Robo-advisors have turned the investing world on its head in recent decades. More importantly, they’ve opened investing up to more individuals than ever.
Only recently, investing was restricted to the wealthy: people who had a lot of money to put in the market and plenty to spend on a pricy financial adviser to tell them the best ways to invest and manage all those bazillions of dollars.
We mortals had our retirement accounts, but that’s about it.
Now, it’s easy — and accessible — for anyone to invest and have a chance to earn money in the stock market.
With robo-advisors’ algorithms doing the work you once had to pay costly advisers to do for you, these investment apps let us all become savvy investors with a few taps on a screen — from the comfort of the couch (in our pajamas, if we may).
Wealthfront is one of the oldest and best-known companies in this space, and it’s kept up with the times by adding banking and investment account options to meet customers’ ever-evolving money-management needs.
Considering an account with Wealthfront? Here’s everything you need to know.
In this review of Wealthfront:
- What Is Wealthfront?
- Our Wealthfront Review: At a Glance
- Wealthfront Features
- How Wealthfront Works
- Is Wealthfront Right for You?
- Ready to Get Started?
What Is Wealthfront?
Wealthfront is an investment, banking and financial planning app, best known as a popular robo-advisor for its investment management options.
Wealthfront was founded in 2008 (originally as kaChing, a mutual fund analysis company) by Dan Carroll and Andy Rachleff, previously the co-founder of venture-capital firm Benchmark.
The company touts the PhDs behind its technology and investment strategies, including Burton Malkiel, the “original champion of passive investing” and Wealthfront’s chief investment officer.
Like other robo-investing apps, Wealthfront makes financial planning and investment expertise accessible to everyday investors. Unlike micro-investing apps — like Stash and Acorns — Wealthfront is designed to handle and provide some of its greatest value to higher-level investors.
Our Wealthfront Review: At a Glance
Before we dive into the details, here’s a quick overview of Wealthfront:
| Investment account minimum | $500 |
| Investment withdrawal minimum | $250 |
| Account management fee | 0.25% |
| Fees | Annual ETF expense ratios nCash withdrawal or deposit fees with debit card n529 program administration feesn |
| Account types | Individual and joint investment nRoth IRAs, Traditional IRAs, SEP IRAs n529 College Savings nTrusts nCash (banking) account n |
Pros
Here’s what we love about Wealthfront:
- Low-fee investing for beginners or seasoned investors.
- Tax efficiency.
- Diversified investment portfolios.
- Hands-off investment.
- All-in-one financial management.
- Fee-free banking.
- Free financial planning tools.
Cons
Here’s what we don’t love about Wealthfront:
- No human advisor option.
- No socially conscious or cause-driven investment options.
- No fractional shares.
Wealthfront Features
Wealthfront offers a wider range of investment accounts and benefits than you’ll see from many robo-advisors. It also integrates banking, saving and financial planning in its aim to put all your money on auto-pilot.
For Everyday Investors
Anyone can start a Wealthfront account and benefit from its basic savings and investment vehicles, and free financial planning.
You can open an investment account with a minimum $500 investment or a bank account with just $1, and you can benefit from its financial planning tools for free — even if you don’t invest through Wealthfront.
- Retirement planning: Open a traditional, Roth or SEP IRA. Wealthfront accepts IRA and 401(k) rollovers from existing retirement accounts.
- College savings: Open a 529 college savings plan for yourself, your child, grandchild or someone else. Before signing up, compare Wealthfront’s 529 option with your state’s state-sponsored 529 to avoid missing out on any tax advantages.
- Long-term investing: For other long-term savings goals, open an individual, joint or trust account to invest in mutual funds.
- Banking: The Wealthfront Cash Account is a fee-free high-yield bank account you can use for spending and savings. Your balance will earn 0.35% APY and is FDIC-insured up to $1 million through Wealthfront’s partner banks. You’ll get a Visa debit card issued by Green Dot Bank that you can use for everyday transactions and to withdraw money for free at Allpoint ATMs. You can get paid up to two days early through direct deposit, and you can even use the account to set up automatic bill pay with providers.
- Free financial advice: The Path tool analyzes your financial data — including connected external accounts and your Wealthfront accounts — to determine whether you’re on track to meet your financial goals, like paying for college, a home purchase or retirement. Path’s home-planning feature even helps you go house-hunting and compare prices around the country through Redfin. Its Time Off for Travel feature helps you see how extended travel, parental leave or sabbatical will affect your finances.
- Tax-loss harvesting: Daily tax loss harvesting on taxable accounts (long-term investing accounts that aren’t IRAs or 529s) automatically sells your stocks and other assets that drop in value, lowering your tax bill by offsetting capital gains.
Tax-loss harvesting aims to reduce how much you pay in taxes by balancing your gains with some losses.
For Higher-Level Investors
Unlike many robo-advisors, some of Wealthfront’s most powerful features offer the greatest benefit to high-balance accounts. It’s well-known for its tax strategies that maximize gains for investors with six-figure accounts.
- Stock level tax-loss harvesting: For investors with $100,000 or more in their accounts, Wealthfund increases your tax-loss harvesting opportunities. Stock level tax-loss harvesting takes advantage of a broader range of individual stocks in the S&P 500, rather than ETFs, to find more tax-loss harvesting opportunities.
- Wealthfront Risk Parity Fund: You can choose to invest up to 20% of your portfolio in this fund (for a higher investment fee) if you have at least $100,000 in your Wealthfront account. The fund applies the alternative “risk parity” asset allocation methodology to the investment in an aim to increase your returns.
- Smart Beta: Available to accounts of $500,000 or more, this methodology aims to increase your returns through a non-traditional multi-factor approach to tracking the performance of stocks in an index.
- Portfolio line of credit: Investors with at least $25,000 in their accounts can borrow up to 30% of the value of your portfolio as a line of credit, secured by your investments. You don’t have to fill out an application or go through a credit check — so your credit isn’t affected! The line of credit also comes with no fees and interest rates between 2.40% and 3.65%, lower than typical rates for personal loans or credit cards.
How Wealthfront Works
Wealthfront is primarily a robo-advisor, though it employs experts in investing and financial planning to continually improve the investment strategies behind its technology. The app gives you access to automated, hands-off investment with low fees and no personal human advisers.
- Name your financial goals. When you sign up, you’ll start by telling Wealthfront your financial goals, so it can determine what kind of accounts you need from among its investing, college savings, retirement savings and cash management options.
- Determine your risk tolerance. Before investing, you’ll fill out a brief questionnaire that determines your risk tolerance and sets up a portfolio of mostly exchange-traded funds (ETFs).
- Automated investment and threshold-based rebalancing. After that, enjoy automated investment, with the automatic rebalancing when your portfolio’s asset allocation tips beyond certain thresholds (rather than waiting for a quarterly or annual rebalancing, typical in traditional investment management).
- 11 global asset classes. Wealthfront is known for its diversified portfolios, investing in several types of stocks and bonds, real estate, natural resources and Treasury inflation-protected securities.
An asset class is a group of things you can invest in (like stocks, bonds or real estate). Investing in a variety of asset classes is key to weathering major shifts in the market.
Wealthfront doesn’t purchase fractional shares, or portions of a stock. That means you might deposit money into your Wealthfront account, but it won’t all necessarily be invested right away. A little could be left over — sitting in your account not earning a return — until the next time you deposit enough to purchase a full share.
How Good Is Wealthfront for Beginners?
Wealthfront is an easy-to-use, hands-off investment app, so it’s great for beginners with a good chunk of money to invest.
The app will automatically set up your portfolio and keep it balanced and optimized over time, so you don’t have to have any investing know-how or keep track of stock performance. Your money will take care of itself.
If you’re unsure about investing and just want to play around with stocks without risking any real money, consider a micro-investing app instead. Those let you get into the stock market with around $5, so you can see what investing is all about.
Can You Trust Wealthfront?
Wealthfront employs security measures equal to or above and beyond what you’ll find from most financial institutions, so you can rest assured your money and information are safe.
- SIPC insurance: Your investment assets with Wealthfront are SIPC-insured up to $500,000.
- FDIC insurance: By partnering with multiple financial institutions, Wealthfront offers $1 million FDIC insurance on your cash account, four times what most banks offer.
- Data protection: Your data and financial information are safe with Wealthfront and its service providers. All employ bank-level security and data protection best practices.
Can Wealthfront Make You Money?
Returns on investment are never guaranteed, but Wealthfront uses sophisticated technologies and tested investment strategies to optimize your gains based on your financial goals and risk tolerance.
Based on your investments and the performance of the market, Wealthfront will show you projected returns for your individual portfolio in the app.
Wealthfront’s account management fee of 0.25% is comparable to other robo-advisors. The only other fees you’ll have to watch out for are those associated with ETFs your money is invested in. You’ll pay those with any broker, but the expense ratios for the ETFs Wealthfront invests in are relatively low.
An expense ratio shows the portion of an ETF’s funds that go toward fund management. The lower an ETF’s expense ratio, the more of your money is invested and the more you stand to earn.
Wealthfront Customer Service
Wealthfront client service specialists are available via phone and email, though you’re encouraged to visit its Help Center to find your answer before contacting them.
You can see the customer service phone number by logging into your account in the app or online.
Is Wealthfront Right for You?
Wealthfront is a well-known company and was one of the first robo-advisors to hit the market. Its features are solid, and it’s adapted well over the years to customers’ changing financial needs — but it’s still not for everyone.
Wealthfront might be a great tool for you if:
- You want a low-fee, tax-efficient investment account.
- You’re new to investing and want affordable investment advice.
- You want to manage your banking, investing, saving and borrowing in one place.
- You want guidance planning for major events, such as world travel or parental leave.
- You don’t have access to a 401(k) plan, or you max out your contributions each year.
Wealthfront probably isn’t a good fit for you if:
- You want to be a hands-on investor and make regular trades.
- You prefer to invest in companies based on their environmental or social impact.
Ready to Get Started With Wealthfront?
Wealthfront is designed to simplify investing for mid- or high-level investors who prefer to put their money on autopilot. Its low fees and automated portfolio management let you take a hands-off approach to investing in the market.
The app doesn’t offer an option to connect with human advisers or easily facilitate your own trading — so it’s best if you want to really embrace the “robo” part of “robo-advisor” and let your money take care of itself.
With high-yield banking and low-interest credit, the company could replace a whole host of financial services you use with various companies, tucking the bulk of your financial management peacefully under one roof.
If you’re ready to start preparing for your financial future through Wealthfront, you can sign up through its website or by downloading the app in the App Store or Google Play Store.
To get started, you’ll create an account with your email address. To benefit from its financial planning tools, you’ll need to connect third-party financial accounts. TurboTax users can import financial data by connecting your account to Wealthfront (that’ll make reporting easy come tax time, too!).
Dana Sitar (@danasitar) has been writing and editing since 2011, covering personal finance, careers and digital media.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.
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