Updated July 3, 2018

Wealthfront Review: Is It Good?

Read more about Wealthfront
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Wealthfront makes long-term, low-cost investing with a diversified portfolio seem simple. But is it safe? Read on to learn if Wealthfront is worth it.

Overall Score

4.3

Annual Fee

4.5

Minimum Deposit

4.5

Customer Service

4.0

Investment Types

4.0
5-point scale (the higher, the better)

Pros and Cons

  • Minimal opening deposit & fees
  • Advanced goal tracker
  • Tax loss harvesting
  • No human advisors
  • No fractional shares

Bottom Line

Good robo-advisor for hands-off investor. Fees are low, but lack human advisors

What is Wealthfront

Wealthfront is a robo-advisor that creates your investments based on an algorithm after you complete a questionnaire about your comfort with risk. The robo-advisor, which invests primarily in ETFs, automatically adjusts your portfolio as needed in order to stay in line with your investment goals.

Wealthfront takes the emotional aspect out of investing by making your asset allocation automatic. As your risk profile changes, Wealthfront automatically reassesses your asset allocation.

Wealthfront doesn't require payment upfront. In fact, you can create a profile and get your suggested investment profile before funding your account. This way you can see if Wealthfront's methodology is right for you.

Who Wealthfront Is Best For

  • Investors transferring funds from another broker: Rather than selling your old portfolio and transferring the investments into cash, Wealthfront offers a "Tax-Minimized Brokerage Account Transfer."

    Certain assets, such as stocks and ETFs, can be electronically transferred to your Wealthfront portfolio. Investments less than one year old are left to sit until they hit that long-term milestone. The software then automatically sells the securities, helping you realize tax savings as a result. Other types of investments such as penny stocks, mutual funds, annuities, and individual bonds, will not qualify, though.

  • Investors saving for college: If you are saving for your child's college, you can easily set up a 529 college savings plan through Wealthfront at any time.

    As your child gets older and chooses a college, you can use the Path tool to help get a better view of how much you need to save. The tool takes into account the school's costs and estimated financial aid you may receive, and then automatically determines your monthly saving requirements.

    Check out your state's 529 plan: It's always recommended to check out your state's 529 plan first. Many state-sponsored plans offer tax benefits (deductions or credits) to residents. If you've exhausted this benefit or your state doesn't offer one, then Wealthfront offers a great alternative.

  • Investors saving for retirement: Wealthfront offers realistic numbers to help you plan for retirement based on your current spending and projected spending during your retirement age.

    Wealthfront uses government data to determine the spending habits of people as they hit retirement age and compares it to your current spending habits to determine how much you'll need. The retirement calculations take into consideration Social Security income and the risk of inflation as well.

Is Wealthfront FDIC insured? Wealthfront is not FDIC insured. Instead, it is insured by SIPC (Securities Investor Protection Corporation) for up to $500,000 per account. Insurance on cash is limited to $250,000. SIPC protects against loss of securities at a brokerage at the hands of bankruptcy or other financial troubles (like if Wealthfront were to go out of business). It does not protect against losses due to the market or bad investment advice.

Fees

Currently, Wealthfront charges an annual fee of 0.25% of your assets under management. Wealthfront does not charge:

  • Account opening fees
  • Account closing fees
  • Trading fees
  • Commission fees
  • Account transfer fees
  • Withdrawal fees

Wealthfront deducts the annual fee monthly, basing it on your average monthly balance. For example, if you had an average monthly balance of $150,000, you would pay $30.82 per month. Wealthfront automatically deducts the fee from your account.

You will also incur one other fee: The ETF expense ratio, which is charged by the funds you're investing in through Wealthfront. ETF expense ratios cost an average of 0.8% - 0.12%.

How much do you need to invest in Wealthfront?
Minimum Investment Required: Wealthfront requires a $500 minimum to open an account with them. This enables Wealthfront to allocate your funds over eight asset classes.

If you want to take advantage of the Stock-level Tax Loss Harvesting, though, you will need an account minimum of $100,000.

Returns

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As is the case with any broker you choose, there's no guarantee of your returns. You run the risk of losing your investment at any point. A benefit of Wealthfront's strategy, however, is their focus on creating and rebalancing a balanced portfolio over time. This portfolio consists of indexed ETFs that help minimize individual investment risk.

While Wealthfront minimizes individual investment risk - the risk that any one stock goes bust, causing you to lose lots of money - it's important to note that Wealthfront will not protect against a big market correction. If the stock market as a whole goes down, so will your diversified Wealthfront portfolio. However, the same is true with any broker or investment service.

Is Wealthfront Safe? As is the case with any broker, your money is at risk based on the market's performance. Wealthfront holds your money in a brokerage account at Wealthfront Brokerage Corporation. They also use RBC Correspondent Services for clearing trades and IRA Services Trust Company for IRA accounts.

As far as keeping your information safe, Wealthfront uses military-grade encryption. It's how you manage your safety on your end that matters. Keeping up-to-date with updates and using two-factor authentication can help prevent your information from being stolen.

Tax Loss Harvesting

If you open a taxable account with Wealthfront, you'll benefit from their tax loss harvesting program. They offer daily tax loss harvesting, whereas most brokers only offer this service annually. Tax loss harvesting means selling securities at a loss (if you've lost money on them since your initial investment). The loss is then used to offset any gains you make on other assets. This service is available to all investors with taxable accounts.

If you have more than $100,000 invested with Wealthfront, you can also take advantage of Stock-level Tax Loss Harvesting. This program purchases individual stocks from the S&P 500, rather than ETFs. The daily tax loss harvesting then watches for movement in the stocks, taking advantage of any tax loss that occurs. The tax savings are then reinvested to help increase the value of your investments.

Pros

  • Minimal opening balance: As a beginning investor, it can be hard to get started without a large amount of cash. Wealthfront allows you to get started with just $500 and charges no fees if you drop below that amount.

  • Tax loss harvesting: The ability to maximize your tax savings can save you thousands of dollars come tax time, and it's automated so you don't have to give it a second thought.

  • The ability to plan: The Path Financial tool helps you determine if you are on track for your investment goals, whether for retirement, college, or something else.

How easy it it to get money out of Wealthfront?
To withdraw funds, just go to "Transfer Funds" and select the account you want to withdraw from and the bank account to transfer into. You must withdraw at least $250, and the account balance cannot go below $500. So in other words, you need at least $750 in the account to withdraw. There are no withdrawal fees. You can withdraw as often as you like, as long as the minimum balance is $500.

If you want to withdraw all your money and close out your account, select "Withdraw funds" and "withdraw the entire account balance." You can liquidate your account and transfer the cash to your bank account. This may incur taxes. You'll have to call Client Services to close your account.

Cons

  • No access to an advisor: As a beginning investor, it can be difficult not having a human to talk to regarding your investments.

  • No fractional shares: You could end up with a cash balance that just sits if you don't have enough money in your account to purchase a full share of an ETF.

App

Wealthfront is one of the few robo-advisors to provide the same desktop experience on an app. The app is available on both iOS systems and Android. You can create your custom financial plan, go through the "what if" questionnaires to see how your future financial life may pan out, and get financial advice, all on your smartphone.

Wealthfront vs Betterment

Wealthfront and Betterment are both good choices if you're looking for a robo-advisor. They offer similar services, including portfolio rebalancing and tax loss harvesting. They both also offer similar account types, including IRAs and taxable accounts. However, Wealthfront's fees are lower for accounts over $100,000, whereas Betterment increases the fee for high-balance accounts.

 

Wealthfront

Betterment

 

Benefits and Features

Annual Fee
0.25%
0.25% for accounts under $100,000; 0.40% for accounts $100,000+
Minimum Deposit
$500
$0
Phone Support
Yes
Yes
Live Chat Support
No
No
Email Support
Yes
Yes
Human Advisors
No
Yes
Assets Under Management
$10+ Billion
$10 Billion
Tax Loss Harvesting
Yes
Yes
Goal Tracker
Yes
Yes
Automatic Deposits
Yes
Yes
Online Platform
Yes
Yes
iPhone App
Yes
Yes
Android App
Yes
Yes
Single Stock Diversification
Yes
No
Fractional Shares
No
Yes
Taxable Accounts
Yes
Yes
401k Plans
No
Yes
IRA Accounts
Yes
Yes
Roth IRA Accounts
Yes
Yes
SEP IRA Accounts
Yes
Yes
Trust Accounts
Yes
Yes
529 Plans
Yes
No

Wealthfront: Pricing information from published website as of 04/04/2018

Betterment: Pricing information from published website as of 04/04/2018

Why You Might Like Betterment More:
If you need human advisor. Betterment offers unlimited access to financial experts, no matter what your balance is. And if you have a minimum of $100,000 invested, their Certified Financial Planners can give you advice on investments outside of Betterment and guidance on life events. In comparison, Wealthfront has no human advisors, but they do have financial planning tools that look at your entire overall financial health.

Betterment also has the ability to purchase fractional shares. This is helpful because if you can purchase fractional shares rather than leaving cash lying around, you're able to make money on your entire portfolio. Wealthfront rounds down to the nearest whole share, whereas Betterment invests every penny you have available.

Why You Might Still Prefer Wealthfront:
Saving for College. If your main goal, or even one of your goals, is to save for college, Wealthfront is the better robo-advisor, as they offer 529 savings plans. With a tailored program based on when your child will enter college and even being able to name a specific college at any point, you can maximize your tax savings while saving for your child's education.

You have less than $100,000 to invest. Wealthfront's fees are among the lowest of all robo-advisors we've encountered for customers with less than $100,000.

Wealthfront vs Vanguard

Vanguard Personal Services is yet another robo-advisor on the market today. It's geared toward the investor with a higher net worth, though, as it requires a $50,000 minimum deposit. Vanguard Personal Advisor Services offers IRAs, taxable and joint accounts, just like Wealthfront.

 

Wealthfront

Vanguard Personal Advisor

 

Benefits and Features

Annual Fee
0.25%
0.3%
Minimum Deposit
$500
$50,000
Phone Support
Yes
Yes
Live Chat Support
No
No
Email Support
Yes
Yes
Human Advisors
No
Yes
Assets Under Management
$10+ Billion
$100+ Billion
Tax Loss Harvesting
Yes
client-by-client basis
Goal Tracker
Yes
Yes
Automatic Deposits
Yes
Yes
Online Platform
Yes
Yes
iPhone App
Yes
Yes
Android App
Yes
Yes
Single Stock Diversification
Yes
No
Fractional Shares
No
No
Taxable Accounts
Yes
Yes
401k Plans
No
No
IRA Accounts
Yes
Yes
Roth IRA Accounts
Yes
Yes
SEP IRA Accounts
Yes
Yes
Trust Accounts
Yes
Yes
529 Plans
Yes
Yes

Wealthfront: Pricing information from published website as of 04/04/2018

Vanguard Personal Advisor: Pricing information from published website as of 04/04/2018

Why You Might Like Vanguard More:
If you want human interaction, and you have more $50,000 to invest. Vanguard offers personal financial advisors you can talk to Monday - Friday. The human advisors select investments for you based on your goals, and monitor and rebalance your portfolio. Both Wealthfront and Betterment rely on technology to build and manage your portfolio. However, Vanguard has a $50,000 minimum investment requirement.

Because you'll have access to a human advisor, you have a say in some of the account selections made for you. If you have specific investments you want to make or want advice on those selections, it's made available to you with Vanguard.

Why You Might Still Prefer Wealthfront:
If you have less than $50,000 to invest, and/or you are concerned about fees. Wealthfront's annual fee is lower than Vanguard's, at 0.25% versus 0.30%, and you can't even invest in Vanguard with less than $50,000. In addition, if you trade anything other than Vanguard securities, you'll pay commission fees with Vanguard. The main reason to invest with Vanguard over Wealthfront is if you have over $50,000 to invest and you really need the additional human interaction Vanguard offers. Otherwise, you're better off with Wealthfront's lower fees.

Bottom Line

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Wealthfront is a good option for both a beginning investor and an advanced investor looking for passive income. If you are looking for personal investment advice, though, you may want to look elsewhere. Wealthfront is best suited for the investor who can manage their account digitally.

If you have little money to invest, but want to get started on your goals, Wealthfront provides you with the opportunity with their minimal investment requirement and low fees.

Disclaimer: Opinions expressed here are those of the author's alone. Please support CreditDonkey on our mission to help you make savvy financial decisions. Our free online service is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content.

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