Wealthfront Review – A Robo-Advisor That Invests For You
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Wealthfront offers outstanding financial planning which enables you to see the larger picture.
8.5/10
Cost
7/10
Features
8.5/10
Ease of use
9/10
Services
9/10
Wealthfront is one of the best robo-advisors that offers excellent advice for professional financial planning and automated investment management. It appeals to beginners and experienced investors alike. The robo-advisor has several personal finance tools that help diversify the portfolio and provide efficient tax optimization strategies.
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What is Wealthfront?
Wealthfront offers the best financial planning tools without the high expenditure of hiring an expert financial advisor. The platform offers holistic financial advice and investment management tips that help with tax optimization, financial planning, and portfolio diversification. Founded in 2008, it has one of the most robust portfolios of robo-advisors.
Wealthfront is a user-friendly platform that offers the complete package of goal setting, banking, planning, and investing in one place. There is a sea of robo-investors, and Wealthfront is a big fish that stands out.
Wealthfront helps set and achieve a goal, keeping your financial position in mind. What sets Wealthfront apart from others is that it considers the entire financial picture, not just your income, savings, or expenses. Wealthfront has a huge appeal for young investors and those keen on increasing their wealth through systematic, automated investing. The robo-advisor offers complete digital investing services without human intervention.
Working With Advisors Can Provide More Security than Going at It Alone.
- SmartAsset's free tool matches you with up to 3 financial advisors that serve your area in 5 minutes.
- Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests.
How does Wealthfront work?
Wealthfront has a simple and straightforward process. You can open an account or explore the free financial planning tool. Wealthfront offers different account types, including retirement accounts.
If you want to open an account, choose from the below.
- Roth IRAs
- Traditional IRAs
- SEP IRAs
- Rollover IRA
- Individual and joint taxable brokerage accounts
- 529 plans for college
If you want to explore the free planning tool, answer the questions below and set your goal. The site will then take you through different ways you can save for the milestones, and if you do not know where to start, the site recommends saving for retirement.
If you are ready to set up an account, you will have to complete a questionnaire with four objective and six subjective questions. This questionnaire will help determine your risk tolerance to the asset allocations. Setting up an account provides access to Path, a free financial planning tool. It will integrate the account information and use third-party data to meet the financial situation. It works simply: You invest the money into an account, and the funds will be held in the brokerage account by the company's subsidiary, Wealthfront Brokerage LLC. Wealthfront will allocate the investment into different exchange-traded funds. You can integrate all your accounts to get a complete financial view.
Wealthfront uses an automated approach to allocate assets by dividing the investments among ETFs per your parameters. This passive investing approach relies on technology and software to deliver the highest returns while keeping the risks and costs low. The company has a modern portfolio theory to build an automated asset allocation. This will help offer a personalized investment strategy based on the client's time horizon and risk tolerance. It will take into account the user's financial needs and risk tolerance. The platform will ensure that the allocation is optimal and offers automatic rebalancing.
After establishment, the allocations remain constant irrespective of the amount invested. Once specific thresholds have been crossed in the account, the portfolio will be automatically adjusted to keep it in line with the asset mix.
How much does Wealthfront cost?
Wealthfront is completely free to use, but to open an investment account, there is a $500 account minimum requirement. It does not charge account opening, closing, transfer, withdrawal, or trading fees. Wealthfront Cash account will pay an interest rate of 5.00% and has a minimum balance requirement of $1. For an investment account, Wealthfront charges an annual management
fee of 0.25%.
Wealthfront’s college plan's management fee is up to 0.46%.
The line of credit requires a $25,000 minimum investment to access credit with an APR ranging between 7.65% to 8.90%
Wealthfront features
Wealthfront has several excellent features that make it a popular tool for people looking to grow their wealth.
Free financial planning
Wealthfront provides free software-based financial planning and gives answers to your questions instantly. Path is an automated advice engine connecting your outside bank and brokerage accounts to give an insight and real-time view of the finances.
Convenient transfers
Wealthfront allows easy transfers. If you need to transfer stock or cash in and out of Wealthfront, you can do it quickly and for free.
Automated rebalancing
The platform automatically rebalances the client portfolios based on the portfolio deviation from the specific percentages. It differs from the time-based rebalancing strategy, where the portfolio is adjusted every month or quarter. Wealthfront portfolio is monitored regularly, and automatic rebalancing timing can be anytime.
College savings plans
Wealthfront offers the platform in the form of a 529 college savings plan. The investment will differ slightly and constitute municipal securities across nine asset classes. It will help reduce the tax within the portfolio and provide diversification.
Cash management account
The cash management account offered by Wealthfront is an ideal combination of a traditional checking and savings account. There are no account fees, and you can use the account for direct deposit of the paycheck, pay bills, use a debit card, and earn interest on the balance. It is not mandatory to have an investment account; the minimum balance required for a cash management account is $1. Further, you get FDIC insurance of up to $2 million and access to over 19,000 ATMs.
Portfolio line of credit
Wealthfront has a feature that allows clients to borrow quicker, easier, and cheaper than other providers. Any client with at least $25,000 invested in a taxable account can use the portfolio line of credit. One can request cash up to 30% of the current value of the account with no credit check. You will receive the amount in as little as one business day.
Passive Plus
Wealthfront’s collection of rule-based investment strategies is known as PassivePlus. It helps maximize return and minimize risk. PassivePlus will incorporate techniques like Smart Beta and risk parity for individuals, joint accounts, and trust. Smart Beta is a method used to deliver high returns with low risk and is available for portfolios of at least $500,000. Risk parity is an enhanced asset allocation strategy that will kick in only at the $100,000 level.
Socially responsible investing
Taxable investment accounts from $100,000 to $500,000 will qualify for stock-level tax-loss harvesting. These accounts will have a socially responsible investing strategy where you can single out individual stocks you do not want to own. The platform also offers the option of index funds to reduce taxes. Capital gain can be a headache for many, and Wealthfront will minimize the capital gain and help lower your tax bill.
Working With Advisors Can Provide More Security than Going at It Alone.
- SmartAsset's free tool matches you with up to 3 financial advisors that serve your area in 5 minutes.
- Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests.
Who should use Wealthfront?
Wealthfront offers a fine selection of features at a low cost, making it a great investment platform.
Those who want to make minimum financial decisions
The robo-advisor Wealthfront will make it easy and convenient for you to make financial decisions. It is ideal for those who enjoy many features and want to invest in various products without spending much time and effort on research.
Those with a large account balance and are in a high tax bracket
Wealthfront will benefit those who fall in a high tax bracket and have a large account balance, as the tax-loss harvesting can lead to a significant reduction in tax.
Those seeking low costs
If you want to get hold of your finances and investment but do not want to incur a huge amount for human, financial advisors, Wealthfront is perfect for you. It offers exceptional services at a low cost and uses technology and software to allocate your funds.
Beginners
For individuals who do not know where to start, Wealthfront is a great place. It has a simple process to create an account and lets you have all your finances in one place. You can pay bills, use your debit card, and invest in ETFs and mutual funds from a single place.
Those who are not sure about their goals
An important part of Wealthfront’s account opening process is the questionnaire. The platform has a goal-centered approach that will help identify your short-term and long-term goals. If you do not know your goals, the simple and straightforward questionnaire will help you get started. You can make sense of your life and choose which areas of your life you want to save money for.
Who shouldn’t use Wealthfront?
While Wealthfront is a great platform, it’s not for everyone.
Hands-on investors
If you understand different investment products and know the best ways to cut taxes, Wealthfront might not be for you. You may not agree with the investment portfolio created by the robo-advisor and might prefer to make investment decisions yourself.
Those who want to work with a financial advisor
Wealthfront is not ideal for those who like human contact at all levels. A lot of customization is available, but you do not work with a financial expert. Robo-advisors make the decisions. This platform might not be the best option if you want a financial advisor for personal advice.
Pros and cons
Pros
- See the big picture: Wealthfront offers outstanding financial planning which enables you to see the larger picture. It is perfect for getting an overall sense of how your finances are currently doing. It allows you to synchronize complete financial information and does not restrict itself to your income, savings account, or your expenses.
- Goal-setting assistance: The platform goes in-depth for your goals like college savings and home purchases. You will be asked straightforward questions at the time of creating an account and the investment criteria are based on the goals you want to save and invest for.
- Ideal for multiple goals: Those who have multiple goals can see the trade-offs you will face through Path.
- Tax-loss harvesting: A major benefit of Wealthfront, tax-loss harvesting allows you to reduce the tax while maximizing returns.
Cons
- No online chat option: There is no chat option for prospective customers or customers to get information about the platform.
- No customization feature for small accounts: The portfolios below $100,000 are not customizable beyond the risk settings.
- No fractional shares: Fractional shares enable you to own a small part of a large company without spending a huge amount. However, it is not possible to purchase fractional shares through Wealthfront.
- No 401(k) assistance: A major drawback of Wealthfront is the lack of 401(k) assistance.
Wealthfront vs. Competitors
Platform | Minimum investment | Advice | Account types |
Wealthfront | $500 | Automated | Several account types, including college savings plan accounts |
M1 | $100 for taxable accounts, $500 for retirement accounts
| Automated | Only five account options |
Betterment | $0 for the Digital tier, $100,000 for the Premium tier
| Human assisted | Individual, retirement, trust, and high-yield savings/ cash accounts. |
Wealthfront vs. M1 Finance
M1 Finance is a flexible investing automation platform that does not offer a comprehensive approach that can be incorporated into your financial goals. While both platforms offer automated investment advice, M1 does not offer tax-loss harvesting. Further, Wealthfront has a wide range of investment products to consider, and M1 only has stocks or ETFs.
Wealthfront vs. Betterment
Betterment offers a $0 minimum investment requirement for its entry-level tier and offers human-assisted advice. It is significantly different from the robo-advisors in the market today. However, Betterment only offers a few accounts to choose from. It does not have a college savings plan account or offer access to financial advisors. But for a fee, users can purchase an advice package that includes a consultation with an advisor. The prices start at $299, which makes it significantly expensive compared to Wealthfront.
FAQs
What is the cost of using Wealthfront?
Wealthfront is free to use but to open an investment account, you need to have an account balance of $500. For a Wealthfront cash account, you need only $1 to get started and you enjoy a 5.00% APY.
Is Wealthfront safe?
Wealthfront is a safe platform. You can link your external brokerage and bank accounts, and your financial data will remain protected.
What are the main features offered by Wealthfront?
Wealthfront offers a range of tools that help with financial planning and investment. It allows you to sync all your accounts and get rid of multiple apps. The platform will give a complete view of your finances. Its main features include a 529 college savings plan account and tax loss harvesting.
Working With Advisors Can Provide More Security than Going at It Alone.
- SmartAsset's free tool matches you with up to 3 financial advisors that serve your area in 5 minutes.
- Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests.
The bottom line
If you want to get a hold of your finances but have no idea how and where to start, Wealthfront is a great platform. The robo-advisor will help you understand your goals better and will allow you to track your expenses while building a diversified portfolio. It will give a complete view of your finances and let you focus on investments that will grow your money. It offers outstanding advice at a minimum cost. Additionally, you can reduce tax and consolidate all your brokerage and banking accounts in one place, making life and finances simpler.
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Writer
Vandita Jadeja is a financial writer and editorial assistant at Joywallet. She loves to read and write about money and brings 7 years of experience from the financial industry. She loves coffee, mountains and sunsets.
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