock that has experienced a loss. By realizing this loss, you can offset taxable gains on other investments. The sold fund is replaced with a similar one, maintaining an optimal asset allocation.

Both Personal Capital and Betterment offer tax-loss harvesting to clients with Socially Responsible Portfolios.

Betterment offers automatic tax-loss harvesting at no additional cost at the ETF level. A more advanced tax-loss harvesting strategy, selling individual stocks that have lost money (also called direct indexing), is available from Personal Capital.

💰 The winner: Personal Capital. Both Betterment and Personal Capital offer tax-loss harvesting capabilities, but Personal Capital has more advanced stock-level tax-loss harvesting.

Betterment vs. Personal Capital: Human Financial Advisors

Personal Capital gives you ongoing access to financial advisors. Investors with over $200,000 invested have access to two advisors.

The Betterment Digital plan doesn’t come with access to human advisors, though you can buy a package for an extra fee ($299-$399 for 45-60 minutes).

Here are some of the packages:

  • Getting Started: $299
  • Retirement Planning: $399
  • Financial Check up: $399
  • College Planning: $399
  • Marriage Planning: $399

Betterment Premium customers, who must have at least $100,000 invested, get ongoing access to fiduciary financial advisors.

💰 The winner: Tie. If you only need a one-off consultation, you can buy a 45-min or 60-min package from Betterment. You can get ongoing personal advisor access from both if you have at least $100,000 invested.

Betterment vs. Personal Capital: Automatic Rebalancing

Both robo-advisors automatically rebalance your portfolio. Automatic rebalancing means that the robo-advisors will buy or sell investments to get to the asset allocation that suits your goals.

Sometimes, when one asset class, like stocks, does much better than another one, like bonds, your portfolio may “drift” and become riskier (or less risky) than it should be. Automatic rebalancing solves that.

💰 The winner: Tie. Nearly all robo-advisors now offer this feature.

💰 The Overall Winner

  • There is no clear winner: the best investment platform depends on what type of investor you are
  • Best for beginners: Betterment. Betterment is an accessible, low-cost robo-advisor. Their platform lets you start investing with $0 and pay only 0.25%. It is cheaper than Personal Capital, but services are automated, and you need to buy hourly packages to access human advisors (unless you are a Premium member, which requires a $100,000 investment)
  • Best for high-net-worth individuals: Personal Capital. With Personal Capital, you get personalized attention from a dedicated financial advisor (or two.) They can help you with complex financial needs like estate planning. You also have access to advanced tax-loss harvesting strategies and private equity investments

🔔 Want to compare more options? Read our guide to ESG robo-advisors.

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Methodology

We compared robo-advisors with an ESG offering based on management fees, ESG portfolio expense ratios, the percentage of the ESG portfolio invested in ESG funds vs. traditional funds, ESG portfolio ratings (from Sustainalytics and MSCI), portfolio exposure to energy, transparency, features like tax-loss harvesting and automatic rebalancing, and access to human advisors.