On Friday, September 2, 2022, Wealthfront announced that, together with UBS, the companies have decided to terminate the pending acquisition, leaving Wealthfront to remain an independent company.
Wealthfront, our top choice overall for robo-advisors as well as best for goal planning, is one of the original robo-advisors and currently claims 490,000 users with $27 billion assets under management (AUM). Wealthfront offers more than 200 ETFs that users can add to existing portfolios or use to build an ETF portfolio from scratch. Regardless of your investments, the company will rebalance and manage them on your behalf. Investors looking for cryptocurrency exposure can choose to invest in Grayscale’s Ethereum or Bitcoin funds.
Classic Wealthfront portfolios are now joined by Socially Responsible and Direct Indexing portfolios. If you’re comfortable with a completely online platform, then Wealthfront’s lineup offers something for most types of investors. We’ll dig deeper into Wealthfront’s platform and features to help you decide whether it is the right fit for your portfolio.
New and Notable Updates
- Wealthfront customers can now invest up to 10% of their portfolios in cryptocurrencies through the addition of the Grayscale Bitcoin Trust (GBTC) and the Grayscale Ethereum Trust (ETHE).
- Wealthfront has brought new portfolio customization tools to customers, allowing them to add and remove ETFs, build an ETF portfolio from scratch, and filter investments for factors like ESG.
- Wealthfront is our top choice overall for robo-advisors as well as best for goal planning.
- Wealthfront’s sophisticated digital financial planning tool answers scores of planning questions and is accessible to anyone.
- Cash accounts offer up to $2 million FDIC insurance.
- Wealthfront now offers Classic, Socially Responsible, Direct Indexing and customized portfolios.
- The highly regarded mobile app is on par with the desktop version in terms of functionality and ease of use.
Pros & Cons
Customize portfolio with ETFs and cryptocurrency funds
Direct stock indexing for larger accounts-$100,000 minimum
Free digital financial planning tool on a par with human planners
Daily tax-loss harvesting
529 accounts available
No human financial advisors
Difficult to connect with a live product specialist
No online chat
|Goal Planning||Goals encompass retirement, home buying, saving for college, taking time off from work, making a large purchase, and receiving a windfall.|
|Available Assets||ETFs, Cryptocurrency funds, individual stocks|
|Interest Paid on Cash Balances||3.30%|
|Customizable Portfolio||Yes, able to add ETFs to existing portfolio or create a customized ETF portfolio for Wealthfront to manage.|
|View Portfolio before Funding||Yes, but you need to create an account and provide name, email, and phone number first.|
|Customer Service||Help Center FAQ, email, phone|
|Financial Advisor Available||No|
|Cash Management||Yes - high yield cash account|
|Mobile App||Android, iOS|
Wealthfront enables you to set up an account quickly, take a brief financial goals and risk quiz, and view a potential investment portfolio. Opening an account with Wealthfront starts with you clicking the “Get Started” button on the home page and selecting either “Open a Cash Account” or “Open an Investment Account.” The total process for opening either account type is roughly 5 minutes.
After filling out a brief questionnaire about investment goals and account ownership, the site will ask for your name, email address, and phone number.
After completing the initial questionnaire, you’ll choose the account ownership structure with options ranging from individual and joint brokerage accounts, trust, traditional, Roth, simplified employee pension (SEP), and rollover individual retirement accounts (IRAs), to a unique 529 account.
Now that you have a Wealthfront account and a specific type of investment account selected, you’re asked the standard age, income, net worth, and risk questions. Before viewing your investment portfolio you’ll choose either the Classic, Socially Responsible, or Direct Indexing (limited to accounts with more than $100,000) account style.
After selecting the style, you can then view the recommended investment portfolio for your risk level. You’re able to view other portfolio options by increasing or decreasing risk tolerance using a slider. You can also choose to further customize the portfolio using “Edit Portfolio” to add or remove investments. Once you’re satisfied, the last step is linking a bank account to fund the Wealthfront account.
After linking accounts, you can access Wealthfront’s comprehensive free digital financial planning tool, Path. To actually start investing with your Wealthfront account, your account balance will need to reach $500 before it is invested in your selected portfolio.
Wealthfront’s goal planning and financial decision-making tools are among the best in our robo-advisor platform reviews. To properly use Wealthfront’s goal planning features, collectively called Path, you need to link all of your financial accounts to create an accurate picture of your current finances.
Wealthfront investors can choose from the following list of initial goals:
- Home ownership
- Early retirement
- Time off for travel
It’s easy to track progress towards goals. After logging in to Wealthfront, users can view their dashboard which shows progress towards goals. As mentioned, anyone who registers and links their banking and investment accounts can use the digital financial planning tools. Path draws upon academic research to project your likelihood of reaching stated goals while taking into account inflation, projected income changes, market performance, and so on. The modeling automatically updates whenever any of the inputs change. This allows Path to approximate the services you might receive from a human financial planner, including building a financial plan that sets out how much to save to reach your various goals.
In addition to helping you track the progress being made toward reaching your goals, embedded charts and graphs show how much your goals will cost. Again, the plan will update with new guidance every time you change a goal or other key inputs, so you can use Path to run a variety of scenarios on your finances. Getting this level of free financial analysis is well worth it, whether you intend to invest with Wealthfront or not.
Wealthfront continues to innovate with cash management, borrowing, and the opportunity to customize portfolios by adding additional ETFs. There are no fees to trade the ETFs and they can be added to an existing portfolio or used to create a new one.
Wealthfront Cash is similar to a free interest-bearing checking account and is available to individuals whether they sign up for the investment services or not. Users can save for specific goals, automate transfers to their investment account, pay bills, and directly deposit a paycheck. Wealthfront Cash sign-up is separate from the Invest sign-up.
Additional features include:
- Interest-bearing account that currently pays 3.30% and fluctuates based upon movements in the federal funds rate.
- In-network fee-free ATM transactions.
- Up to $2 million FDIC insurance through related banks.
- App-based mobile check deposits.
- Unlimited free transfers.
Through Wealthfront Borrow, users with a minimum of $25,000 invested with Wealthfront in a taxable account are eligible for a portfolio line of credit and can borrow up to 30% of their account value. There’s no credit check required and interest rates range from 5.40% to 6.65%, depending upon your account balance.
There is no payment schedule or constraints on how you use the money. But, if your account balance falls, you may need to add money to your investment account or repay some of the loan.
Portfolios are created by the company's investment management team, which includes renowned Dr. Burton Malkiel, author of A Random Walk Down Wall Street. The portfolios include low-cost index funds and abide by Modern Portfolio Theory, which strives for the greatest returns at a specific risk level.
Asset classes include ETFs from the following categories:
- US Stocks
- Foreign Developed Market Stocks
- Emerging Market Stocks
- Dividend Growth Stocks
- US Bonds
- US Corporate Bonds
- Emerging Market Bonds
- Municipal Bonds
- Treasury Inflation-Protected Securities (TIPS)
- Real Estate
Wealthfront’s portfolio options include:
- Classic portfolios with a diversified portfolio of low-fee index funds
- Socially Responsible portfolios substitute several ETFs with socially responsible choices
- Direct Indexing includes individual stocks ( $100,000 minimum)
- Customize with over 200 ETFs to add to existing portfolios or create new ones
- Risk Parity portfolio attempts to outperform markets ($100,000 minimum)
- Cryptocurrency funds from Grayscale (10% maximum of portfolio value)
- Smart Beta for accounts worth more than $500,000
|Individual Stocks||Yes-for accounts worth $100,000+|
|Fixed Income||Yes - ETFs|
|Socially Responsible or ESG Options||Yes|
|Crypto, Forex||Crypto funds not individual coins, no Forex|
Wealthfront does offer customization options in terms of adding or removing specific ETFs from your recommended portfolio. More DIY-inclined investors looking for a robo-advisor that allows you to tweak a portfolio at a deeper, more active level will find a more flexible option through competitors like M1 Finance or Interactive Advisors, but with less in terms of overall financial planning support.
Wealthfront’s algorithmic portfolio management is grounded in best practices and research-supported theory. Portfolio rebalancing is not automatic, but it is adopted when deposits or withdrawals are made or if the asset allocation significantly deviates from its target. Tax consequences are also programmed into asset allocation decisions. The original Wealthfront portfolios and those with added ETFs or client-customized options are all rebalanced according to this plan.
Wealthfront claims that the daily tax-loss harvesting benefits offset the 0.25% management fee for taxable accounts. This service is included in the management fee and is available to all investors. The platform sells ETFs with losses and replaces them with an alternate ETF that tracks a different, but correlated index, to maintain the risk and return characteristics. This avoids falling prey to the IRS’s Wash Sale rule.
Clients with over $100,000 who participate in the US Direct Indexing receive both stock-level and ETF-level tax-loss harvesting.
|Key Portfolio Management Features|
|Automatic Rebalancing||When deposits or withdrawals occur and when percentage allocations deviate from their goal.|
|Reporting Features||Tax and monthly statements are available on the website.|
|External Account Syncing/Consolidation||Yes-anyone can link accounts and receive net worth, saving, spending, and “what if”
The Wealthfront user experience is good, with a clean interface and easy access to menu items. The platform menu includes Invest, Cash, Borrow, and Blog categories enabling users to find what they need quickly and readily access their account. Accessible research, support, and contact verticals round out the most needed features of the platform.
Some users have complained that the linked accounts need to be re-synced and that they take a few days to update. This is a common problem among many financial apps that link to other accounts. We experienced some sync issues during our review process, but no more than other services collecting data from multiple financial institutions with varied authentication processes.
The mobile apps are highly regarded on both the Android and iOS platforms. The user experience is good and the apps approximate the functionality of the desktop version. The opportunity for non-Wealthfront users to link their accounts, use the financial planning software, obtain financial planning insights, and have a true 360o view of their spending and net worth is an enormous benefit.
Customer service is available through three venues:
- Help center with access to FAQ and a search bar
The Help Center articles and frequently-asked-questions are comprehensive. Email is the second option if you can’t find what you need from the Help Center.
The phone customer service number is difficult to find. When you call, there are eight menu options for questions ranging from deposits to investing. When we reached a Product Specialist, he was poised to answer account-related questions.
Although the Product Specialists are not financial planners, they are registered with FINRA and have both Series 7 and Series 66 registrations. They might also possess additional credentials such as CFA, CFP, or CPA.
The company makes it difficult to access a human on the phone and does not offer live financial planners. The expectation with Wealthfront is that you will help yourself using the FAQs and perhaps email, but other robo-advisors have found better ways to keep the human element for those needing it. We found customer service a rare weak spot for Wealthfront after a sometimes frustrating assessment.
Wealthfront takes security seriously with limited access by employees to your data, and a team that actively monitors and reviews security protocols.
- Two-factor authentication.
- Wealthfront Cash accounts are protected by $2,000,000 FDIC insurance through its member banks.
- Wealthfront Investment accounts are protected with up to $500,000 insurance by the SIPC. This insurance covers up to $250,000 in cash. SIPC insurance protects against investment firm failure, not against the normal volatility of the financial markets.
Wealfront’s education vertical is strong with a comprehensive blog, educational articles, and videos. Guides are available to assist with home buying, college planning, retirement, and more. The educational content covers how to use the portfolio, taxes, financial planning, account types, general investing, and scores of other topics. For investors looking for deeper explanations of how the platform operates, Wealthfront has some excellent blog posts as well as white papers discussing major elements of the model and some of the research underpinning it.
Commissions and Fees
The Wealthfront investment account charges a 0.25% AUM wrap fee for all accounts, deducted monthly. This is in line with many robo-advisors and significantly lower than the management fees charged by traditional financial advisors.
The portion of an account in the risk parity style (maximum of 20% of account value) incurs an additional 0.25% investment management fee.
There are no additional charges for withdrawals, trading commissions, account transfers, or account closings. The “Invite” program gives clients free account management for a portion of their funds when referred friends fund an account.
Cash accounts are free of any fees, but there are several fees for the Wealthfront debit card:
- Out-of-network ATM: $2.50 + ATM owner fee
- Bank teller: $2.50 + teller fee
- International transaction fee: 2.75%
- Cash deposits at select retailers: Up to $5.95
|Management fees for $5,000 account||$12.50|
|Management fees for $25,000 account||$62.50|
|Management fees for $100,000 account||$250.00|
|Expense ratios||Average 0.08% for portfolios that include the Wealthfront Risk Parity Fund|
Wealthfront is the robo-advisor for any level of investor seeking a comprehensive investment management solution for a low fee, as long as you are comfortable with the fully automated approach. The company continues to innovate and it has grown into a complete financial planning, money, and investment management platform for those comfortable with an all-digital platform. Wealthfront’s free financial planning capabilities give it a significant edge in creating value for its users beyond simply constructing a portfolio compliant with Modern Portfolio Theory and managing it for you, which it also does well.
In 2021, Wealthfront made enhancements to its portfolio construction process, addressing previous concerns we had in the area of portfolio customization. This leaves customer services as the only area where Wealthfront wasn’t at or near the top of our rankings. If you are willing to leave this feature behind, however, Wealthfront offers a robust, fully automated solution for your investment needs and is working towards being a complete financial solution.
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