Wealthfront Review and Profile May 2020

Wealthfront is Ranked #1 for Digital Financial Planning


Overview: 

Wealthfront was founded in 2008 as kaChing, a mutual fund analysis company, before pivoting into wealth management.  Wealthfront officially launched in December 2011 and has since raised a total of $205M in venture capital to expand operations.  Between its investment management and cash account offerings, Wealthfront is now one of the largest independent robo advisors, with over $13.5 billion in assets under management and an additional $7+ billion in deposits into its high-yield cash account. 

Wealthfront has been ranked by Backend Benchmarking as the Best Robo for Digital Financial Planning.  Its free online planning platform allows users to model six different planning scenarios: retirement, saving for college, buying a home, large one-time purchase, income windfalls, and taking extended time off of work to travel.  Once inputted, all goals are plotted along the net worth timeline for easy visualization. Wealthfront continues to operate as a digital-only platform and is one of the few remaining robo advisors that does not offer access to live planners.  For investors with higher account balances, Wealthfront offers individual stock portfolios and access to its Risk Parity fund (WFRPX).

Wealthfront recently announced a high-yield cash account, which will eventually come with a debit card, and has acquired technology to help build an automated cash management service called “Self Driving Money”.  Clients will soon be able to deposit their paychecks directly into the Wealthfront cash account. With Self Driving Money, Wealthfront will ensure that bills are paid, an appropriate amount of money is in their emergency fund, and the remaining funds will be allocated to an investment account to achieve specific goals.  For the do-it-yourself planner, Wealthfront is a great option for affordable investment management.

Pros:

  • Robust digital financial planning tools
  • High-yield cash account
  • Future automated cash management

Cons:

  • No access to live advisors
  • No fractional shares

Platform Facts:

Last updated: 03/31/2020

Account Minimum $500
Advisory Fee 0.25%
Average Weighted Expense Ratio 0.11%
Accounts Supported Individual, Joint, Traditional IRA, Roth IRA, SEP IRA, Trust

Performance Figures:

Last updated: 03/31/2020


Trailing 2-Year Return (annualized)Trailing 2-Year Sharpe Ratio
Wealthfront Taxable -2.89%-0.24

Digital Advice Ratings:

Access to Advisors  (1/5) 

Since its founding, Wealthfront has maintained a digital-only platform without access to human advisors.  It does not have any service levels that provide human advisors and may not be the best choice for investors hoping to speak with humans regarding planning issues.  To further develop its advisor-less platform, Wealthfront is currently working on an offering called “Self-Driving Money” that will provide automated financial advice.

Financial Planning  (5/5)

Wealthfront has been ranked by Backend Benchmarking as the Best Robo for Digital Financial Planning.  Its free online planning platform allows users to model six different planning scenarios: retirement, saving for college, buying a home, large one-time purchase, income windfalls, and taking extended time off of work to travel.  Once set up, all goals are plotted along the net worth timeline for easy visualization.

Transparency and Conflicts  (3/5)

Wealthfront does not provide access to traditional or blended benchmarks to assess performance.  It does provide white papers detailing investment strategy and detail performance of their models online.  Portfolio models are made available before account opening, based on the planning goal and results of the risk tolerance questionnaire.  If you meet certain minimum balance requirements, Wealthfront offers access to invest in its proprietary Risk Parity mutual fund.

Features and Customer Experience  (3.5/5)

Wealthfront falls in the middle of the pack in regards to features and customer experience.  While it does offer a high-yield cash account and mobile app, it does not provide the full range of features offered at competing robos.  For example, it does not invest in fractional shares and does not allocate reinvested dividends. It also does not provide flexibility for clients with current positions that are concentrated or have unrealized taxable gains.

Costs  (4/5)


Management Fee*Fund Expenses*Total Cost*
Managed Account$25$11$36

*Per $10,000 invested

Wealthfront is a low-cost option, with investment management offered at just .25%, however competing offerings provide human advisors for a similar price point.  For example, Vanguard Personal Advisor Services offers access to CFP® professionals for just 0.37% (0.30% management fee and 0.07% average fund expenses).