Fees and Deposit Limits7.8 /10
Ease of Use9.7 /10
Account Types and Services9.0 /10
Budget Flexibility9.2 /10
- Fixed 0.25% management fee
- Direct Indexing available to accounts over $100,000
- PassivePlus investment suite
- Portfolio Line of Credit available to larger accounts
- Path mobile financial planning
- Doesn’t work for existing brokerage accounts
- No reduced management fees for larger balances
- Little flexibility for active trading
- Accounts under $10,000 are no longer free
Wealthfront is now one of the biggest and well-established Robo Advisors in the market. It used to manage just over $4 billion worth of investments in 2016. For 2018, this Robo Advisor is now managing over $10 billion.
Wealthfront is a prime example of a fully automated investing service
In this 2018 Wealthfront review, we will reveal if this fully-automated robo advisor is still the best service for your investment activities. This is despite the recent announcement from CEO Andy Rachleff that Wealthfront will no longer manage $10,000 for free for new clients beginning April 2018.
Wealthfront started life as kaChing, which was a mutual-fund analysis company in 2008. Wealthfront founders Andy Rachleff and Dan Carrol slowly pivoted to wealth management after receiving funding from Benchmark Capital and DAG Ventures among others.
Let’s begin our 2018 Wealthfront review by looking at the fees and deposit limits. Wealthfront’s $500 deposit limit is very low indeed. In fact, it is one of the lowest among Robo Advisors that also impose a minimum investment amount. This makes it perfect for beginners or first-time investors.
However, Wealthfront used to offer the first $10,000 investment free of charge for new clients. If you are planning to use the Wealthfront Robo Advisor, you should know the service will stop offering zero management fees for the first $10,000 deposit beginning late in the first quarter of 2018. This is primarily the reason why Wealthfront might be surpassed by other Robo Advisors in terms of low fees and deposit limits.
Wealthfront will impose an annual advisory fee of 0.25% for all accounts. In all honesty, that figure is still very competitive. It stacks up well against other charges levied by most of Wealthfront’s competitors. Wealthfront will still continue to offer account holders the chance to get an additional $5,000 managed free for every successful referral.
Wealthfront is a prime example of a fully automated investing service that provides an almost completely hands-off wealth management experience. This makes it extremely attractive to investors who simply don’t have the time, inclination, or ability to manage their investments.
It isn’t perfect, though. During this part of our Wealthfront review for 2018, we discovered that the service lacks flexibility in personally managing your accounts. It doesn’t offer much leeway to investors who want to get involved, or those who prefer a hands-on approach.
The service cannot work with or within existing brokerage accounts. This means you don’t have the option of sticking with a provider that you trust. The service doesn’t have the facility to invest in mutual funds, individual stocks or bonds either. What this means is you will have to sell your holdings before transferring to Wealthfront – unless you have at least $500 minimum deposit available to invest.
This is obviously not a weakness, as the general purpose of Wealthfront is to offer an automated investment service. But if you wish to be more involved in managing your portfolio then Wealthfront may not be the best option for you.
Ease of Use
One of the main selling points of an automated investment service is the ease at which they provide wealth management services, even to the average Joe. In this regard, Wealthfront is at the top of the heap.
Opening an account and getting started with Wealthfront is quick and easy. You simply answer a few questions regarding your finances, and then provide some personal allocations if so desired. From that point on, all of the management of the portfolio created, including rebalancing, reinvestment and tax loss harvesting is entirely handled by the Robo Advisor.
It is in this regard that we declare Wealthfront to be one of the simplest and easiest to use, though not as flexible as we want it to be.
Account and Investment Types
Similar to the vast majority of Robo Advisors, Wealthfront will generally allocate your money between selections of stocks and bond ETFs. While this is fairly standard, the service’s provision for both account types and features is nothing short of exceptional.
The Wealthfront Robo Advisor offers both individual and joint taxable accounts, as well as trusts and traditional, Roth, SEP and rollover IRAs. That is arguably the most diverse selection of account types to be found anywhere. We find Wealthfront’s range of account features to be equally impressive.
Every portfolio managed by Wealthfront benefits from automated rebalancing and reinvestment to maintain profit potential, and they are also all subject to tax loss harvesting to further improve the efficiency of investments. If your account balance is over $100,000 Wealthfront will activate the Risk Parity feature.
Risk Parity is Wealthfront’s attempt to deploy the most sophisticated investing strategies in a cost-effective software. Risk Parity combines daily tax loss harvesting, stock-level tax loss harvesting, and Smart Bet. Risk Parity will basically equalize the risk of each asset in your portfolio to constantly maintain a higher rate of return.
The provision for tax loss harvesting is a huge plus, but Wealthfront goes one step further by offering Direct Indexing to accounts worth more than $100,000 and Advanced Indexing for accounts over $500,000. Direct Indexing is a more focused and optimized version of tax loss harvesting. It focuses on harvesting losses on individual stocks in an index, not just the index itself. This can make a huge difference to the value of any portfolio. Advanced Indexing simply weighs the stocks in your portfolio more intelligently.
Wealthfront also offers the Path Financial Plan. Path is an innovative way to experience financial planning so you can prepare a better financial future. Path is easy to use and will only take five minutes to set-up. After signing in, Path will give you an estimate on how much money you should be saving today in order to achieve your retirement or financial goals. Path is the first fully mobile financial planning experience and is a great addition to the plethora of accounts and services that Wealthfront has to offer.
The 529 college savings plan was first offered in 2017. This service makes it easier for doting parents to open and manage a college savings account for a 0.43% to 0.46% fee, which will vary on the investment expense ratio. The first $10,000 will be managed for free as well.
Wealthfront also introduced the Portfolio Line of Credit in 2017. This service is available for taxable accounts of $100,000 or more. This service will allow you to borrow cash without upsetting your investment strategy. This service is available for all eligible accounts with no application required. The best part is that you can easily get the cash you need in just 1 business day.
Suitability for Different Investment Budgets
With a low minimum deposit amount of $500, Wealthfront is an excellent Robo Advisor that is perfect for any type of budget. Unlike many of their competitors, Wealthfront provides a full range of account features – including tax loss harvesting – to all accounts regardless of the account balance, making it even more attractive to those with lower budgets.
The very reasonable 0.25% advisory fee will also please investors of varying budgets. While wealthier investors may complain about the lack of discounted fees for larger accounts, they can benefit from Direct Indexing if their portfolio is worth more than $100,000.
Since its inception in 2008, Wealthfront has grown to be the second largest Robo Advisor in the world. As long as you meet the low account minimum of just $500, you can select from one of the most diverse collections of account types in a Robo Advisor, aside from a plethora of outstanding wealth management features.
This includes Passive Plus and Risk Parity that combines automated rebalancing, automatic reinvestment, and daily tax loss harvesting (if it is relevant to the account). Wealthfront makes their service even more impressive by offering their unique Direct Indexing feature to accounts worth over $100,000, making a potentially huge difference to the profit potential of any portfolio.
Even though Wealthfront will stop offering zero management fees for the first $10,000 for new clients, it is still one of the best Robo Advisors in terms of reasonable management fees, diverse investment services, and ease of use.