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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.
Wealthfront could be a good fit for you if:
Wealthfront
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.
$0 per trade, management fee 0.25%
$500
We believe in comparing options before committing. Wealthfront might be right for you -- or it might not. Here are two robo-advisors we recommend highly for you to compare side by side with Wealthfront when deciding which robo-advisor is right for you:
Wealthfront offers one of the most robust robo-advisors. However, investors wanting occasional support from registered advisors will want to consider alternatives. 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.
At The Motley Fool Ascent, brokerages are rated on a scale of one to five stars. We primarily focus on fees, available assets, and account types; however, we also take into account features like research, education, tax-loss harvesting, and highly rated mobile apps. Our highest-rated brokerages generally include low fees, a diverse range of assets and account types, and useful platform features.
See our full methodology here: Ratings Methodology
Wealthfront charges a 0.25% annual management fee for its robo-advisory services. While this isn't the cheapest we've seen (there are a few top-rated robo-advisors with no management fees), it's certainly on the lower end of the spectrum.
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 0.05%-0.29% per year, they are some of the cheapest funds we've found.
Wealthfront's Stock Investing Account lets users trade stocks commission-free, including fractional shares, with a minimum account balance of $1. The account also offers curated stock collections to help users broaden their portfolios, and allows multiple stock purchases from a single deposit.
In addition to its automated investing services, Wealthfront also offers a cash account to its customers for their emergency funds or rainy day cash. Currently, the account pays 5.00% APY, and it offers FDIC insurance of $8 million per account ($16 million for joint accounts). Wealthfront also gives customers debit card access to their money at 19,000 fee-free ATMs.
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. In fact, Wealthfront claims that for their average client, the tax-loss harvesting savings more than offsets the management fee. 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.
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.
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.
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.
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To be fair, Wealthfront's $500 new account minimum isn't exactly the highest, but there are several competitors with no minimums at all.
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.
You currently can't open a SIMPLE IRA, Solo 401(k), Coverdell, partnership, or custodial (UGMA/UTMA) account through Wealthfront's platform.
RELATED: Best Robo-Advisors For Beginners
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.
When it comes to services, Wealthfront is one of the strongest robo-advisors we've seen.
We've already discussed the as-needed account rebalancing feature, as well as the fact that tax-loss harvesting is available for all taxable 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.
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 | 0.05%-0.29% |
All-in fees | 0.3%-0.54% |
Other account charges | None |
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, Monday through Thursday, and 10 a.m. to 7 p.m. EST on Friday, as well as support by email.
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Vanguard Digital Advisor is an all-digital service that targets an annual net advisory fee of 0.15% across your enrolled accounts, although your actual fee will vary depending on the specific holdings in each enrolled account. To reach this target, Vanguard Digital Advisor starts with a 0.20% annual gross advisory fee to manage Vanguard Brokerage Accounts. However, we'll credit you for the revenues that The Vanguard Group, Inc. ("VGI"), or its affiliates receive from the securities in your managed portfolio by Digital Advisor (i.e., at least that portion of the expense ratios of the Vanguard funds held in your portfolio that VGI or its affiliates receive). Your net advisory fee can also vary by enrolled account type. The combined annual cost of Vanguard Digital Advisor's annual net advisory fee plus the expense ratios charged by the Vanguard funds in your managed portfolio will be 0.20% for Vanguard Brokerage Accounts. For more information, please review "https://personal.vanguard.com/pdf/vanguard-digital-advice-brochure.pdf" Form CRS and the Vanguard Digital Advisor brochure.
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