Launched in 2008, Wealthfront has quickly established itself as one of the market’s biggest robo-advisors. The company’s automated investment management and holistic financial advice appeal to both new and experienced investors.
Multiple tax-optimization strategies, low fees, and free financial planning guides make Wealthfront worthy of consideration, especially since you don’t need lots of experience or a huge amount of money to get started.
Wealthfront offers traditional, Roth, SEP, and rollover IRAs; individual and joint non-retirement accounts; 529 college savings plans; trusts; and cash accounts.
Designed to meet the needs of both hands-off investors who want guidance from experts and hands-on investors who need help making smarter decisions, Wealthfront’s investment management is automated but also strategic and adjusted to each client’s individual risk levels.
When starting your robo portfolio management relationship with Wealthfront, you'll be asked to provide some basic information. The website will inquire after personal information, then ask about how much you have in savings and what your pre-tax income is.
Then you'll be given an opportunity to choose your investment goal - this can be anything from long-term investing to retirement or college savings. Lastly, to assess your risk tolerance, Wealthfront will require you to complete a short questionnaire.
After assessing your level of risk tolerance, Wealthfront's automated advisor builds a diversified portfolio with up to 11 asset classes (most portfolios include six to eight asset classes). Wealthfront’s investment options cover US and foreign stocks, dividend stocks, real estate, natural resources, emerging market bonds, US government bonds, corporate bonds, and Treasury inflation-protected securities.
The robo-advisor primarily uses low-cost exchange-traded funds, while investors with six-figure investments can opt for a stock portfolio.
From there, the process is completely automated. The software may rebalance your portfolio when money is deposited or withdrawn, dividends are reinvested, or market fluctuations make it necessary.
One of the best things about Wealthfront is that it uses threshold-based rebalancing. In other words, portfolios are rebalanced each time an asset class crosses a predetermined threshold, rather than on a monthly, quarterly, or yearly schedule.
There are no options to get in touch with a human advisor. Still, given that Wealthfront's software does a great job in creating and managing personalized portfolios, this isn't a major disadvantage.
Wealthfront offers daily tax-loss harvesting on all taxable account types. New account holders who transfer in assets may find the company’s tax-minimized brokerage account transfer service useful. Accounts with balances of at least $100,000 are also eligible for stock-level tax-loss harvesting.
What makes Wealthfront stand out from the competition in the context of additional advisor services is its robust set of financial planning tools. These tools come free of charge even if Wealthfront isn’t managing your assets. They can help you plan for life events such as buying a home, paying for college, retiring, and traveling.
In addition to multiple investment account options, Weatlhfront also offers cash accounts. Defined by the provider as a good place to earn interest on the funds you don’t want to invest, these FDIC-insured accounts come with an impressive 0.35% APY.
Lines of Credit
Clients with $25,000 or more in their accounts can borrow against their portfolios by opening a line of credit. Wealthfront lets you take out up to 30% of the value of your portfolio at rates that currently range from 3.9% to 5.15%. You won’t be asked to fill out an application, undergo a credit check, or pay any additional fees.
Fees and Commissions
Wealthfront has a competitive and easy-to-understand fee structure. Investment account holders are charged 0.25% of their portfolios every month.
Note that larger portfolios (over $100,000) may be invested in funds that incur slightly higher fees. Exchange-traded funds make up most of the portfolios Wealthfront manages. They come with expense ratios of 0.06%-0.13%.
To open an investment account with Wealthfront, you’ll be required to deposit a minimum of $500, while the minimum for a cash account is $1.
Automatic portfolio rebalancing is free on all accounts, as is linking your retirement and bank accounts to the company’s signature financial planning tool, Path.
Almost all interactions with Wealthfront’s customer service agents are conducted electronically. In addition to the comprehensive library of frequently asked questions and answers, Wealthfront’s account holders can also get in touch with the customer service team via phone and email. Support agents are available Monday through Friday from 10 a.m. to 8 p.m. Eastern time.
The Bottom Line
Wealthfront offers goal-based investing and helps its clients understand how the financial choices they make today may affect their futures.
This robo-advisor also provides tax-loss harvesting and automatic portfolio rebalancing. It supports a good selection of investment account types, and the fees on its ETFs are among the market’s lowest. The company doesn’t buy fractional shares, which may prevent it from investing your entire deposit; however, it offers a good deal on an FDIC-insured cash account.
Reasons to Open an Account:
- Daily tax-loss harvesting
- Low ETF expense ratios
- Automatic portfolio rebalancing