Wealthfront

9

Fees and Deposit Limits

8.2/10

Flexibility

8.6/10

Ease of Use

9.8/10

Account Types and Services

8.9/10

Budget Flexibility

9.5/10

Pros

  • Low 0.25% management fee
  • $5,000 managed free (with our link)
  • ESG Investing Available
  • Advanced Features available
  • Excellent financial planning tools

Cons

  • Little flexibility for active trading
Wealthfront Review (2021 Update) 1

Wealthfront is one of the biggest and well-established robo advisors on the market. Back in 2016, they managed just over $4 billion worth of investments. For 2021, this robo advisor is now managing over $23 Billion.

Wealthfront is a prime example of a fully automated investing service

In this Wealthfront review updated for 2021, we will see if this fully automated robo advisor is the best service for your investments.

Wealthfront started life as kaChing, which was a mutual-fund analysis company in 2008. Founders Andy Rachleff and Dan Carrol slowly pivoted to wealth management after receiving funding from Benchmark Capital and DAG Ventures among others.

 

Annual Fee 0.25%
AUM (Assets Under Management) $23 billion
Minimum Investment $500
Discount $5,000 managed free (with our link)
Headquarters 900 Middlefield Rd. Ste 200
Redwood City, CA 94063
Desktop App Yes
Mobile App Yes
Socially-Responsible Investing Yes
Referral Program Refer a friend and you and the friend get $5,000 managed for free
Customer Support Support form

Wealthfront Fees

fees priceWealthfront’s $500 minimum deposit is very low. In fact, it’s one of the lowest among robo advisors that have 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. Smart marketing, eh?

Wealthfront’s annual fee of 0.25% for all accounts is very competitive. 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. Wealthfront’s pricing is all-inclusive. More on that below.

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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.

When you open a Wealthfront account, there is a survey to determine your financial goals and risk tolerance. Wealthfront then assigns your portfolio 1 of 20 risk levels between 0.5 and 10.

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

The low-risk portfolios have historically seen returns between 5-9%, while the higher risk portfolios, 6.5+, have seen better long-term gains of 8-12%. This is no surprise, of course. Both high- and low-risk portfolios have seen huge gains of between 30-55% during 2020-2021 so far. The only exception is very low-risk, which still saw around 20% gain.

Here is a quick overview of some of the historical data. All of the returns and risk levels can be found here

Risk Level Account Type 1 Year Return 3 Year Return 5 Year Return Since Inception
(2012-2013)
1.0 Taxable 23.18% 7.40% 7.12% 5.36%
Tax-Advantaged 18.74% 7.63% 7.03% 5.64%
4.0 Taxable 36.83% 9.23% 9.55% 7.34%
Tax-Advantaged 31.03% 9.33% 9.35% 8.28%
6.5 Taxable 44.48% 9.90% 10.86% 8.60%
Tax-Advantaged 39.55% 10.01% 10.30% 9.03%
10 Taxable 55.11% 10.08% 12.13% 9.08%
Tax-Advantaged 48.89% 9.71% 10.81% 9.23%

Flexibility

Wealthfront is a prime example of a fully automated investing service that provides an almost completely 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 own portfolio, you still can’t trade your own 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 are now able to 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 2021.

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. Just answer a few questions regarding your finances and risk tolerance, and then deposit at least $500. You can transfer cash from a bank account or transfer an existing account from another brokerage or bank. Wealthfront will handle the entire transfer process for you, unlike many of the other firms. From that point on, all of the management of your portfolio, including rebalancing, dividend reinvestment, and tax loss harvesting is entirely handled by them.

This is why Wealthfront is one of the simplest and easiest to use robo advisors out there, and comes with a great mobile app and desktop platform.

Account and Investment Types

Like 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. We find Wealthfront’s range of account features to be equally impressive and exclusive.

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

Risk Parity Fund 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 US 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 huge 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 moves on 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

To keep up with the rest of the market, Wealthfront also offers a high-yield cash account. Fortunately, they’re also 0.10% 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 0.06%. Ouch.

Your Wealthfront Cash account is also protected by up to $1 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.

Other Features

Wealthfront also offers the Path Financial Plan feature. Path is an innovative way to experience financial planning so you can prepare for a better financial future. It’s easy to use and will only take five minutes to set up.

After signing up, Path will give you an estimate on how much money you should be saving today to achieve your retirement or financial goals. This is the first fully mobile financial planning experience and is a great addition to the plethora of accounts and services that Wealthfront offers.

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.

Wealthfront also offers the Portfolio Line of Credit if you need to borrow money for an unexpected expense. This service is available for taxable accounts of $25,000 or more. Portfolio Line of Credit will allow you to borrow up to 30% of your account’s value without upsetting your investment strategy. The best part is that you can easily get the cash you need in just one business day. Rates are between 2.40% – 3.65% depending on your account size.

Suitability for Different Investment Budgets

Investment BudgetsWith a low minimum deposit amount of $500, Wealthfront is an excellent robo advisor perfect for any 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 many advanced features if their portfolio is worth more than $100,000.

Overall Summary

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

This includes Passive Plus and Risk Parity, which combines automated rebalancing, automatic reinvestment, and daily tax loss harvesting for taxable accounts. Wealthfront makes its service even more impressive by offering its unique Direct Indexing feature to accounts worth over $100,000, making a potentially huge difference to the profit 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.