Wealthfront Review (2023 Update)

Wealthfront Review (2023 Update)

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Wealthfront
Who is Wealthfront Best For?
Wealthfront is best for investors who want a hands-off approach to investing. Wealthfront is entirely automated and requires very little input. Some more seasoned investors who want to be more actively involved in their investments might not like this approach, but for most of us, it's perfect. You give them your risk tolerance level and let them do their job.
Pros
No fees for accounts under $5,000 (with our link)
Fixed 0.25% management fee is very reasonable
Socially-responsible portfolios available
Advanced features available to accounts over $100,000
Most features are available to all accounts
Cons
No reduced management fee for larger balances
Little flexibility for active trading
95
Overall Score

Wealthfront is one of the world’s biggest and most well-established robo advisors. In 2013, they managed just over $97 million worth of investments. For 2023, this robo advisor is now managing over $31 Billion for more than 500,000 customers.

This Wealthfront review will see if this fully-automated robo advisor is the best robo-advisor service for you.

Wealthfront started life as kaChing, a mutual-fund analysis company, in 2008. After receiving funding from Benchmark Capital and DAG Ventures in 2013, founders Andy Rachleff and Dan Carrol slowly pivoted to wealth management.

Annual Fee0.25%
AUM (Assets Under Management)$31 Billion
Minimum Investment$500
Promotion$5,000 managed free (with our link)
Headquarters900 Middlefield Rd. Ste. 200
Redwood City, CA 94063
Desktop AppYes
Mobile AppYes
Socially-Responsible InvestingYes
Referral ProgramRefer a friend, and you both get $5,000 managed for free & a 0.50% APY increase in your Cash account for 3 months
Customer SupportSupport form

Wealthfront Pricing & Fees

Wealthfront’s $500 minimum deposit is very low; it’s among the lowest among robo advisors with a minimum investment amount. This makes it perfect for beginners and first-time investors. This isn’t just a ruse to get you to sign up, though – even the basic service gets features like Tax Loss Harvesting and fully-managed services.

They also give readers of this website a special offer. Sign up using our link and get the first $5,000 managed for free. On top of that, if you refer any friends to sign up, you get an extra $5,000 managed for free for each friend. You will also get a 0.50% increase on your Cash APY for three months. Clever marketing, eh?

Wealthfront’s annual fee of 0.25% for all accounts is very competitive, and it stacks up well against other charges from most of Wealthfront’s competitors. Better than most, actually. Betterment, Wealthfront’s biggest competitor, charges the same annual fee for their basic service and 0.40% for the premium service, and Wealthfront’s pricing is all-inclusive. More on that below.

0.25%

Annual Fee

Wealthfront Historical Performance & Returns

Wealthfront provides some insight into the historical returns that investors have seen in the past. Even though past performance can’t guarantee future success, it gives an idea of what your returns might look like.

You can check previous average returns over the past year, three years, five years, and since the portfolio’s inception. There are also differing returns between taxable and tax-advantaged portfolios. In most of the historical returns, the taxable accounts have better returns.

Here is a quick overview of some of the historical average annual returns, last updated in December 2022 (down market).

Risk LevelAccount Type1 Year Return3 Year Return5 Year ReturnSince Inception
(2012-2014)
1.0Taxable-11.67%1.13%2.85%3.67%
1.0Non-Taxable-15.98%-0.76%1.96%3.34%
4.0Taxable-12.45%3.06%4.20%5.74%
4.0Non-Taxable-17.95%0.14%2.89%4.99%
6.5Taxable-13.97%3.29%4.36%5.75%
6.5Non-Taxable-18.51%0.96%3.43%5.36%
9.5Taxable-14.87%3.73%4.53%5.72%
9.5Non-Taxable-18.90%1.51%3.47%5.39%
Wealthfront Average Annual Returns Over Time

2022 was not a friendly year for the market, which can be seen very clearly by the large negative returns for all portfolios. Taxable accounts typically did much better, but still lost money somewhat dramatically.

Longer-term, the low-risk portfolios have seen average annual returns between 2-5%, while the higher-risk portfolios have seen better long-term gains of 4-6%.

All of the returns and risk levels can be found here

Related: Wealthfront vs. M1 Finance

Flexibility

Wealthfront is a prime example of a fully automated investing service that provides an almost entirely hands-off wealth management experience. This makes it very attractive to investors who don’t have the time, inclination, or ability to manage their investments manually.

It isn’t perfect, though. While Wealthfront does offer a decent amount of flexibility in building your portfolio, you can’t trade individual stocks. This is fine for most investors but not for very hands-on traders.

In April 2021, Wealthfront released a feature that gives investors much more flexibility in deciding how their portfolios are allocated. Hands-off investors can still use Wealthfront’s default portfolios for fully automated investing; those who would like more flexibility can now diversify their portfolios into whichever industries or ETFs they choose, including SRI & ESG portfolios. The lack of flexibility was our only complaint about Wealthfront in the past, and now they’re one of our top picks for a robo advisor in 2023.

Ease of Use

As we have mentioned above, one of the main positives of fully automated investing services is the ease at which they provide wealth management features to investors who otherwise may not have benefited from them.

Opening an account and getting started with Wealthfront is quick and straightforward, involving answering a few financial questions, giving them your risk tolerances, and then they give you their recommendations. You can tinker around with allocations, or leave it all up to Wealthfront.

From that point on, all of the portfolio management, including rebalancing, reinvestment, and tax loss harvesting, is entirely handled on the investor’s behalf, making Wealthfront one of the simplest and easiest robo advisors for anybody to use.

The main dashboard is simple and straightforward, giving you a holistic view of your finances managed by Wealthfront and your other banking and investment accounts, along with your estimated net worth at retirement and any other significant milestones you’ve set.

The investment account-specific pages show a time-based graph with annualized returns, growth or decline, and your asset allocations compared to the target, which can be rebalanced automatically:

Wealthfront Review (2023 Update) 1

Account Features

Like most robo advisors, Wealthfront will allocate your money between stocks and bond ETFs. While this is relatively standard, the service’s provision for both account types and features is exceptional.

The Wealthfront robo advisor offers individual and joint taxable accounts and trusts and Traditional, Roth, SEP, and rollover IRAs. Wealthfront’s investable account selection is above average.

Every portfolio managed by Wealthfront gets automated rebalancing and dividend reinvestment to maintain profit potential and tax loss harvesting for taxable accounts to improve investments’ efficiency further. If your account balance is over $100,000, Wealthfront will activate additional advanced strategies:

Risk Parity Fund (WFRPX) is Wealthfront’s attempt to deploy the most sophisticated investment strategies in cost-effective software through an enhanced asset allocation strategy to constantly maintain a higher rate of return.

Tax loss harvesting is a huge plus, but Wealthfront goes one step further by offering Direct Indexing to accounts worth more than $100,000, harvesting losses on individual stocks in an index, not just the index itself. This can make a massive difference to the value of any portfolio.

Smart Beta activates when your account level reaches $500,000, weighing the stocks in your portfolio more intelligently.

As time progresses and machine learning and AI become more advanced, we expect Wealthfront to be on the leading edge of additional features to optimize your portfolio.

Wealthfront Banking: A High-Yield Cash Account

Wealthfront also offers a high-yield cash account offering 3.8% APY – a market-leading interest rate in a market full of disastrously low interest rates. To give this some reference, the current national average interest rate is 0.22%. Ouch.

Your Wealthfront Cash account is also protected by up to $2 Million FDIC insurance, comes with no account or transaction fees, no transaction limits, and no minimum deposit. They also offer a debit card, bill pay, direct deposit, check deposit through the app, and integration with many other services and financial planning features. This is one of the best robo advisor cash accounts on the market.

Sign up for a high-yield Wealthfront Cash account here and get $30 free to open your account. If you refer a friend, you both will get a 0.50% increase in your Cash APY for three months, making Wealthfront Cash the highest-yielding cash account available on the market.

Borrow: A Portfolio Line of Credit

Wealthfront also offers “Borrow” – a Portfolio Line of Credit if you need to borrow money for an unexpected expense or want to use it as a margin loan.

Borrow is available for taxable accounts of $25,000 or more, and you can borrow up to 30% of your account’s value without upsetting your investment strategy. There are no credit checks, funds are available nearly instantly, and there’s no repayment schedule.

Rates are between 6.65% – 7.90% APR, depending on your account size. This rate fluctuates with the federal interest rate.

Other Features

The 529 College Savings Plan makes it easier for 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 $5,000 will be managed for free.

Suitability for Different Investment Budgets

With a low minimum deposit amount of $500, Wealthfront is an excellent robo advisor for any budget. Unlike many of its competitors, Wealthfront provides a full range of account features – including tax loss harvesting – to all accounts regardless of their size, making it even more attractive to those with lower budgets.

The low 0.25% advisory fee will also please investors of all budgets.

While wealthier investors may complain about the lack of discounted fees for larger accounts, they can benefit from many advanced features if their portfolio is worth more than $100,000, including Risk Party, Direct Indexing, and Smart Beta (available for accounts over $500,000.)

Wealthfront Reviews Around the Internet

We give Wealthfront a very high rating for being one of the best robo advisors out there, but it will give you confidence to know what other users and publications think about the service.

  • Wealthfront won TheRoboReport’s “Best Robo for Performance at a Low Cost” award for 2022 and one of the top spots in nearly every other category.
  • NerdWallet loves Wealthfront, giving them a 5.0 out of 5 score. They summarize, “Wealthfront is a force among robo-advisors, offering a competitive 0.25% management fee and one of the strongest tax-optimization services available from an online advisor.”
  • Hundreds of users rated Wealthfront 4.0/5 on ConsumerAffairs.
  • SmartAsset doesn’t give a score, but they rated Wealthfront very highly, saying “Wealthfront is a great, low-cost option for online investing services as well as software-based financial planning and short-term cash management solutions.”
  • Investopedia rated Wealthfront 4.8 out of 5, saying “Wealthfront is our top choice overall for robo-advisors as well as best for goal planning.”
  • BankRate gives Wealthfront a perfect 5 out of 5, saying, “Wealthfront ranks among the best robo-advisors, offering sophisticated portfolio management, a top cash management account, and some of the most useful planning tools.”
  • Forbes gives Wealthfron 4.4/5, saying, “Wealthfront is best for someone who’s looking to make as few financial decisions as possible—as well as users who enjoy lots of features and messing around with graphs and charts.” (this review is outdated.)
  • BusinessInsider gives Wealthfront a 4.34/5, mentioning, “Wealthfront is a good robo-advisor option if you’re in search of low-cost automated portfolio management and access to features like tax-loss harvesting, US Direct Indexing, and crypto trusts.”
  • Reddit, as usual, has mixed reviews across the r/Wealthfront, r/PersonalFinance, and r/Investing communities. Some (especially in r/Wealthfront) swear by them, while other more active traders don’t like it so much, and suggest that they’re only good for taxable accounts since you can self-allocate a tax-advantaged account (which is true, if you want to deal with it yourself.)

Overall Summary

Since its inception in 2008, Wealthfront has grown to become one of the largest robo advisors in the world. You can select from many outstanding wealth management features as long as you meet the low account minimum of $500.

Wealthfront makes its service even more impressive by offering Direct Indexing and other features to accounts worth over $100,000, making a potentially huge difference to the growth potential of any portfolio.

Wealthfront is one of the best robo advisors for reasonable management fees, diverse investment and personal finance services, and ease of use.

If we were to choose one quintessential example of a robo advisor, it would be Wealthfront.

What are the Pros of Wealthfront?

Wealthfront is an easy-to-use, trusted, hands-off robo advisor with an excellent history, low (0.25%) fees, a good referral program, and some extra personal finance features such as savings, checking, loans, and college savings plans that make it an excellent robo advisor for every investor.

There isn’t much flexibility in portfolio allocation with Wealthfront outside of risk tolerance, which can be considered a good or bad thing, depending on your preferences. There also isn’t a human to talk to for financial advice, although you can reach out to Wealthfront’s customer service with any questions.

Yes, Wealthfront has industry-leading historical returns for the investment portfolio, and their high-yield savings account is one of the best high-APY cash accounts on the market.

No. In fact, if you withdraw money from your taxable investment account, Wealthfront will withdraw it in a tax-advantaged way to ensure you pay as few taxes as possible.

Yes. Wealthfront is probably the best robo advisor for beginners due to its low cost, ease of use, and low entry barriers.

$500

Wealthfront partners with Green Dot Bank to offer the checking features in their Cash accounts.

No. While individual stock selection isn’t possible with Wealthfront, you can customize your portfolio with different ETFs based on your values and preferences.

Yes. While you can’t buy individual coins, you can invest in cryptocurrency via the Grayscale Bitcoin Trust (GBTC) and the Grayscale Ethereum Trust (ETHE) with Wealthfront just like any of their other ETFs. Note that tax loss harvesting is not offered for cryptocurrency.

Yes. Any investment comes with a risk, and Wealthfront is no exception. Your portfolio may go up or down depending on market volatility, but historically, it will go up if you invest for the long term. If Wealthfront fails, your portfolio is insured for up to $500,000 by the Securities Investor Protection Corporation (SIPC).

Not directly, but you can roll over your 401(k), 403(b), 457, TSP, or another employer-sponsored retirement plan into a Rollover IRA managed by Wealthfront, which will most likely have lower fees, once you’re no longer with your employer (with some exceptions).

Wealthfront is a better robo advisor for most investors, but Personal Capital has a better personal finance dashboard.

Wealthfront

0.25 % 

$5,000 Managed Free