Wealthfront Review: Live the life you want

Fees 0.00%-0.15% Per Year
Minimum Investment $5,000
Types of Accounts available Tax savings, etc.
Advisor type Robotic + Human(Optional)
Asset Under Management $1 Billions
Access Computer, IOS and Android

Andy the Co-founder of Wealthfront had a successful career as the co-founder of VC firm Benchmark Capital. He kicked back into retirement from Benchmark and started teaching. His proficiency in the art of investing attracted many students and entrepreneurs to his door seeking investment advice. While helping them out in finding the best investment strategy, he realized that the investment industry was outdated and the minimums of investments were too high for the likes of a student. He knew that a technology-driven product could create a huge impact on this industry.

On the other side, Dan the Co-founder of Wealthfront was helping his parents who were badly struck by the 2008 financial crisis. Dan was a former trader and whilst assessing the damage suffered by his parents he realized that most people didn't have access to good financial advice. And he decided to do something about it. So he started tinkering with a few solutions. He eventually built a prototype that got some traction and even got the attention of a lecturer at Stanford.

That's when Andy called Dan and started Wealthfront.

Unique Feature of Wealthfront

Portfolio Line Credit is the unique feature that is provided by Wealthfront. Your long-term investments provide security for your future, but they can also give you financial flexibility now. Portfolio Line of credit lets you access cash quickly while staying focused on your long-term goals.

It is very easy to get credit through this service and no application is required for this. Moreover, no fees are charged from you and no credit check is required. The rates at which this credit is offered is quite low. You enjoy complete flexibility, as you can borrow up to 30% of your account whenever you need it. It is very smart option than another alternative that you might have.

Best Features of Wealthfront

Direct Indexing

The service is available only to the taxable accounts. The sole purpose is to save the taxes and annual fees that are charged on an ETF. You can say that Direct indexing is something similar to ETF but it is directly managed by Wealthfront. Wealthfront uses their advanced technological system to save taxes and annual fees on ETFs. You can access the direct indexing at three levels-

1) Wealthfront 100: It is available to the accounts that have a minimum of $100,000 with Wealthfront. In this type of account, Wealthfront uses individual stocks in up to 100 of the largest US companies, and the Vanguard Extended Market ETF (VXF) and the Vanguard S&P 500 ETFs (VOO) to represent smaller companies.

2) Wealthfront 500: It is available to the accounts that have a minimum of $500,000 with Wealthfront.  In this type of account Wealthfront uses up to 500 individual large company stocks, and the Vanguard Extended Market ETF (VXF) is used to represent non-S&P 500 smaller companies.

3) Wealthfront 1000: It is available to the accounts that have a minimum of $500,000 with Wealthfront.  In this type of account Wealthfront extends the previous options and uses up to 1,000 stocks in large companies, and the Vanguard Small-Cap ETF (VB) is used to represent small-capitalization stocks.

Easy Transfers

In general, cases, if you transfer your investment account from your existing advisor or brokerage firm, into other robo-advisors, the Robo-Advisor will sell all of your previous holdings and create a new portfolio. On the other hand, Wealthfront will simply take in your existing portfolio and start modifying it to make a better portfolio. This will happen over a period of time resulting in the lower tax bill.

Advanced Indexing

This feature is available to customers having at least $500,000 with Wealthfront. Advanced Indexing is an improved version of what’s more commonly known as “Smart Beta”. It is an investment feature designed to increase your expected returns by weighting the securities in your portfolio more intelligently. Most index funds weight the stocks in the funds in direct proportion to each company’s market capitalization. In other words, the larger the company, the more of the fund is invested in that company’s stock. This has been the traditional approach to tracking the index.

The Primary Benefits of Advanced Indexing are:

1) Tax Efficient- By coupling it with direct indexing, more tax benefits are reaped resulting in extra returns for the investors.

2) Multifactor- Instead of using a couple of factors to governs Advanced indexing, the data scientists at Wealthfront have implemented 5 factors which they found important during various researches conducted by them.

3) No Fee- Advanced Indexing is available for no additional fee above and beyond the standard Wealthfront advisory fee. This is significant, as no other issuer of a factor weighted index funds do this.

Services provided by Wealthfront

Invest Savings

Everyone works hard to earn money and plan smartly to save money. But if your savings a kept in your bank account doing nothing, then it simply means your a losing a chance every day to earn money on it. Saving account is great and it helps you keep money in your pocket but with utmost safety. But in order to grow, you must allow your money to work for you and in return make more money for you.

Wealthfront has built a specific account type where you can invest your savings in utmost safety and great returns on your investment. Wealthfront has built a diversified portfolio to grow your money for the long term. And unlike IRAs or 401(k) retirement accounts, there are no restrictions. You can withdraw what you need at any time, for any reason. Wealthfront has created an account for every situation. You can create an account for yourself(Individual account), for you both(Joint Account) and for your estate(Trust Account).

Retirement Investment

Everyone is bound to get retired from their professional careers. When that happens you would no longer have your active source of income so your passive source has to replace your active source of income. Or you can take the smarter way out by investing in a Retirement account where you can ask your money to work for you while you still have time for your retirement to come. So that you can enjoy your retirement with all the money you need in your bank.

Wealthfront has created a very easy path to start the retirement investment account with them. This account will come with all sorts of service you require to get the most out of your investments. Depending on your personal and financial situation, you may benefit from one or more account options. They have Traditional and Roth IRA, SEP IRA, 401(k) Rollover and other accounts to suit your requirement.

Save For College

Everyone wants their kid to go to the college of their dream. The college fees are increasing so rapidly that you can expect it to go beyond a normal person's reach in some years. When your kid grows up you would like them to be able to go to a good college. Wealthfront allows you to do that with their college saving account.  It starts with 3 numbers 529. A 529 plan is specifically designed to save for college. You can use it to pay for qualified higher educational expenses, which may include tuition, room and board, and books. Like a retirement account, a 529 plan has tax advantages that help you keep more of your savings. That means you could cover up to 16% more of those educational expenses than with a traditional investment account.

Brief on the portfolio of investment

The portfolio under which you invest with Wealthfront is completely dependent on your requirement and the account you hold. To get the maximum out of your investment your portfolio is designed, for eg- if you own a taxable account then the investments in your portfolio must have lower tax rates in order to maximize your profit.

Every portfolio is an amalgamation of different stocks, bonds, and other asset classes. Interestingly, ETF's are included in the portfolios of Wealthfront. You portfolio at Wealthfront would consist of these-

Stocks

Sector ETF Ticker
US Vanguard US Total Stock Market VTI
Foreign Vanguard FTSE Developed Markets VEA
Emerging Market Vanguard FTSE Emerging Markets VWO
Dividend Vanguard Dividend Appreciation VIG

Bonds

Sector ETF Ticker
US TIPS Schwab US TIPS SCHP
Muni iShares National AMT-Free Muni Bond MUB
Corporate iShares Corporate Bond LQD
Emerging Market iShares JPMorgan Emerging Markets Bond EMB

 

Summary: Wealthfront

Wealthfront is a Robo-Advisor which is created without any complex features or services. They have a clear direction as to what they have to offer to the investors.  This direct and clear approach clearly benefits the results of the investments and reflects in the investments available to them. They have incorporated all the essential services in their platform to benefit the investors like Tax-Loss Harvesting, Direct Indexing etc.

Wealthfront must add the feature to buy fractional shares as it will help the investors with less capital in hand to take benefit of their services.