Wealthfront Review 2017

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Wealthfront does not offer some of the bells and whistles that other robo-advisors provide but in three very key areas Wealthfront makes a compelling case to earn your business.

  1. Where Betterment and Personal Capital offer dedicated financial advisors for their premium offerings, Wealthfront has remained a pure robo-advisor. But where Wealthfront shines is its focus on tax-optimized investing, an underappreciated yet very important consideration that can enhance after-tax portfolio performance by up to 2% annually according to Wealthfront.
  2. Wealthfront also distinguishes itself as the only robo-advisor in our review sample that offers a 529 Plan, which is a tax-advantaged savings plan designed to encourage saving for future college tuition costs.
  3. When it comes to fees, Wealthfront is nearly impossible to beat. It has a highly competitive fee schedule and one of the best introductory offers of any robo-advisor: zero fees for the first $10,000 of assets under management.

Wealthfront Spotlight

WEALTHFRONT SPOTLIGHT
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InvestorMint Rating

4 out of 5 stars

  • Management Fee: $0 for first $10,000
  • An additional $5,000 managed free for each friend invited who signs up
  • Management Fees thereafter: 0.25%
  • Account Minimum: $500

via Wealthfront secure site

Wealthfront Customers

Wealthfront targets fee-conscious investors who prefer a hands-off investment experience that is highly automated and who have no need or desire to connect with a dedicated human financial advisor. It’s also designed for investors who value the benefits of tax-optimized investing as well as those who may have or be guardians to children and wish to start saving for college tuition expenses.

Wealthfront has always offered a low-fee robo-advisory service and, unlike Betterment which added dedicated human financial advisors in 2016, remains a pure robo-advisory service.

For investors who desire the hybrid of a human financial advisor and the low fees associated with robo-advisory firms, Personal Capital and Betterment may be better choices. But for investors who need less hand-holding or have simpler financial situations that don’t warrant portfolio oversight or analysis from a dedicated advisor, Wealthfront has ample features to recommend it.

Wealthfront does have fast response times to answer customer phone calls but surprisingly does not offer a Live Chat feature, which is virtually standard across robo-advisory and brokerage firms. Email support is available but customers should choose phone communication for urgent issues.

Wealthfront serves Millennials, beginner investors, retirees, and hands-off investors well. With a pure robo-advisory service, Wealthfront provides the intuitive, easy-to-use website interface and simple navigability expected of a company that wants customers to spend time on its website.

Wealthfront is best for:

  • Millennials
  • Hands-off investors
  • Retirees
  • Fee-conscious investors
  • Tax-aware investors

Wealthfront Management Fees

Wealthfront has perhaps the most competitive fees in the industry.

  • 0.0% for the first $10,000 of assets under management
  • 0.25% thereafter

In addition to higher long-term client portfolio returns from lower fees, Wealthfront claims that its tax-loss harvesting service enhances returns by up to 2% annually. Balances over $100,000 are required to avail of the tax-loss harvesting service.

Wealthfront Investment Method

Similar to Personal Capital and Betterment, Wealthfront stacked its team with renowned financial veterans who lend credibility to its investment philosophy and methods. Dr. Burton Malkiel is the Chief Investment Officer for Wealthfront and author of the renowned book A Random Walk Down Wall Street.

Wealthfront seeks to optimize risk-adjusted returns by allocating assets to a diverse group of sectors, including domestic and foreign stocks, emerging markets, bonds and natural resources. Low expense ratio exchange-traded funds are used to keep costs low though these costs are passed onto clients as is the industry norm.

Customers should be aware that Wealthfront does not perform the same level of in depth due diligence via its short questionnaire as a human financial advisor might when evaluating risk tolerance and setting an investment allocation. Plus, fractional shares are not supported meaning that some cash is left uninvested, which creates a drag on portfolio performance.

Wealthfront employs a tax-optimized investment method called Direct Indexing. This approach is applied to accounts over $100,000 and works by purchasing up to 1,001 individual securities versus a single ETF of an Index Fund and identifying individual tax-loss harvesting opportunities.

Wealthfront Tools

Wealthfront launched Path to compete with Personal Capital’s Retirement Planner Tool and Betterment’s RetireGuide, allowing clients assess spending capacity in retirement and savings adjustments needed to realize retirement objectives.

Wealthfront provides a financial planning tool called Path that is designed to identify where a client sits relative to retirement goals. Path allows clients better understand the impact of saving more monthly as well as the probability of maintaining their current lifestyle in their retirement years.

Like retirement tools offered by other robo-advisors, such as Betterment’s RetireGuide, Wealthfront links third party accounts that are subsequently analyzed to assess retirement spending capacity.

Wealthfront Pros and Cons

Wealthfront is a low-fee leader among robo-advisory firms. It’s also the only robo-advisory firm in our sample company list that offers 529 Plans. Its focus on tax-optimized investing via tax-loss harvesting is in our view an underrated advantage that the company claims increases annual returns by 2%. Investors looking for more human interaction via a dedicated financial advisor would be best served elsewhere, such as Personal Capital or Betterment.

Wealthfront Pros Wealthfront Cons
Management Fees: No fees are applied for the first $10,000.
After that, the fees are just 0.25%. So for a $100,000 portfolio, the fees are just north of a couple of hundred dollars annually.
No Dedicated Financial Advisors: Unlike Betterment and Personal Capital, Wealthfront has no human advisors available for consultations however its rivals also charge higher fees for those higher touch point services.
Tax-optimized Portfolios: Wealthfront claims client portfolio returns are enhanced by up to 2% annually by applying tax-loss harvesting strategies to individual stocks. No Live Chat: Most brokerage firms and robo-advisory firms offer a Live Chat feature but Wealthfront surprisingly is not one of them given its target demographic audience is known to prefer digital communications to phone calls.
529 Plans: Wealthfront distinguishes itself from its peers by offering 529 Plans which are primarily designed for parents and guardians wishing to save for children’s college tuition expenses. Wealthfront’s 529 Plan is sponsored by Nevada so clients should evaluate their own State plans also. Cash Drag: Wealthfront does not purchase fractional shares of exchage-traded funds, creating a balance of uninvested cash that leads to a slight cash drag on overall portfolio performance.
Tools: Wealthfront provides a retirement tool called Path which helps customers determine savings goals needed to meet retirement lifestyle objectives.

Wealthfront Fees & Minimums

Wealthfront has competitive fee charges compared to other robo-advisors and substantially lower fees than most traditional personal financial advisors.

Category Fees
Account Management Fees 0.0% for first $10,000
0.25% on amounts > $10,000
Investment Expense Ratio 0.12%
Account Minimum $500
Annual, Transfer, Closing Fees None

Wealthfront Accounts

Wealthfront distinguishes itself in supporting not just individual and joint non-retirement accounts, Roth IRAs, Traditional IRAs, SEP IRAs, Rollover IRAs, and Trusts but also 529 Plans – unlike other robo-advisory firms.

Type Capability
Individual Non-retirement YES
Joint Non-retirement YES
Roth IRA YES
Traditional IRA YES
SEP IRA YES
Rollover IRA YES
Trusts YES
529 Plans YES

Wealthfront Tax Strategy

Wealthfront’s Direct Indexing investment method on accounts over $100,000 is a tax-optimized strategy that purchases up to 1,001 individual securities versus a single ETF of an Index Fund to improve tax-loss harvesting.

Type Capability
Tax Loss Harvesting YES
(daily on all taxable accounts)
Direct Indexing YES
(on accounts over $100,000)
Account Rebalancing YES

Wealthfront Summary

Wealthfront focuses on tax-optimized investment methods that optimize for the all-important after-tax returns. With exceptionally low fees, but no dedicated financial advisors, Wealthfront is an ideal solution for hands-off investors who are seeking an automated investment solution.

Parents and guardians will be attracted to Wealthfront as the sole robo-advisory firm in our sample set offering 529 Plans.

Wealthfront also has the tools to support visualizing and analyzing retirement objectives and recommend actions needed to best achieve them.

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