If algorithm driven financial guidance is what you are looking for and you don’t really care much about the guidance coming from a human being, Wealthfront is a great option for you. What’s more, it even comes with extremely competitive pricing. Wealthfront has an excellent goal-setting and planning technology. When you set up a Wealthfront account, you gain access to Path, the free financial planning tool that integrates your account data and utilizes third-party data to project your financial situation more accurately.
Overall rating: 4.5/5
- Minimum investment corpus in the account: $500
- Fees: 0.25% for most accounts, no trading commission or fees for withdrawals, minimums, or transfers. 0.42%–0.46% for 529 plans. Underlying portfolios of ETFs average 0.07%–0.16% management fee
Even if you have your primary investment account at another institution, looking at Path’s scenarios is extremely helpful. Wealthfront offers the following features—Invest, Save, and Borrow. In this review, we will focus on Wealthfront’s robo-advisor under the Invest offering.
Let’s start by outlining the pros and cons of Wealthfront:
- Excellent financial planning that will help you see the big picture
- Goal-setting assistance can provide you in-depth assistance for large value goals, such as home purchases and college savings
- Portfolio line of credit available
- If you have multiple goals, Path shows you the trade-offs you’ll face
- Tax-loss harvesting
- Lacks an online chat feature (for both existing customers or prospective customers)
- Wealthfront doesn’t have any extra SIPC insurance
- Portfolios under $100,000 can’t be customized for anything more than risk settings
- Larger accounts may be made up of expensive mutual funds
Account setup – 4/5
The experience of getting started with a Wealthfront account varies counting on what amount of other financial institutions and assets you’ll hook up with your plan. If it’s just a bank account , it’ll go fairly quickly. However, you’ll put tons of data into Wealthfront, and you’ll enjoy this effort as it will reward you with better goal planning afterwards. For example, you’ll put the worth of your house into your assets as well as the offsetting mortgage.
Once your information is all entered—including IRAs and 401(k)s, along with the other investments you would possibly have, like a Coinbase wallet—Wealthfront shows you an image of your current situation and your progress towards retirement. All of this is carried out without speaking to a human advisor, unlike some robo-advisors that have made a session with a human advisor a part of their setup process.
To determine the portfolio you’ll invest in, you’re asked a couple of questions on your attitude towards risk and what you might do if you have an urgent need for cash. You’re shown the precise portfolio before funding your account, but you can’t customize the pre-set portfolio. Clients who have less than $100,000 in a Wealthfront investing account can choose a stock portfolio instead of portfolios of ETFs. If there are certain companies that you don’t want to invest in, you have the option of putting them on a restricted list.
Wealthfront allows you to open taxable individual, joint and trust accounts as traditional IRAs, Roth IRAs, SEP IRAs, and 401(k) rollovers. Wealthfront also allows you to open a 529 college bank account, which is a rarity among robo-advisors. 529 accounts carry higher fees than other wealthfront accounts. The reason behind that is the additional administrative fee.
Goal Setting: 5/5
Goal planning and tracking are where Wealthfront shines. Your dashboard shows all of your assets and liabilities, supplying you with a fast visual check-in on the likelihood of achieving your goals.
If a home purchase is in your plans, Wealthfront connects with Redfin to assist you in estimating the price of houses in specific areas. Similarly, college savings scenarios have cost estimates for varied U.S.-based universities. College expense projections include not just tuition, but also room and board, as well as other expenses. Wealthfront’s use of third-party data makes it incredibly useful for all sorts of planning and you may find yourself running scenarios far beyond your current investment needs. You can even figure out how long you can take a sabbatical from work and travel, while still making your other goals work.
Wealthfront adds additional goals to the suite supported customer feedback.
Account Services: 4/5
As your checking account is linked during the process of onboarding, Wealthfront makes it very easy to line up automatic deposits. Clients who have at least $25,000 in their accounts have the option of borrowing up to 30% of their account’s worth using Wealthfront’s portfolio line of credit. As of June 2019, they are available at interest rates of 4.70%–5.95%. You can pay the loan back on your own schedule. If the worth of your investments drops significantly, you’ll be asked to pay the loan back faster.
As of September 2019, Wealthfront’s cash management account also pays an interest rate of 2.07%. The interest rate fluctuates depending on the Federal Funds rate. It’s a separate account from the investing account, but you’ll be able to shift your funds back and forth easily. Wealthfont appears to be making a robust move to integrate all of its financial services within a single platform with its Self-Driving Money concept, where you deposit your pay into the platform and it handles your finances for you. This service isn’t up and running yet, but it’s a primary focus for the corporation as a part of the upcoming major launch.
Portfolio Content: 4.5/5
For creating the asset allocations of your portfolio, Wealthfront uses Modern Portfolio Theory (MPT). Wealthfront primarily uses low-cost exchange-traded funds (ETFs) in order to cover 11 different asset classes, not including cash. The asset classes are:
- U.S. stocks
- Foreign stocks
- Emerging market stocks
- Dividend stocks
- Real estate
- Treasury inflation-protected securities
- Municipal bonds
- Corporate bonds
- U.S. government bonds
- Emerging market bonds
- Natural resources
Portfolio Management: 4.5/5
There is no set schedule for rebalancing; Wealthfront’s philosophy is to watch portfolios and rebalance them once they drift significantly from the target asset allocation strategy. Portfolio rebalancing triggers include deposits, withdrawals, and dividend reinvestments. Similarly, if customers change their risk score, Wealthfront’s algorithms will transition the asset allocation to match the new score, but it can take a while.
This is because Wealthfront takes tax minimization quite seriously. Wealthfront’s goal is to attenuate short-term capital gains and avoid wash sales, and it does this even when accounts are transferred in or stocks are added to your restricted list. Wealthfront has one among the foremost robust tax-loss harvesting programs of all the robo-advisors. The company has a superb white book explaining the method, but rest assured that the methodology is sound and can benefit your portfolio over time.
In case you hold large value accounts (over $100,000), Wealthfront provides more technological help with your account with stock-level tax-loss harvesting and their Smart Beta portfolio weighting. This has been designed to increase the value of your expected returns by virtue of intelligent weighing of securities that make up your portfolio.
User Experience: 4.5/5
When it was launched, Wealthfront was mainly designed to be a mobile tool. The desktop platform uses the extra real estate to its advantage. The design is clean and searching for important primary information is easy in the Help Centre.
The mobile apps, native iOS and Android, are designed to be very simple to use with minimal typing. Data inputs, like dates and monthly deposits, are displayed on sliders or drop-down menus to avoid making typos. When linking external accounts, however, you continue to need to enter your user IDs and passwords. The workflow for a replacement account is logical and straightforward to follow.
Customer Service: 3.5/5
Wealthfront is taking its non-human approach seriously. It does not have an online chat feature on its website or in its mobile apps. There is a customer support phone line staffed by licensed professionals, who can help you with anything from a forgotten password to a question about your portfolio. Most support questions posed on their Twitter are answered relatively quickly, though some users had to wait for a week for a response.
Education and Security:4/5
Wealthfront does a terrific job helping its clients find out a budget. The Path tool was covered within the goal planning section, but there are many resources beyond that. Those tools include guides, articles, a blog, and FAQs. In terms of the nitty-gritty details on using the platform, there is a lot of help on the website and most of it is accessible through the mobile apps as well.
Wealthfront is also a member of the Securities Investor Protection Corporation (SIPC) and client accounts are protected up to a maximum amount of $500,000. The site actually has a piece of writing on why SIPC insurances don’t protect investors in the manner they think it does, but the corporate still holds the coverage—likely because they have faced an excessive amount of client friction on the matter. The separate cash account is FDIC insured. The specific details on the location security weren’t given, but Wealthfront’s site states that it uses third-party providers that “employ robust, bank-grade security and follow data protection’s best practices.”
Commission and Fees: 4/5
Wealthfront’s fee structure is extremely simple and really competitive: 0.25% of your portfolio, assessed monthly. There are no fees charged for cash balances. The ETFs that structure most of the portfolios have annual management fees of 0.07%–0.16%. Larger portfolios enrolled within the Smart Beta program could also be invested in funds with slightly higher management fees. It is worth noting that the shortage of trading commissions, withdrawal fees, and transfer fees is integral to the regular tax management strategy that might otherwise cost you a lot to implement, it might even wipe out all of the tax savings.
Wealthfront Inc. is an automated investment service firm located in the town of Palo Alto, California. Wealthfront was founded in 2008 by Andy Rachleff and Dan Carroll. As per data released in January 2019, the total assets under management for Wealthfront were over $11.4 billion. It’s one of the most popular robo advisors in the world.
Wealthfront was founded in the year 2008 by Andy Rachleff, the retired co-founder of the VC firm Benchmark and Dan Carroll as kaChing, a company which specialized in mutual fund analysis. Eventually, the firm turned to wealth management. Andy Rachleff was also the founding CEO of the firm. In December 2012, Wealthfront also started tax loss harvesting for accounts which were valued over $100,000.
In 2013, Wealthfront’s assets under management were worth $97 million. The assets under management grew by 450% in one year and Wealthfront became really well known in the wealth management field. Wealthfront’s tax loss harvesting platform, “direct indexing” was launched in 2013. The platform purchases the individual securities of an investment portfolio. Adam Nash was appointed as Wealthfront’s CEO In January 2014.
Wealthfront collaborated with the state of Nevada in 2016 and launched a 529 tax-advantaged college savings plan. In 2015, the state of Nevada had approved a new tax credit rule for employers who provide fund matching to employees participating in 529 savings programs. In January 2018, Wealthfront launched a homeownership planning tool for Path. In January 2020, Wealthfront was listed in Business Insider’s Top 10 Best Robo Advisors in 2020. Andy Rachleff serves as the CEO and executive chairman of Wealthfront as of today.
The company has received funding from Benchmark Capital, DAG Ventures, Index Ventures, The Social+Capital Partnership and individuals, including Marc Andreessen, Ben Horowitz and Jeff Jordan. In April 2014, Wealthfront raised $35 million in a funding round led by Index Ventures, Ribbit Capital and Benchmark Capital. The funding round brought the firm’s total funding to $65.5 million.
The Wealthfront Story
After a successful career as the co-founder of VC firm Benchmark Capital, Wealthfront co-founder Andy Rachleff kicked back into a relaxed retirement*.
Teaching technology entrepreneurship courses at Stanford Graduate School of Business.
Partnering with his wife and the Damon Runyon Cancer Research Foundation to fund novel cancer research projects.
Sitting on the University of Pennsylvania Board of Trustees, his alma mater, where he was Vice Chairman of the university’s endowment investment committee.
At Stanford, entrepreneurs and students alike came to him for investing advice. But he often couldn’t recommend the services he used because the minimums were too high — especially for students.
He saw a need to democratize access to sophisticated investment products.
Meanwhile at the University of Pennsylvania, Andy found that even the best-managed endowments in the world relied on spreadsheets, outdated tools, and manual calculations. It turned out that even high-end investors needed an upgrade.
Andy’s tech expertise led to a breakthrough notion:
Software could make investing easier and better for more people.
Around this time, Dan Carroll was visiting his parents outside Chicago. They’d been hit hard by the financial crisis of 2008, and Dan, a former trader, was helping them assess the damage. He opened a statement from their financial advisor and was horrified.
He knew the deal — financial advisors make 90% of their revenue from the top 20% of their clients.
People like his parents didn’t get the attention they deserved — that they paid for.
It was clear to him most people didn’t have access to good financial advice.
And he decided to do something about it.
So he started tinkering with a few solutions. He eventually built a prototype that got some traction, and even got the attention of a lecturer at Stanford.
That’s when Andy called Dan.
But no, this isn’t the point in the story when Wealthfront was born. Dan thought VCs were [bleep], so he didn’t call back. He wasn’t about to sell out.
He was on a mission to do good.
Andy persisted, however, and eventually tracked Dan down. He explained that he’d already had a wildly successful career, so he wasn’t in it for greed. He simply wanted more people to have the same investing advantages that he had.
The two realized they not only shared a mission — to help democratize access to sophisticated financial advice — they agreed that software could unlock great investing for everyone. So they gathered some of the best technical minds they knew.
That was the day WealthFront was born.