Before making an investment decision, determining the safety of your money should be your top priority. Robo-advisors can sometimes seem like higher-risk investment options, since they often exist solely online and many do not often have a human financial advisor counterpart. However, robo-advisors have many ways to protect your data and ensure your investments stay safe.
One secure robo-advisor is Wealthfront, an all-digital robo-advisor with a host of affordable financial planning services. Wealthfront launched in 2008 and has over $27 billion in assets under management, making them a long-standing, high-performance independent robo-advisor.
- Is Wealthfront Secure?
- Is my Wealthfront Investment Account Insured?
- Is my Wealthfront Cash Account Safe?
- Wealthfront Investment Management vs. Wealthfront Cash Accounts
- What Happens if Wealthfront Goes Out of Business?
- The Takeaway: Wealthfront is Secure, But is it Right for You?
*Disclosure: Please note that this article may contain affiliate links which means that – at zero cost to you – I might earn a commission if you sign up or buy through the affiliate link.
Wealthfront offers both investment management and a high-yield cash account, in addition to lending and digital financial planning services.
Clients can get started investing through Wealthfront with a $500 minimum investment and an 0.25% AUM management fee. Additionally, Wealthfront will manage the first $5,000 for free with the sign up link below. The investment side of this robo-advisor offers many perks, such as daily tax-loss harvesting, varied account types and additional ETFs for portfolio customization.
For clients looking for a cash account, Wealthfront offers a no-fee, $1 minimum starting investment account that can be linked to a debit card. This cash account is also a high-yield account, which means it typically pays more interest than a brick-and-mortar bank will.
If you’re wondering “Is Wealthfront secure?” you’ve come to the right place. In this article, we will explore the ways Wealthfront keeps your information – and your money! – secure across both their investment management tools and their high-yield cash accounts. We’ll also cover what you can expect if Wealthfront goes out of business, and how FDIC insurance affects robo-advisors with cash accounts.
Finally, if you’re wondering, “Is it safe to link accounts to wealthfront?” The answer is, “Yes.”
Is Wealthfront Secure?
The short answer is yes, Wealthfront takes thoughtful measures to ensure your account information will be secure.
Wealthfront security measures include using bank-grade security and third-party providers to keep your data safe. They do not store account passwords on Wealthfront servers, and they don’t share your data. Additionally, the only data Wealthfront requests is data that will help them provide you with comprehensive financial advice.
Wealthfront also offers two-factor authentication. Two factor authentication or 2FA is an added layer of security that surpasses just a username and password. This security feature might include sending a code to your phone or email address on record. You aren’t allowed access to your account until you input the code from your proprietary device.
However, there is something important to note about security: in this case, security refers to how well protected your personal data is. Investment portfolios can still lose money because of the nature of the stock market, but this does not impact how secure a robo-advisor is.
Is my Wealthfront Investment Account Insured?
Are you wondering, “Is Wealthfront SIPC Insured?”
Your Wealthfront Investment Account carries SIPC insurance.
The Securities Investor Protection Corporation (SIPC) insures Wealthfront investment accounts for up to $500,000. Of this $500,000, $250,000 cash is covered by SIPC insurance. SIPC insurance protects your money and securities against loss. For example, if your account includes $450,000 in securities and $50,000 in cash, the insurance will cover the loss, due to company failure or bankruptcy.
Although, even with SIPC insurance, investment accounts can still lose value due to market volatility. All investors need to understand that investments go up and down in value, despite the fact that over the long term stock market returns have been roughly 9%. No insurance will protect against the normal volatility of investment markets.
However, SIPC insurance protects you against broker-dealer failure, which provides an extra level of security to your account. You don’t need to worry about losing your money in the unlikely event that Wealthfront goes out of business.
Are you worried about insurance, if your account value surpasses $500,000, since SIPC only covers up to that amount?
SIPC insurance is quite irrelevant when it comes to asset protection. In fact it has seldom been used over the 42 years it has been available. Simply put there are exceptionally few cases where investors have lost money due to a brokerage firm going out of business.“The False Comfort of SIPC Insurance,” Wealthfront blog
For larger investors, worried about the lack of SIPC insurance for account values over $500,000, it is unlikely that you will lose assets to bank failure. That said, some larger investment brokers, like Charles Schwab provide added insurance through Lloyds of London above the $500,000 amount.
Is it Safe to Link Accounts to Wealthfront?
Once you select your institution, you’ll be prompted to enter your username and password with that bank or brokerage, and Wealthfront will then link to your account. Your security is important to us. We use bank level security to keep your account safe. Linking does not allow Wealthfront to manage or transfer assets in your linked account.Wealthfront website
Today, you can be confident that linking accounts is commonplace among fintech platforms as well as traditional financial insititutions like banks and investment brokerages. Wealthfront has bank-level security, so if you’re comfortable banking online, it is safe to link accounts to Wealthfront.
Is my Wealthfront Cash Account Safe?
As part of the Wealthfront offerings, Wealthfront’s back-grade security systems protect cash accounts. This means that whether you use the Cash and Investment accounts or just one, your personal information is highly secure. This security protects you from hackers who might want to access your personal information like your social security number.
Security looks a bit different for cash accounts and investment portfolios, however. Unlike the investment side of Wealthfront, cash accounts value should not decline. Since your money is not invested in a fluctuating stock, your cash account should only grow and earn more interest over time. In this case, security involves both making sure your data stays safe – similar to the investment side of Wealthfront – and insuring your deposits are insured through the Federal Deposit Insurance Corporation (FDIC).
Next you’ll learn about the FDIC insurance that protects your Wealthfront Cash account.
Is Wealthfront FDIC Insured?
The Wealthfront Cash Account deposits are stored at various partner banks to guarantee clients FDIC insurance coverage of up to $2 million, through partner banks. While joint accounts receive FDIC insurance of up to $4 million through partner banks.
Another benefit to Wealthfront’s cash account is the interest rate, which is among the higher yields available online. This makes the cash account a no-brainer for individuals who want to maximize earnings and be protected with FDIC insurance with little effort on their part.
Wealthfront Investment Management vs. Wealthfront Cash Accounts
Though both investment and cash accounts are protected in many ways, there are some crucial differences in how Wealthfront secures your financial investments in each case.
Similarities and Differences between Wealthfront’s Investment and Cash Accounts
|Investment Accounts||Cash Accounts|
|Personal Data Protection?||Yes – bank-level security through a third-party provider; information is not shared.||Yes – bank-level security through a third-party provider; information is not shared.|
|Protected Against Market Fluctuations?||No – there is always a risk that investment portfolios will decrease in value through no fault of the investor or the investment manager (robo-advisor or otherwise). These fluctuations are part of the risk involved in investing.||Yes – cash accounts are not invested in the stock market, and therefore grow according to the annual interest rate but do not decrease in value unless you make a withdrawal.|
|How Are Your Funds Insured?||Investment accounts are insured through SIPC for up to $500,000, or up to $250,00 for cash entities.||Cash accounts are FDIC insured, through partner banks. Wealthfront uses various partner banks to guarantee individual accounts up to $2 million in FDIC insurance, and joint accounts up to $4 million ($250,000 per partner bank).|
Which is More Secure: Wealthfront Investing or Wealthfront Cash Account?
If you’re primarily worried about your personal data remaining secure, you can’t go wrong with either account type. Wealthfront security options are as thorough as traditional banks.
Even though investment portfolios can lose value due to market fluctuations, Wealthfront guarantees SIPC insurance coverage on these accounts to protect you from broker-dealer failure. Similarly, cash accounts are protected by FDIC insurance. That means that if something goes awry with Wealthfront itself, client deposits are safe.
What Happens if Wealthfront Goes Out of Business?
The good news is that there are many protections available to Wealthfront customers. The first two have already been named: SIPC and FDIC insurance will ensure that your assets – at least up to the insured values – are returned to you in case of an untimely closure. Wealthfront also works with SEC and FINRA, other securities regulators, to protect assets.
Occasionally robo-advisors are acquired by larger banks or other entities; in these instances, clients are typically decide to keep their accounts with the new entity or move their assets to another investment management platform.
Wealthfront is no different in this regard. Since your account is held under your own name, you will always be permitted to manage your account as you see fit in the instance that Wealthfront is acquired by another firm. This includes continuing to add assets to your portfolio if you wish to remain with the new company or withdrawing your assets and moving them to a different provider.
Your money is as safe with Wealthfront as it would be with any major bank of investment company. Typically, financial institutions use high level security measures and 2FA so that strangers can’t log into your account.
No. It’s your money and you can withdraw it at any time and for any reason. Be aware that it might take a few days to receive your funds.
The answer to this question depends upon your financial situation, goals, and need for a financial advisor and/or high yield cash account. Wealthfront is well-regarded and one of the oldest robo advisory firms available. To help you decide, read the Wealthfront Review.
The Takeaway: Wealthfront is Secure, But is it Right for You?
Wealthfront uses a myriad of security and insurance protections to ensure that your personal data and assets are secure. From employing third-party, bank-grade security to keep your data secure, to using both FDIC and SIPC insurance to protect you from losses due to broker-dealer failure or sudden closure, Wealthfront has clearly thought of everything.
Still, is Wealthfront the right robo-advisor for you? When we put Wealthfront head-to-head with big-bank robos, such as Fidelity Go, we found independently-owned Wealthfront really held its own. While there are perks to using a robo-advisors connected to a bigger financial institution, Wealthfront manages to offer many unique services, like customization with 200+ ETFs, and daily tax-loss harvesting with reasonable fees.
In comparison to robo-advisors like Betterment and M1 Finance, Wealthfront is still on an even playing field: like Wealthfront, Betterment is one of the earliest and largest stand-alone robos. Both Wealthfront and Betterment offer investment management for only 0.25% AUM fees, though Betterment does offer human financial planning packages, for a fee, as part of their Digital package. M1 Finance and Wealthfront both offer all-digital investment advice, making them ideal for investors who don’t mind the absence of human financial professionals.
Essentially, Wealthfront is a secure and safe robo-advisor that is ideal for clients with at least $500 for an initial investment, who appreciate the frequency of daily tax-loss harvesting, and who want to have multiple financial products, such as a high yield cash account and loans, under one roof.
- Is Wealthfront Worth it? Wealthfront Review
- Is Personal Capital Safe to Use?
- Is Your Data Safe With a Robo-Advisor?
- Personal Capital vs Quicken Review
- Wealthfront vs Vanguard Robo Advisors
Disclosure: Please note that this article may contain affiliate links which means that – at zero cost to you – I might earn a commission if you sign up or buy through the affiliate link. That said, I never recommend anything I don’t believe is valuable
Robo-Advisor Pros receives cash compensation from Wealthfront Advisers LLC (“Wealthfront Advisers”) for each new client that applies for a Wealthfront Automated Investing Account through our links. This creates an incentive that results in a material conflict of interest. Robo-Advisor Pros is not a Wealthfront Advisers client, and this is a paid endorsement. More information is available via our links to Wealthfront Advisers.
Cash Account is offered by Wealthfront Brokerage LLC (“Wealthfront Brokerage”), a member of FINRA / SIPC. Neither Wealthfront Brokerage nor any of its affiliates are a bank, and Cash Account is not a checking or savings account. Wealthfront conveys funds to institutions accepting and maintaining deposits. Investment management and advisory services are provided by Wealthfront Advisers LLC (“Wealthfront Advisers”), an SEC registered investment adviser, and financial planning tools are provided by Wealthfront Software LLC (“Wealthfront”).
Wealthfront partnered with Green Dot Bank, Member FDIC, to bring you checking features.
Checking features for the Cash Account are subject to identity verification by Green Dot Bank. Debit Card is optional and must be requested. Wealthfront Cash Account Visa® Debit Card is issued by Green Dot Bank, Member FDIC, pursuant to a license from Visa U.S.A. Inc. Visa is a registered trademark of Visa International Service Association. Green Dot Bank operates under the following registered trade names: GO2bank, GoBank and Bonneville Bank. All of these registered trade names are used by, and refer to, a single FDIC-insured bank, Green Dot Bank. Deposits under any of these trade names are deposits with Green Dot Bank and are aggregated for deposit insurance coverage. Wealthfront products and services are not provided by Green Dot Bank. Green Dot is a registered trademark of Green Dot Corporation. ©2022 Green Dot Corporation. All rights reserved.
Other fees apply to the checking features. Fee-free ATM access applies to in-network ATMs only. For out-of-network ATMs and bank tellers a $2.50 fee will apply, plus any additional fee that the owner or bank may charge. Please see the Deposit Account Agreement for details.
Other eligibility requirements for mobile check deposit and to send a check may apply.
The cash balance in the Cash Account is swept to one or more banks (the “program banks”) where it earns a variable rate of interest and is eligible for FDIC insurance. FDIC insurance is not provided until the funds arrive at the program banks. FDIC insurance coverage is limited to $250,000 per qualified customer account per banking institution. Wealthfront uses more than one program bank to ensure FDIC coverage of up to $2 million for your cash deposits. For more information on FDIC insurance coverage, please visit www.FDIC.gov. Customers are responsible for monitoring their total assets at each of the program banks to determine the extent of available FDIC insurance coverage in accordance with FDIC rules. The deposits at program banks are not covered by SIPC.
The Annual Percentage Yield (APY) for the Cash Account may change at any time, before or after the Cash Account is opened. The APY for the Wealthfront Cash Account represents the weighted average of the APY on the aggregate deposit balances of all clients at the program banks. Deposit balances are not allocated equally among the participating program banks.