Wealthfront Review

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 520,000 users with $34 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.
  

Pros & Cons

Company Overview

Account Setup

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 “Cash” or “Automated Investing.” The total process for opening either account type is roughly 5 minutes. 

To move forward with creating an investment account, 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. 

Then you'll fill out a brief questionnaire about investment goals and account ownership, the site will ask for your name, email address, and phone number.

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.

Goal Planning

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
• College

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. 

Account Services

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.

Cash Management

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 4.30% and fluctuates based upon movements in the federal funds rate.
• In-network fee-free ATM transactions.
• Up to $3 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 6.65% to 7.90%, 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. 

Portfolio Construction

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
• Commodities

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)

While there are only three broad portfolio options for most users, you can access Wealthfront's Smart Beta portfolio if you have more than $500,000 in your account. This is a feature designed to "increase your expected returns by weighting the securities in your portfolio more intelligently."

Portfolio Customization

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. 

Portfolio Management

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.

User Experience

Desktop Experience

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.  

Mobile Experience

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

Customer service is available through three venues:

• Help center with access to FAQ and a search bar
• Online form

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. 

There is a phone customer service number, but it 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 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.

Security

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 $3,000,000 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.

Education

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.

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

Methodology

Our mission at Investopedia is to provide investors with reviews and ratings of robo-advisors that are comprehensive and unbiased. Our team of researchers and expert writers, led by Michael Sacchitello, spent months evaluating all aspects of a robo-advisor’s platform, including the account setup process, goal planning tools, account service options, portfolio construction offerings, portfolio management, mobile and desktop user experience, educational content, fees, and security. As part of this evaluation, we extract critical data points that are weighted by our quantitative model that produces a powerful star-scoring system.

With the individual investor in mind, we’ve designed a comprehensive ranking methodology to find the best overall robo-advisors and the best robo-advisors across nine key categories. Each advisor is then scored across multiple variables to rate performance in every applicable category. The score for the overall award is a weighted average of the categories

Dotdash Meredith receives cash compensation from Wealthfront Advisers LLC (“Wealthfront Advisers”) for each new client that applies for a Wealthfront Automated Investing Account through our links. This creates an incentive that results in a material conflict of interest. Dotdash Meredith is not a Wealthfront Advisers client, and this is a paid endorsement. More information is available via our links to Wealthfront Advisers.