You are welcome to my Wealthfront review.
Wealthfront welcomes you with a bold statement on its website, describing its system as your “co-pilot.”
Wealthfront is an automated investment platform popularly known as ‘Robo-Advisers'?
Many people believe that employing robo-advisers as a financial innovation for investment is a bad idea.
This is what caused the financial crisis then, which was a threat to the world economy.
Wealthfront claimed to simplify a long term and low-cost investment with a very diversified structure portfolio.
I am glad you have taken your time to find out more about Wealthfront. It is a commendable effort considering the number of scam products out there.
And I am sure you are wondering if you can invest and get your returns from an algorithm.
But, can you make money with Wealthfront?
Is It safe to commit your life investment to a robo-adviser?
Or, is Wealthfront a Scam?
Before we continue, I will like to tell you that I am in no way affiliated to Wealthfront, so, expect an unbiased review from me.
Scroll down to learn if Wealthfront is worth it.
Wealthfront at a Glance
Industry: Personal Finance, Stock Exchanges, Finance
Founders: Andy Rachleff and Dan Carroll in 2008.
Price: Minimum Investment of $500
Fee Structure: 0.25% of AUM (Nil on Cash Account)
Free Services: Free portfolio review. Home buying guide.
Promotions: First $5,000 to be Managed Free
Summary Review of Wealthfront
Wealthfront is an automated investment platform that utilizes robo-advisor that robotically invests and manages your financial portfolio for you to eliminate the long-standing issues investors usually encounter with financial advisors.
It helps you become an investor in your own right by simplifying your investment process in a hassle-free and straightforward way.
Your job is to simply complete and fills out an inquiry form that spells out your financial goals, objectives, and risk tolerance.
The robo-adviser (The algorithm) then invests your money based on the answer you gave.
When you invest your money with Wealthfront, its automated system allocates your investment into various exchange-traded funds (ETFs).
There is no human intervention with Wealthfront; because the process is automated and the fees charged are lower compared to hiring a financial expert.
Are you considering investing in Wealthfront? Continue reading to find out if it is an investment platform you can trust with your money?
What is Wealthfront About Exactly?
Based in Redwood City, Califonia, Wealthfront Inc. is a fully automated investment service firm founded by Dan Carroll and Andy Rachleff in 2008.
The company, which was formerly called kaChing, began as a mutual fund analysis company, before pivoting into wealth management.
They serve as Robo advisor in the personal finance, stock exchange, and corporate finance industry.
You might be wondering what a Robo advisor is, right? Robo-advisers are financial advisers that provide online, automated financial advice or Investment management with minimal human intervention.
What they do is to give financial advice based on mathematical rules or algorithms. The algorithms are executed by software.
Therefore, characteristically, financial advice does not involve a human; at least they claimed.
The algorithms automatically allocate, manage, and optimize clients' assets.
Wealthfront, the fourth-largest robot-advisor service provider globally, uses self-guided online wealth management service to allocate investments among asset classes (portfolio management).
However, it does not provide personalized financial planning to investors, such as estate, tax, or retirement planning.
This makes it attractive to a demographic of younger investors (Millenials).
To meet your financial needs while taking into account your risk tolerance, Wealthfront utilizes Modern Portfolio Theory (MPT) to create an automatic asset allocation.
After which it continues to ensure that the allocation is correct with automatic rebalancing. Also, your invested funds aren't held by Wealthfront but by the Royal Bank of Canada (RBC).
Three primary services offered by Wealthfront are:
Wealthfront focuses on investing your funds in Exchange Traded Funds (ETFs).
The platform auto adjusts your portfolio according to your investment goals and objectives.
Wealthfront uses its free software to help you achieve the following:
They will help you plan your retirements:
- They will recommend a home (mortgage) budget that still keeps your other financial goals on tracks
- They will help you with a financial plan of achieving your lifelong dream trip (traveling plan) to your dream location.
- They will help you with what you need to save to send your child/children to your dream college and how it will affect your financial goals.
Wealthfront also offers a short-term cash account APY of high yield with FDIC insurance cover up to $1m.
You can also borrow $100,000 against your portfolio if you are under the robo-advisor category
Wealthfront Cost and Fees
The least possible amount required to open an account with Wealthfront is $500; equally, the minimum funds for withdrawal is $250.
For instance, the Wealthfront fee structure deems that the first $5,000 in your account is managed for free.
Wealthfront will charge you an annual fee of 0.25% of your asset with them.
The monthly deduction of this annual fee is based on the average monthly balance you have with the company.
Suppose you are doing an average monthly balance of $200,000; you would be paying $41.67 monthly ($500 per annum).
You will also be paying an ETF expense ratio; this fee is from the funds you are investing. The ETF expense ratio will cost an average of between 0.8% to 0.12%.
Note: Wealthfront will not charge you for the following:
- Account opening fee
- Account transfer fees
- Account closing fees
- Commission fees
- Withdrawal fees
- Trading fees
Who Is Wealthfront Best For?
Most investors using Wealthfront are the younger generation, most often under the age of 40; also, it will be best for a few groups as highlighted below:
If You Are Novice Investors
Wealthfront will be great for beginners that are not sure of themselves as regards the investment of their finances.
Since an algorithm (Robo-Advisor) is a program to do everything for you as claimed by the company.
If You Want Third Party Investment Manager
Wealthfront will be great for you if you love to hand off in the planning and investment of your money.
Many people do not want to be involved in, and they won’t mind employing a professional to do it for them.
Investors Saving for The Future
If you are saving for the future, planning for high college for a child, planning great mortgage and such things that have to do with your future and finance.
Wealthfront will help you estimate what you need to achieve your targeted goals and objective as regards your financial goals.
If You Want to Make Money.
Wealthfront is for people that want to earn via Wealthfront referral program.
If and when you refer a friend and your friend, or family members create and funds his or her account.
Both yourself and your friend will get an additional $5,000 managed for free.
Who Is Wealthfront Not Good For?
If you are good in trading stocks and options, or you love to use your money for trading, then Wealthfront is not for you.
If you are okay to handle your investment yourself, then this is not good for you.
How Does Wealthfront Work?
On signing up, Wealthfront requests that you fill a questionnaire. This is to help assess your risk tolerance and to determine your asset allocations.
Also, it ensures that your investment is allocated to the best possible ways to keep you profitable at all times.
Next, you invest your money into a Wealthfront account with a minimum of $500. You can choose to use a tax-deferred individual retirement account (IRA).
Wealthfront does not hold your investments; instead, your funds are held by the Royal Bank of Canada (RBC).
After you fund your account, Wealthfront's systems will now be charged with the responsibility of allocating your investment into a variety of exchange-traded funds (ETFs).
The perks also extend to services like Free Financial Planning, Tax-loss Harvesting, Stock-Level Tax Loss Harvesting, Single Stock Diversification, Smart Beta, Risk Parity, Portfolio Line of Credit, Referral Program Rewards, Third-Party Account Support, and College Savings Plan.
I'll run through some of them briefly.
Free Financial Planning
Wealthfront's free financial planning tool offers answers to thousands of financial questions personalized for their clients.
Wealthfront offers passive investment strategies called PassivePlus®. When a client signs up, they fill out a detailed risk questionnaire which generates an individual risk score.
Based on this, Wealthfront builds a globally diversified portfolio of low-cost ETFs that it automatically rebalances over time.
All taxable investment accounts can get this service, which includes daily ETF level tax-loss harvesting, monitoring movements in the markets to capture investment losses and reduce clients' tax bills.
Wealthfront also publishes actual performance data on its tax-loss harvesting service.
Stock-level Tax-Loss Harvesting
Available for taxable accounts over $100,000, this is an enhanced form of Tax-Loss Harvesting that checks for movements within individual stocks on the US stock index (rather than ETFs) to harvest more tax losses and further lower tax bills.
Support /Customer Service
None, there is no personal investment adviser or customer care representative. Help is limited to an online-based FAQ help center.
What is Good About Wealthfront?
Transparent Investment Process
To ensure that it runs a transparent system, Wealthfront goes through the process of publishing its investment methodology white paper and other strategic investment approaches such as smart beta.
Annual advisory fees of 0.25% are lower than what other services charge. For a full year, a $100,000 account would yield a fee of about $237.50.
Also, they do not charge any account-opening fees, withdrawal or account-closing fees, trading/commission fees, or account transfer fees.
Asides the fact that the company has a decade worth of experience under its belt; they are registered with the SEC (Securities and Exchange Commission).
Also, customer accounts are insured by the Securities Investor Protection Corporation (SIPC) up to $500,000 in total value per entity but limit insurance on cash to $250,000 per entity.
Bear in mind that this coverage protects against failure of a broker-dealer, not against loss of market value of securities.
Issues with Wealthfront?
the company only provides an online-based FAQ help, which allows customers to search for answers to questions.
Also, there is live technical support during business hours from Monday to Friday, but there is no investment support or advice offered.
Wealthfront mandates that you invest a minimum of $500. This feature makes them less attractive compared to the other robo-advisors in the game.
Wealthfront Public and Online Opinion?
While Wealthfront claims to help people invest and yield profits, some users disagree.
One claimed that after holding his account for about six months, he noticed that it started losing money.
According to him, the markets “were reaching all-time highs,” so, there was no need for them to lose money in a bullish market.
Another user claimed that he held an account for 16 months, and he had to leave the usage of their service due to their political promotions.
He claimed he emailed their customer service and demanded reasons for their leftist support; however, he claims he got no response from them. His complaints seemed purely political.
On the other hand, one user was impressed with their services as he claimed that they were accurate and that the fees were ok for the services he has received from them.
Is Wealthfront a Scam?
Wealthfront is not a scam; it appears to be a pretty sound investment service.
There are a lot of robo-advisers out there, and Wealthfront has managed to stay relevant for the past eight years amidst competition from counterparts such as Personal Capital and Betterment.
With its minimal fees, flexible and accessible financial services, Wealthfront is one of the tops recommended robo-advisers for long-term investment.
Is Wealthfront Worth Your It?
As with any service where you are required to make payments of up to $10,000, you need to ask questions. Wealthfront offers financial planning and management that traditional financial advisers are unable to provide. While most Millennials and tech-savvy people will find Wealthfront an attractive investment option, some other people may not.
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Let me know what you think about my review. Kindly drop your thoughts in the comment section below. I will love to hear what you think.
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