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Wealthfront offers some of the best parts of professional financial planning, such as a custom-designed investment portfolio, but without the high expense of hiring a human financial advisor. It's costs are low and its offering don't suffer at that expense, rather, Wealthfront offers one of the most robust robo-advisors. In this Wealthfront review, we'll take a closer look at what the company does well, what the potential drawbacks are, and whether using Wealthfront for your investing needs could be the right move for you.
Ratings Methodology
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We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor.
Wealthfront
Rating image, 4.5 out of 5 stars.
4.5 stars
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor.
Bottom Line
The low costs, tax loss harvesting, array of investing account types, and cash management options round out a packed feature set that is hard to beat.
Fees:
$0 per trade, management fee 0.25%, expense ratio 0.06%-0.13%
Account Minimum:
$500
Full Wealthfront review
This robo-advisor is a good fit for: Hands-off investors that are looking for a fully-featured robo-advisor. Investors wanting occasional support from registered advisors will want to consider alternatives.
Pros
- Low management fee and expense ratios
- Cash management features
- Diverse account types
- Tax-loss harvesting
Cons
- No human advisors
Top perks
Low management fee
Wealthfront charges a 0.25% annual management fee for its robo-advisory services. While this isn't the cheapest in the industry (there are a few top-rated robo-advisors with no management fees), but it is certainly on the lower end of the spectrum.
Cheap investment expenses
Like most robo-advisors, Wealthfront uses exchange-traded funds to construct client portfolios, and these have their own investment expenses. With expense ratios ranging from 0.06%-0.13% per year, they are some of the cheapest funds in the business.
High-interest savings option
In addition to its automated investing services, Wealthfront also offers a high-interest savings account to its customers for their emergency funds or rainy day cash. Currently, the account pays 0.35% APY. Wealthfront also gives customers debit card access to their money at 19,000 fee-free ATMs.
Tax-loss harvesting
Wealthfront is one of the few robo-advisors to offer tax-loss harvesting to investors of all account sizes. The idea is that when one of your portfolio's investment funds declines in value, Wealthfront may strategically sell it at a loss and reinvest in a similar fund. This allows you to offset any capital gains in your account, which can dramatically reduce your tax bill. And for accounts with $100,000 or more, Wealthfront offers stock-level tax-loss harvesting, which can help take your tax efficiency to the next level.
Automatic rebalancing
This is a standard feature in the robo-advisor business, but rather than rebalancing at set times, Wealthfront differentiates itself by doing this whenever a portfolio's asset allocation gets out of balance.
Lots of account types
Wealthfront offers standard brokerage accounts (individual and joint), traditional and Roth IRAs, SEP IRAs, Rollover IRAs, and trust accounts. Wealthfront is also one of the only robo-advisors that offers a 529 college savings plan through its platform.
Line of credit
One of the most unique features of Wealthfront is the ability to borrow against your account. If you have at least $25,000 in your Wealthfront account, you can borrow as much as 30% of the value of your portfolio with no credit check and at a lower interest rate than you're likely to find from a personal loan. (Currently from 2.40% to 3.35% depending on account size.)
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What could be improved
Account minimum
To be fair, Wealthfront's $500 new account minimum isn't exactly the highest in the industry, but there are several competitors with no minimums at all.
No human advisors
Some of Wealthfront's competitors provide clients with access to human financial advisors, but Wealthfront's advice is entirely automated. This is generally fine for the purposes of creating an investment portfolio but can be a drawback if you want financial guidance in other areas, like saving for college or buying your first home.
Some account types aren't supported
You currently can't open a SIMPLE IRA, Solo 401(k), Coverdell, partnership, or custodial (UGMA/UTMA) account through Wealthfront's platform.
Alternatives to consider
If you want low costs and human advisors in one package: SoFi Automated Investing is among the lowest cost robo-advisors. It doesn't charge a management fee and the investment expense ratios low. Plus, SoFi Automated Investing accountholders receive unlimited access to registered financial advisors.
If you want to compare with another top robo-advisor: Betterment and Wealthfront go toe-to-toe on many fronts, including low management fees and a diverse set of offerings. Where Betterment shines is with its $0 account minimum, making a good fit for beginner investors.
How Wealthfront works
Like most robo-advisors, Wealthfront starts the investment process by giving new customers a questionnaire to help assess their risk tolerance. Then, a recommended asset allocation is achieved through exchange-traded funds or ETFs.
Services offered
When it comes to services, Wealthfront is one of the strongest robo-advisors in the market.
We've already discussed the as-needed account rebalancing feature, as well as the fact that tax-loss harvesting is available for all accounts. Plus, Wealthfront offers additional investment options and services to investors with larger accounts, such as a proprietary ETF that aims to produce superior risk-adjusted rewards.
The one area where Wealthfront's service falls short is the lack of guidance from human financial planners. Wealthfront certainly has an excellent assortment of financial planning tools that clients can use, but one thing it lacks is financial advice from a person.
Pricing and fees
The two main costs investors should be aware of before signing up with a robo-advisor are the account management fee and the investment fees. The account management fee is paid to the brokerage for their services. The investment fees are charged by the underlying investment funds that make up your portfolio. Your total (all-in) cost is the combination of these two fees.
| Service/Item | Wealthfront Cost |
|---|---|
| Account management fee | 0.25% |
| Investment fund fees | 0.06% - 0.13% |
| All-in fees | 0.31% - 0.38% |
| Other account charges | None |
Customer service and support
There are two types of support that clients of a robo-advisor might need -- investment advice from a human being and help with technical issues. So let's see how Wealthfront does in both areas:
As far as human financial advisors go, this is one of the biggest drawbacks of the platform. Unlike several of its competitors, Wealthfront does not give its customers access to real-live financial advisors.
However, when it comes to technical support for account issues, Wealthfront has phone support available from 10 a.m. to 8 p.m. EST on weekdays, as well as support by email.
Wealthfront is right for you if:
- You have at least $500 to invest.
- You have a large account balance or are in a high tax bracket, as tax-loss harvesting can result in significant savings.
- You aren't concerned with access to human financial planners.
- You want the ability to borrow money against your account's value if you need to.
- You want to open an individual or joint brokerage account, an IRA, or a trust.
- You want to open a 529 college savings plan.
About the Author
Matt is a Certified Financial Planner® and investment advisor based in Columbia, South Carolina. He writes personal finance and investment advice for The Ascent and its parent company The Motley Fool, with more than 4,500 published articles and a 2017 SABEW Best in Business award. Matt writes a weekly investment column ("Ask a Fool") that is syndicated in USA Today, and his work has been regularly featured on CNBC, Fox Business, MSN Money, and many other major outlets. He’s a graduate of the University of South Carolina and Nova Southeastern University, and holds a graduate certificate in financial planning from Florida State University.
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