Category: 10. Wealthfront review

Overall, Wealthfront appears to be an excellent investment service. We think it’s one of the best robo advisors, actually. It shines with taxable accounts. Now that Wealthfront offers tax-loss harvesting for all accounts, its service can minimize your annual tax expenses.

If you’re a beginning investor who’s leery of jumping into individual security selection and management, Wealthfront would be an excellent choice. And it’s a superior vehicle for any passive investor since the selection and maintenance of individual securities is completely unnecessary. Such an investor should supplement their Wealthfront position with substantial cash-type holdings outside.

But more active investors can find use here if they supplement with a self-directed account.

But it’s the everyday savers whom Wealthfront is particularly looking to reach. With its Path planning model, you can “set it and forget it” and let Wealthfront do all of the heavy lifting.

Wealthfront is the perfect investment service for anyone who is looking for professional investment management at a low annual fee. It provides a level of service comparable to traditional investment advisories, but at a small fraction of the fee.

You should also consider Wealthfront if you have a large taxable investment account and are concerned about the tax liability generated by investment gains. Wealthfront is at the forefront of tax minimization strategies, and second to none when it comes to tax-loss harvesting.

It is also the perfect choice if you want to have your investments and banking on the same platform. Right next to your taxable investment account and retirement account, you can take advantage of the Wealthfront Cash Account to earn high interest on your uninvested cash. You’ll also have access to a free checking account, complete with a Visa debit card that can be used in 19,000 free ATMs.

And don’t forget the Wealthfront portfolio line of credit. It gives you access to 30% of your taxable account value, anytime you need it, and at incredibly low-interest rates.

In short, Wealthfront is an outstanding investment platform for just about everyone.

Wealthfront is one of our favorite robo advisors because of its low management fees. The fact you can customize the ETFs you invest in to have more control over your portfolio is also a selling point. Plus, Wealthfront supports a range of account types, including 529 plans, which isn’t a given for robo advisors.

That said, Wealthfront falls short for fractional shares and the fact that human advisors aren’t available. A $500 investing minimum is also higher than some competing robo advisors.

Thankfully, there are numerous Wealthfront competitors you can turn to if you want fractional shares and human advice.

Highlights	Personal Capital	Betterment	Wealthfront
Rating	9.5/10	9/10	9/10
Minimum to Open Account	$100,000	$0	$500
401(k) Assistance	True	True	False
Two-Factor Auth.	False	True	True
Advice Options	Automated, Human Assisted	Automated, Human Assisted	Automated
Socially Responsible Investing	True	True	True

Betterment has the same pricing structure as Wealthfront for accounts under $100,000 but has a $0 account opening requirement. It also has excellent ESG and SRI portfolios to choose from. And if you invest over $100,000, you get unlimited calls with Betterment’s team of certified financial planners for added human advice.

As for Personal Capital, it’s an excellent Wealthfront alternative if you want to work with financial advisors. Clients who invest over $100,000 get access to Personal Capital’s Wealth Management service which helps you create a custom portfolio to reach your goals. Plus, there’s a variety of free tools, like a retirement planning tool and investment fee analyzer, you can use for free regardless of your account balance.

Wealthfront is currently offering two promotions:

1. First, when you sign up for Wealthfront through Investor Junkie, the first $5,000 in your account is managed for free.
2. Second is the referral program—Wealthfront Invite. For every new customer you refer to Wealthfront, you get an additional $5,000 managed for free.

To open an account with Wealthfront, you’ll need to be at least 18 years old, have a U.S. Social Security number, and a current U.S. address. You must also have a U.S. phone number that can accept text messages for security verification.

The sign-up process starts with a questionnaire. It asks you a series of brief questions to help Wealthfront determine your risk tolerance, investment goals, and time horizon. It then produces a risk score it uses to create your portfolio.

Next, you move to the investment plan page. This page provides details of how Wealthfront will invest your money. This includes the specific investments used, as well as the percentage allocations applied.

If you’re satisfied with your risk score and investment allocations, you can click on “open an account.” If you want to make adjustments, you can adjust the weights of asset classes and add or remove ETFs. Afterwards, you have four options to fund your account:

1. ACH bank transfers from a linked checking or savings account. You can set this up directly through Wealthfront, which will verify the external account using two small deposits. If you use this method, you will be able to send recurring transfers from your bank account.
2. Transfers and rollovers. This can include transfers from another investment account or rollovers from a retirement account into Wealthfront.
3.  Wire transfers. These must come from an account where you are listed as the owner.
4. Checks. This is only available for 529 accounts.

Once your account has been opened and funded with the required $500 minimum, Wealthfront can start investing your money.

As a robo advisor, Wealthfront is an excellent choice for anyone who wants their investments professionally managed but doesn’t want to pay the typical 1% -2% management fee charged by traditional investment management funds. Wealthfront provides essentially the same service for a fraction of the fee.

Wealthfront may also be the top choice among robo advisors for investors with larger accounts who are looking for tax minimization. Wealthfront has multiple options to reduce taxes on investment income from taxable investment accounts. This ranges from basic tax-loss harvesting to more advanced strategies, like stock-level tax-loss harvesting and a risk parity option.

It’s also recommended for anyone who wants to combine their investing activities with banking services. Wealthfront’s Cash Account pays interest on balances up to $1 million at rates well above those offered by local banks and credit unions. They even provide a free checking account, complete with a Visa debit card.

Wealthfront charges 0.25% in annual management fees. From our research, for accounts under $10,000, Wealthfront is one of the cheapest robo advisors, including ETF fees. And with our promo link, the first $5,000 in your account is managed free, and amounts above $5,000 have an annual 0.25% fee.Let’s break it down. On a $100,000 account, the fee would be $237.50 for a full year — and with our exclusive promotional link, the first $5,000 would be excluded from annual fees. The amount of the annual fee will be prorated and withdrawn every month. Wealthfront is cheap when compared to the thousands of dollars in fees typically charged by financial advisors.

Other Wealthfront fees and minimums include:

• Wealthfront Minimum Deposit: The minimum account size that Wealthfront allows is $500
• Minimum Withdrawal Amount: $250. You cannot draw your account below the $500 minimum.

There’s also another way to have more than $5,000 managed free under Wealthfront. After becoming a Wealthfront customer, refer friends to the service. Each new signup grants you an additional $5,000 of free management.

The only other fee you incur is the very low fee embedded in the cost of the ETFs. From our 60% stocks, 40% bonds portfolio test, we found the ETF fees averaged 0.18%. That gives Wealthfront an advantage over even the deepest discount brokers.

Typically, if you are moving from an advisor or existing brokerage account to a robo advisor, you have to sell all of your holdings and move-in cash.

Instead of this, Wealthfront transfers your assets into a diversified portfolio over time. This will reduce your tax bill. (However, Wealthfront still recommends that you sell incompatible assets such as stock options or mutual funds.)

Portfolio Line of Credit

For accounts larger than $25,000, you can take out a line of credit against your investments. Loan rates are  3.15% -4.40% APR as of May 25, 2022 and you can borrow up to 30% of the current value of your portfolio.

Wealthfront uses an algorithm called Path to help you reach your financial goals. Using Path, you can set savings goals for the big stuff: retirement, college, and/or a home purchase. This service takes all of your accounts — including external savings, banking, and even mortgage accounts — and creates personal financial advice.

Path generates scenarios to help you determine if you’re on the right… well… a path to meet your savings goals. And if not, it will suggest the best ways to go about doing so. Path is not a separate app; it’s built into everything Wealthfront does.

It’s like having a personal financial advisor that’s software-based.

Not only that, but you can use Path for free with no investment required. In fact, Wealthfront is now the only robo advisor to offer free financial planning. All you have to do is download the Wealthfront app, and Path will get to work for you, with the ability to answer more than 10,000 questions tailored to your personal financial situation.

Wealthfront can help you answer these questions:

• How much should you save today?
• How much will you be worth then?
• Could you live your current lifestyle at retirement?
• Are you on track for your child’s college education?
• Are you saving enough to purchase a home?

Path also has several unique programs to help with goals like retirement planning, buying your first home, and even planning how much time you can take off for travel and vacation.

The PassivePlus Risk Parity fund aims to deliver higher risk-adjusted returns in different market conditions. It does this by giving your portfolio more exposure to asset classes with higher risk-adjusted returns.

The fund is based in part on a similar offering from Ray Dalio’s hedge fund, Bridgewater, which requires a $100 million account minimum. It will take up 20% of your portfolio or less, depending on your personal settings. Wealthfront aims to democratize this strategy with a requirement of only $100,000.

To participate in this fund, you must have a minimum of $100,000 deposited. The fund has an annual fee of 0.25%.

The Risk Parity fund is available only for taxable accounts (no IRAs) at the moment.

STRUCTURE	INVESTMENT MINIMUM	EXPENSE RATIO
Mutual Fund	$100K	0.50%