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Ready to build wealth but not sure where to start? Investing can be overwhelming but investing apps make it easy to get started investing. Wealthfront prides itself on being an all-in-one financial app that helps you make the most of your money.
Wealthfront positions itself as both a robo-advisor and cash management tool. The app allows you to link all of your accounts in one place. Then, you can use Wealthfront to monitor your account activity, keep tabs on your savings rate, and even look at your current and projected net worth.
Their robo-advisor technology gives users access to their expertly selected portfolio or allows you to build your own. Wealthfront then rebalances your portfolio as needed and reinvests your dividends to keep your money growing. Thanks to their smart tax optimization strategy, you can keep your taxes lower as your investments grow. If you’re ready to stop guessing about your finances and get your money growing, Wealthfront could be the tool for you.
Wealthfront Review Summary
- Wealthfront allows investors to passively grow wealth using tried-and-true ETF investing strategies
- Wealthfront investment options feature low fees and competitive management costs
- Wealthfront shines with financial planning tools and comprehensive financial education support
- Wealthfront features tax optimization strategies to reduce tax burden while investing
Wealthfront Pros & Cons
Are you wondering if Wealthfront is the financial tool for you? By exploring the pros and cons of Wealthfront, you will get a sense of exactly who the app is–and isn’t–for.
Pros
- Automated investment management allows you to grow your money effortlessly
- Low ETF fees mean you keep more of your money
- Competitive management fees that rank with other robo-advisors
- Tax-loss harvesting allows you to reduce taxes as you invest
- Provides intelligent insights into finances with free financial planning tools
Cons
- Portfolios have to reach $100,000 balance to see their lowest fees
- Investors don’t choose individual stocks
- No fractional or partial shares could lead to idle cash until balance grows
- Lack of access to human advisors
How Does Wealthfront Work?
Wealthfront is a robo-advisor. That means that instead of humans actively managing your account (and charging a pretty penny for it!), Wealthfront uses an investing formula designed by leading economists to help you meet your investment goals.
After you create and fund your account, Wealthfront gets to work. Their recommended portfolio is designed to match your unique goals and risk tolerance, so Wealthfront invests your money accordingly. As your portfolio balance shifts with the market, Wealthfront will rebalance your account in order to keep your money invested in the asset mix that matches your investing preference.
How Do I Open a Wealthfront Account?
Opening an investment account with Wealthfront is relatively simple and straightforward. To make the process even more streamlined, you will want to decide on the type of investment account you want first. Once you’ve determined if you want a Roth IRA, traditional IRA, or taxable account, you are ready to get started.
Here’s how to open an investment account with Wealthfront in four easy steps:
Step 1 – Click the “Get Started” option and then choose “Start with Investing”. That is when you will select the type of account you want to open.
Step 2 – Complete the Wealthfront questionnaire. Wealthfront will guide you through a series of questions, allowing them to better understand your risk tolerance and investing goals. The questionnaire allows Wealthfront to build a recommended portfolio for you.
Step 3 – View the results. You will be able to see Wealthfront’s recommendations on the investment plan page. From there, you can move forward with the portfolio recommendation they created. Additionally, you can manually adjust your risk score, making your investments more or less conservative. You can also edit your whole portfolio with the “Edit Portfolio” option.
Step 4 – Fund the account. You will link a funding source, such as a checking account, to your Wealthfront account. As long as you meet the $500 minimum requirement, you are ready to start investing with Wealthfront!
It is also worth noting that you can make modifications to your portfolio and open additional accounts at any time.
Wealthfront Pricing
Wealthfront offers low-fee investing and competitive pricing. They charge an annual advisory fee of 0.25% on all investment accounts. This percentage is applied to all assets under their management.
It’s also worth noting what Wealthfront does not charge for. Unlike some platforms, there is no cost to open or close an account. There are also no trading or commissions fees, as well as no account transfer fees.
Wealthfront Fees
In addition to the 0.25% annual advisory fee, there are other fees depending on your investment type. Your ETFs and mutual funds detail expense ratios, which include the fee.
The fee structure on Wealthfront 529 plans and Cash Accounts are set up slightly differently. The total fee for a 529 plan ranges from 0.42-0.46%. That fee includes the Wealthfront advisory fee, program administration fee, and underlying ETF expenses.
For the Wealthfront cash accounts, there are no fees for the account itself. However, users may incur debit card fees. In-network ATMs are free to use, but there is a $2.50 charge for out-of-network ATMs. You may also incur fees for international transactions and cash deposits at select retailers.
Wealthfront Features and Benefits
What stands out in this Wealthfront review is the abundance of features and tools that Wealthfront offers at no cost to users. Thanks to these different features in the planning app, as well as the robo-advisor itself, you can invest like a pro with a few clicks of your computer or phone.
Here are some of the standout features and benefits.
Free Financial Planning App (Path)
When Wealthfront creators set out, they were determined to make top-tier financial advice available to everyone. Their free financial planning platform does exactly that. Launched recently as part of their Wealthfront mobile app, users can access the Path tools without even having a Wealthfront account!
With everything from a retirement planner to a time-off-to-travel feature, the Path planning tools in the Wealthfront app help you identify your priorities and make money moves to inch you closer to those priorities.
Let’s learn more about some of the different aspects of the financial planning app.
Retirement Planner
Have you ever wondered, “Will I be able to retire one day?” Wealthfront has an answer for you. Their retirement planner estimates a reasonable retirement date for you, and it also gives you an overview of the lifestyle you can enjoy in retirement.
Don’t love the results? That’s fine, too! The retirement planner tool shows you what happens if you increase your savings rate, choose a different retirement age, and make other tweaks to your financial plans. Before you know it, you’ll be headed toward your ideal golden years.
College Savings
The College Savings feature in Wealthfront allows you to run various projections for the cost of specific colleges and universities. Based on projected enrollment dates and estimated financial aid, the results should provide a realistic look at what college might cost your family. If the number drops your jaw, Wealthfront is ready to work on that by helping you set a realistic monthly savings goal.
Time Off To Travel
Have you been bitten by the travel bug? The Time Off to Travel feature of the Wealthfront app allows you to see exactly how much traveling you can do. However you envision your trip, this tool allows you to calculate what it might cost and how long you can travel without impacting your other financial goals.
Homeownership
If you think the only cost associated with owning a home is the mortgage, you are in for a surprise. The Homeownership feature actually offers a much more comprehensive look at the true cost of homeownership. By looking at different aspects of your finances, Wealthfront estimates the amount of mortgage you might qualify for and helps you see how location, timing, and home size influence your home’s price tag.
Automatic Rebalancing
One of the best features of a robo-advisor is that it allows investors to take a hands-off approach to their money. Wealthfront will continuously monitor your portfolio to make sure that your asset mix matches your goals and risk level. If things move off balance, Wealthfront rebalances back to your target mix. There’s no work required on your part; instead, Wealthfront does the heavy lifting for you.
Tax-Loss Harvesting
If you have a taxable account, Wealthfront has a tax optimization strategy for you! Called tax-loss harvesting, this strategy is intended to help you pay less in taxes (legally, of course!). When the market trends downward, tax-loss harvesting captures investment losses. These losses will then offset your investment gains or ordinary income, reducing your tax bill come tax time.
Smart Beta
Smart Beta is an investment feature that investors can unlock once their portfolio crests the $500,000 mark. The most standout features of Smart Beta include:
- Tax optimization
- No additional fees
- Multi-factor models to evaluate stocks in your portfolio
Wealthfront’s Risk Parity Fund
Another Wealthfront exclusive, the Risk Parity Fund is an investment feature that offers an enhanced asset allocation strategy. The purpose is to allow investors to increase their returns in a variety of different market environments using a special methodology. Investors can access this feature when their account surpasses $100,000.
Wealthfront Cash Account
Sometimes referred to as a Wealthfront savings account, the Wealthfront Cash Account actually combines some features of both savings and checking accounts.
The account might appeal to people who are looking for no fee accounts with an incredibly low opening balance requirement ($1–no, really!). There are also unlimited free transfers, which offers account holders a lot of flexibility. Plus, using in-network ATMs is completely free.
While the Cash Account’s features may seem familiar, it is different because this is not a traditional bank account. Instead, it is a cash account that you keep with your brokerage. Your money is FDIC-insured by partner banks, but it can take 1-3 business days for the money to move behind the scenes.
Portfolio Line of Credit
Need some flexibility in the short term? Investors can actually use their portfolio to take out a line of credit from Wealthfront. The loan is secured by your investment, which means Wealthfront keeps the interest low. Usually, your line of credit interest will be between 2.5% and 3.5%. This line of credit is automatically available to investors with $25,000 in their accounts.
Wealthfront Investment Options
Wealthfront offers a variety of investment options, meaning it is a tool that will likely meet your needs. In addition to both Roth IRAs and traditional IRAs, you can also open a SEP IRA with Wealthfront. SEP IRAs are investment accounts reserved for self-employed individuals or small business owners.
Additionally, you can open a taxable account as well. These accounts can be individual, joint, or trust accounts.
Wealthfront also gives you the option to open a 529 College Savings Plan account or do a 401(k) rollover. No matter how you earn your income or how you plan to fund your future goals, there’s an option for you at Wealthfront.
Wealthfront ETFs
An exchange-traded fund, or ETF, is an investment fund that can hold different assets like stocks or bonds. They tend to mirror indexes like the S&P 500, which means that they typically perform in line with the market in general.
Wealthfront ETFs boast low fees, and that’s a good thing! It helps investors keep more money in their pockets.
With Wealthfront’s Modern Portfolio Theory, investors can access an optimal mix of assets. Of course, you also have the ability to customize your portfolio. You can change your risk score and adjust your asset allocation as well.
Wealthfront Returns (on Average)
Wealthfront returns vary based on the risk score of the fund. For example, the historical return on taxable portfolios with an 8.0 risk score is 9.45% and tax-advantage portfolios is 10.01% since inception in 2012 and 2011 respectively.
When the risk score drops to 4.0, the historical returns since inception are 7.58% and 8.55% on the respective fund types.
Wealthfront returns are competitive and in line with other investment tools and platforms. While all investing carries the risk of loss, adjusting your investment risk score so it aligns with your risk tolerance can help.
Wealthfront FAQ
Before you get started using any investment tool, you likely have some additional questions that you want answered. We’ve rounded up the most common questions about Wealthfront below.
Read on to learn more about:
- Security and safety features of Wealthfront
- Account minimums to get started investing
- Wealthfront Roth IRA and other account options
- Wealthfront’s answer to savings accounts
Is Wealthfront Safe?
Investing in stocks carries the risk of loss no matter which platform you use, but Wealthfront is safe!
Your investments are protected by the Securities Investor Protect Corporation, or SIPC. SIPC protection does not guard against a market decline or crash. Instead, it protects against the failure of a broker-dealer.
Wealthfront also keeps your cash safe if you use their Cash Accounts. They work with partner banks to offer up to $1 million in FDIC insurance for users. That means that once your cash deposits are received by their partner banks, your money is protected by the federal government in the event that a bank goes out of business.
Additionally, your Wealthfront account and its data are protected with better than bank-grade security and round-the-clock security monitoring. Wealthfront partners with external security firms to ensure that they are implementing best practices to keep your account and information safe.
How Much Do I Need To Invest With Wealthfront?
One of the biggest hurdles to getting started with investing is coming up with enough cash to meet the minimum requirements. Fortunately, Wealthfront understands that and wants to grant investing access to as many people as possible. As a result, their minimum is quite low.
To open an investment account with Wealthfront, you will need $500. This gives you access to their professionally-designed portfolios made up of low-fee ETFs and their tax optimization strategy.
In order to access Wealthfront’s other investment features, such as the Risk Parity Fund or US Direct Indexing, you need a significantly higher account balance of $100,000.
Does Wealthfront Have a Roth IRA?
Are you interested in a Roth IRA? Excellent. This investment vehicle is a fantastic way to grow wealth. You can open a Roth IRA with Wealthfront, in addition to other IRA accounts, including traditional IRAs and SEP IRAs. Of course, you need to make sure that you meet the qualifications for Roth IRAs before investing with Wealthfront or any other platform.
Does Wealthfront Have a Savings Account?
Many people talk about a Wealthfront savings account, but that description isn’t quite a reflection of what Wealthfront offers. Instead of a traditional savings account, Wealthfront offers what they call a Cash Account.
Wealthfront Cash Accounts are a combination of checking and savings accounts. These accounts feature 0.10% APY, bill pay, direct deposit, and over 19,000 fee-free ATMs. Your account is also protected by their partner banks with up to $1 million in FDIC insurance through their partner banks. You also only need a $1 minimum to open an account.
Who is Wealthfront Best For?
Wealthfront is an excellent investing app for several different groups of people. If you are just getting started with investing, the different tools and resources can really boost your confidence. Someone who is a more seasoned investor looking for access to white-glove funds would also likely enjoy Wealthfront.
Finally, if you are on the hunt for an all-in-one financial app that helps you invest, takes care of your banking, and supports your goal setting and financial planning, you definitely want to download the app and start exploring.
Wealthfront Alternatives
Not sure that Wealthfront meets your needs? There are other investing apps worth exploring as well. Take a look at these two Wealthfront alternatives that can help you get started on the path to investing and wealth building.
Betterment
Betterment is another robo-advisor that helps investors reach their financial planning goals without requiring active investing. Where Betterment stands out is in regard to socially responsible investing. Investors can access a socially responsible portfolio vetted by Betterment advising experts. As with Wealthfront, the ETFs are all low cost and built into the account expense ratios. Management fees are identical to Wealthfront at 0.25% of all assets.
Personal Capital
Personal Capital is another fintech tool that offers a comprehensive snapshot of your financial journey. The different tools, including a retirement fee analyzer, savings planner, investment tracker, and many others, are all free to use and can help you plan for the future like a pro.
Where Personal Capital really differentiates itself from Wealthfront is the fact that Personal Capital clients do have the option to work with human advisors. Depending on your investment portfolio balance, you can either access a variety of people in their support network or you will be assigned a specific portfolio advisor. Of course, this type of active management does come with a higher fee.
Check out our full Personal Capital review for more details.
