Wealthfront is a trusted service that has a clear value proposition. They’ve been helping clients invest and grow a portfolio automatically, while they do the heavy lifting!
Wealthfront is currently the only company to offer both investment management and financial planning fully through software. You can now manage your investments and financial plan via smartphone, without having to speak to some one.
Wealthfront is building a financial services company that uses technology to deliver the same type of services multimillionaires receive to young people in their 30s and 40s with less than $1 M to invest.
Who is Wealthfront?
Wealthfront manages over 5 billion in client assets and combines a team of financial experts to create an optimized portfolio for you. They manage a diversified, continually rebalanced portfolio of index funds on your behalf at a very low cost and in an extremely tax-efficient manner. You can have an individual account, a retirement account, you even can set up a 501(c) account for a non profit institution.
How Does Wealthfront work?
After you open an account with Wealthfront, they select a basket of ETFs based on your risk tolerance. These Exchange Traded Funds are index funds meant to track an index. You complete a simple questionnaire that helps them to customize your portfolio.
How Does Wealthfront Choose ETFs?
They look for ETFs with the lowest annual expense ratios, minimal tracking error, and sufficient liquidity. Unfortunately, many investors only focus on cost and end up with an ETF that doesn’t track its benchmark well. This defeats the purpose of optimizing the mix of asset classes. Poor liquidity can create real problems when it comes time to buy a house or pay for your kids’ college.
What do you get with Wealthfront?
- Path; a financial planning experience and unique to Wealthfront.
- Retirement Savings: Wealthfront offers SEP IRA, IRA and Roth IRA accounts as well as 401k rollovers.
- Taxable Savings: Wealthfront offers taxable investment accounts / joint accounts / trust accounts.
- Tailored Transfers; Instead of selling everything at once, use their tailored transfer process to migrate your investments tax-efficiently over time.
- Tax-loss harvesting; a feature of their passive strategy that will automatically sell losses in your portfolio to offset your annual tax bill.
- Direct Indexing; an enhanced form of tax-loss harvesting for accounts over $100k to boost your tax savings. Wealthfront is the only automated investment service to offer Direct Indexing.
- Selling Plan; another service unique to Wealthfront. Wealthfront’s Selling Plan helps all employees who hold public company stock to sell their shares tax-efficiently and commission free, at a level of service previously only available to executives.
- Advanced Indexing: Advanced Indexing is Wealthfront’s improvement on existing Smart Beta ETFs. Wealthfront has implemented a multi-factor investment strategy combined with its Direct Indexing feature, which adds a level of tax efficiency not found in existing Smart Beta ETFs. The feature is offered to clients with $500,000 or more at no incremental cost above the 0.25% advisory fee.
- The Wealthfront 529 College Savings Plan; This is another investment account unique to Wealthfront. The lowest cost 529 plan from an advisor that offers more diversification for higher returns.
- The Wealthfront Portfolio line of credit: Portfolio Line of Credit is available for any Wealthfront client with an Individual or Joint Wealthfront account valued at $100,000 or more. There’s no set up – if you’re an eligible Wealthfront client then you already have access.
Can I Use Wealthfront to Save For College?
Wealthfront has a service called College Planning with Path. With this latest addition, Path will walk you through every important aspect of college planning and deliver a complete, personalized assessment.
How Does it Work?
You Select A College – Wealthfront connects to every U.S. college for real time expenses that include tuition, room and board, books, etc. You can change the school you’re building towards at any time and the data will update automatically.
They Calculate Financial Aid – Using outside data around the costs of a particular college and their specific approach to calculating financial aid, along with the personal details that you’ve shared through Path, they provide a customized estimate of financial aid per school. You won’t find this level of detail anywhere else.
Watch Your Savings Grow. Choose how much you can save, and Path will show you how far that will go towards covering college expenses. Just like with retirement, you can adjust the inputs to see the impact of increased savings. Want to make it personal? You can upload an image for a customized view on your dashboard.
With the addition of College Planning, Wealthfront is now the only advisor who can deliver the most cost-effective 529 AND a personalized college planning solution all in one.
How Much Does it Cost?
The minimum account size with Wealthfront is $500 and the fees are low. The first $10,000 in the account is managed for free. The assets over that first $10,000 are managed for 0.25%. That is extremely cost effective when compared to investing in mutual funds.