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Wealthfront

in Investment Advisors

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Wealthfront

Unaffiliated

in Investment Advisors

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Overview

Wealthfront is a wealth management company that uses software to automate your investment portfolio based on your tolerance for risk and modern portfolio theory. Modern portfolio theory states that trying to time the market and pick stocks is a fool’s errand and that the smart move is to invest in a well-diversified portfolio based on a selection of asset classes chosen for their complimentary risk and return potentials.

Software-based investing is a low-cost and efficient way of investing that makes financial sense for most people. Wealthfront offers clients services that are usually only available to the ultra-wealthy, such as tax harvesting and lines of credit.

Investors with over $100,000 can borrow up to 30% of their account value with interest rates as low as 3.15% - 4.40% by using their assets as collateral.

How Does It Work?

Once you register on Wealthfront’s website, you are asked some simple questions to determine what type of investor your are. Wealthfront then creates a portfolio of stocks, bonds and other asset tailored to your risk tolerance. There are five assets to choose from when building your portfolio: bonds, natural resources, stocks, foreign developed markets, emerging markets and real estate REITs. 

To keep costs and fees down, Wealthfront uses exchange-traded-funds to benefit from the performance of a diversified portfolio without incurring the cost of having a personal advisor or broker. 

Wealthfront charges a 0.25% flat fee on accounts with more than $10,000. (Investors with a personal invitation get the first $15k managed for free). Investors also must pay an average fee of 0.12% that is embedded in the cost of ETFs.

Tax-Loss Harvesting

Wealthfont also offers customers with over $100,000 in assets complimentary tax-loss harvesting. This tax mitigation technique allows you to use any tax benefits you receive from investment losses to offset the taxes you owe on the investments that do make a profit. This can add up to 1% more to your annual return.

The Upside

- Wealthfront’s is the automated investment service that is closest to reaching the volume of assets invested required to turn robo-advisers from a cute novelty into a viable long-term service with a chance of competing with human advisors. Its investment team includes economists, Burton Malkiel, proponent of the efficient market hypothesis and author of the classic investment book, A Random Walk Down Wall Street, and Charles D. Ellis, author of Winning the Loser’s Game, all rock stars in finance and economics; and are ideally qualified to consult in the tailoring of ETF-based portfolios.

- Wealthfront also has the advantage of offering real estate and natural resources in its mix of assets. 

- The design of Wealthfront’s platform is elegant and easy to use. 
- The first $10,000 are managed for free, and even those who exceed that amount only have to pay a 0.25% fee.

The Downside

If your assets come to less than $100,000, Wealthfront provides a competitive option to both financial advisers and other robo-advisers. However, once you have more than $100,000 in assets, the fees are no longer as low as other robo-advisers, such as Betterment and SigFig.

Wealthfront requires a minimum investment of $500, which may be a deal breaker for those who are just starting to save, particularly when direct competitors like SigFig and Betterment don’t have a minimum account.

Wealthfront's Tax-Optimized Direct Indexing service is only available for accounts with over $100k.

In Summary

Wealthfront, as several of the other robo-advisers, provides a low-cost way of creating a scientifically diversified portfolio that would either cost you a small fortune in finance adviser fees or take hours and hours of your time to set up. The design, ease of use and special features, such as tax harvesting, make Wealthfront a solid choice, but there are other competitors, such as SigFig, Betterment, and Vanguard, that are also worth a look.

Wealthfront’s financial advisory and planning services, provided to investors who become clients pursuant to a written agreement, are designed to aid our clients in preparing for their financial futures and allow them to personalize their assumptions for their portfolios. All investing involves risk, including the possible loss of money you invest, and past performance does not guarantee future performance. Historical returns, expected returns, and probability projections are provided for informational and illustrative purposes, and may not reflect actual future performance.
SuperMoney.com is an independent, advertising-supported service. The owner of this website may be compensated in exchange for featured placement of certain sponsored products and services, or your clicking on links posted on this website. Read more...

Contact

  • Headquarters
  • 541 Cowper St.
    Palo Alto, CA 94301 USA
  • Visit Site

Message from Wealthfront

Financial planning and investing with Wealthfront couldn't be easier. We do it for you.

Feature Breakdown

Investment Expense Ratios
0.08% - 0.17%
Account Termination Fee
$0
Account Transfer Fee
$0
Annual Fee
$0
Management Fee
0.25%
Minimum Account
$5,000
Fee Based
Automatic Rebalancing
Tax Strategies
  • Daily Tax-loss Harvesting
  • Direct Indexing
  • Advanced Indexing
Accounts Supported
  • 529 College Savings Plans
  • Individual Non-retirement Accounts.
  • Joint Non-retirement Accounts.
  • Rollover IRA
  • Roth IRA
  • SEP IRA
  • Traditional IRA
  • Trusts
Independent/Registered Investment Advisor
Software Managed

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