Wealthfront Review

Wealthfront Cash Account

Investors have access to a robust Wealthfront cash account, which is a fully featured cash management account that integrates well with their investment account offerings. Cash accounts provide 2% APY, unlimited access to transfer money, a debit card with access to over 19,000 no-fee ATMs, all for no monthly account or overdraft fees.

Savings Account

Wealthfront is one of the only robo-advisors to offer a 529 college savings plan through their platform. The account can be used to pay for qualified higher educational resources, which may include tuition, room and board, and books.

The 529, like a retirement account, has tax advantages helping investors keep more of their savings. Wealthfront walks investors through all the important steps of college planning, and how it will affect their personal financial goals.

Line of Credit

Wealthfront offers a portfolio line of credit for investors with at least $25,000 invested in their account. Up to 30% of a portfolio’s value can be borrowed, with around 2-5% in annual interest.

Smart Beta

Wealthfront’s Smart Beta is designed to enhance returns over core market indexes. Smart Beta is available to investors who have at least $500,000 with Wealthfront.

Wealthfront Account Features

Path Service

Wealthfront offers many goal planning and financial decision-making tools, collectively called Wealthfront’s Path service.

Users can connect their various financial accounts, for a read out of their income, cash flow, and debt. Wealthfront investors can choose from a variety of initial goals, then Path will calculate a plan to save the necessary amount to pay for it. Some of these goals include:

• Retirement
• Buying a home
• Saving for future education
• Taking time off from work
• Making a large purchase
• Investing a windfall

Self-Driving Money

A particularly impressive feature that Wealthfront offers is their Self-Driving Money feature. Wealthfront aims to make the lives of their members easier, providing ways for the robo-advisor to completely automate their financial life. All investors need to do is set up a Wealthfront cash account with direct deposit, then link their outside accounts.

Members can then set up how they want their money managed based on their distinct expenses, lifestyles, and goals, keeping finances organized automatically.

Level Tax Loss Harvesting

Wealthfront attempts to recoup the advisory fee for its clients in the form of tax savings. They may strategically sell an investment fund in a member’s portfolio which is losing value, and reinvest in a similar fund. This can reduce the tax bill of an investor by allowing them to offset any capital gains taxes in their account.

Wealthfront is able to recoup the advisory fee for 96% of their clients in the form of tax savings.

There are 5 different levels of tax minimization for all taxable accounts:

1. Index Funds – Index funds are able to incur much lower capital gains taxes, due to their low turnover rates.
2. Dividend Reinvesting – Uses dividends to rebalance portfolios to minimize annual sales and lower realized capital gains.
3. Tax Location – Clients have access to different asset classes and locations for taxable and retirement accounts to maximize post-tax performance.
4. Daily Tax-Loss Harvesting – Taxable accounts can cover the gains in ETFs with the losses of other ETFs owned with Wealthfront.
5. Risk Parity- Wealthfront now offers a risk parity. The risk parity-based strategy is a deviation from the standard 60/40 stocks/bonds breakdown that aims to increase risk-adjusted returns.

Automatic Rebalancing

Wealthfront’s auto investor automatically rebalances member’s portfolios to meet their risk preferences and optimize tax efficiency.

Wealthfront has recently begun offering low-cost funds in a professional portfolio, socially responsible investing, cryptocurrency funds, and a range of other sector or niche funds.

Socially responsible investing is available with no minimum investments to all Wealthfront account holders.

There is a larger range of investment account offerings available with Wealthfront than their competitors. Wealthfront’s asset classes include ETFs from the following categories:

• US stocks
• Dividend stocks
• Developed market international stocks
• Emerging market international stocks
• Commodities
• Real Estate
• US corporate bonds
• Municipal bonds
• Government bonds
• Inflation protected government bonds
• Emerging market bonds

Wealthfront offers 20 different portfolios, each aligning with an investor’s specific goals and adjustable risk tolerance levels. Wealthfront’s portfolio options include:

• Classic portfolios with a diversified portfolio of low fee index funds
• Socially Responsible portfolios substitute several Exchange Traded Funds with socially responsible choices
• Direct Indexing includes individual stocks ( $100,000 minimum)
• Customize with over 200 ETFs to add to existing portfolios or create new ones
• Risk Parity portfolio attempts to outperform markets ($100,000 minimum)
• Cryptocurrency funds from Grayscale (10% maximum of portfolio value)
• Smart Beta for accounts worth more than $500,000

Account Minimum

Wealthfront fees include an initial deposit of $500 to open an account. This is a higher initial contribution than many of Wealthfront’s competitors. The Cash Management account requires only a $1 minimum deposit.

Advisory Fee

Wealthfront charges a 0.25% annual account management fee for its robo-advisory services, or $25 annually for every $10,000 invested. Investment expense ratios are 0.06-0.13%.

This is much lower than typical fees for traditional financial advisors, which can end up costing investors a lot of money that they didn’t need to spend.

529 college savings account

Wealthfront’s 529 college savings account fees range from 0.42% to 0.46%, which includes the 0.25% advisory fee.

Credit

To access a portfolio line of credit, users must invest a minimum of $25000.

It is easy to type a message to the team, however in order to have access to the number investors must login to their profile first.

Client support seems to be the company’s weak point. There are a fairly high number of customer complaints on Wealthfront, however, so they could use some improved access to client support.