Is Wealthfront Worth it? Wealthfront Review 2021

wealthfront review logo

One of the premier digital investment platforms, the Wealthfront robo-advisor isn’t resting on its laurels. This robo-advisor is innovating to remain one of worlds the most popular automated investment advisors in the fintech universe.

Is Wealthfront worth it?

This expert Wealthfront Review evaluates the funds and specialized features. Find out if this low-fee robo-advisor is right for you.

Wealthfront Review
wealthfront review logo

Name: Wealthfront Review

Description: Wealthfront is our favorite low-fee digital-only financial manager. Banking and lending add to Wealthfront's benefits.

  • Fees
    (5)
  • Investment Choices
    (5)
  • Ease of Use
    (5)
  • Tool & Resources
    (4)
4.8

Summary

Best for:

  • Investors comfortable with “all digital” investment manager. Their online financial planner is the most comprehensive we’ve seen.
  • Investors seeking vast investment diversification including stocks, bonds, real estate, energy and individual ETFs.
  • Investors who want tax-loss harvesting.

Pros

  • Low investment minimum and management fee.
  • Many account types available.
  • Can choose & customize your investments.
  • Cryptocurrency funds available

Cons

  • No human financial advisors.
  • $500 minimum excludes smallest investors.

What is Wealthfront?

Wealthfront is one of the largest robo-advisors or digital investment managers with nearly $16 billion assets under management. Offering low investment management fees, and now the ability to customize investments. Wealthfront employs state of the art research to craft an efficient, diversified investment portfolio.

“Wealthfront is the only automated financial advisor to offer the combination of financial planning, investment management and banking-related services exclusively through software.” ~Wealthfront.com

This means that your investments are managed in a comparable way to a high fee financial advisor, for a fraction of the cost. Wealthfront’s combination of strategies would take an individual investor or investment manager 105 hours to replicate, according to company research.

Features at a Glance

OverviewAutomated investment management robo-advisor with extra features.
Minimum Investment Amount$500
Fee Structure0.25% of AUM. Zero fees for cash account.
Top FeaturesDigital financial planner. Daily tax loss harvesting. Cash account. Loans. Customize with individual ETFs.
Free ServicesFree portfolio review. Home buying guide.
Contact & Investing AdvicePhone for clients & Email 24/7. Client service reps have Series 7 or CFP designations.
Investment FundsLow fee, diversified stock & bond ETFs. Can customize ETFs. Crypto funds available.
Accounts AvailableJoint & individual taxable. Trust. Traditional, Roth, rollover, and SEP IRAs. 529 College Savings.
PromotionsFirst $5,000 managed for free.

Find out if Wealthfront is worth it, for you?

Wealthfront is best for:

  • Investors looking for a middle point between a DIY approach and a full-fledged financial advisor.
  • Those who want to create their own portfolios but have them professionally managed, for a low fee.
  • Wealthy users who can hire other financial pros for estate, tax, and specialty financial planning questions. 
  • Investors who want a low fee digital investment manager and the opportunity to customize their investments.
  • Those seeking a robo-advisor with access to cryptocurrency investments.

What Differentiates Wealthfront from Betterment and other Robo-Advisors?

At the helm is chief investment officer, Burton Malkiel, PhD, a respected investment researcher. He wrote the classic book, “A Random Walk Down Wall Street,” which spurred the index fund investing revolution.

Wealthfront offers the opportunity to add ETFs to your portfolio-including a bitcoin and ethereum fund! This is a big change and available only at M1 Finance and a few other platforms.

Wealthfront offers many unique features including a free Portfolio Review tool which evaluates your investments across key dimensions that impact future performance.

Wealthfront’s daily tax-loss harvesting purports to give investors greater benefits than less frequent tax-loss harvesting. In fact, a recent study by the firm found that,  “over 96% of our taxable Investment Account clients have had their advisory fees fully covered by Tax-Loss Harvesting.”

Find out: Which Robo-Advisors Offer Tax-Loss Harvesting

Wealthfront Path, the digital financial planning experience claims to provide investment advice, on a par with that of a human financial advisor.

Other unique features discussed more fully below are the Wealthfront Portfolio, Wealthfront’s selling plan, direct investing, and a 529 college savings account.

Further adding to the robos allure is adding banking services and a premier Wealthfront savings account to their other investing and planning offerings.

Check out the high yields offered on the Wealthfront Cash Accounts, now.

Is Wealthfront Worth it? Wealthfront incorporates a complete financial picture into your analysis.

How Does Wealthfront Work?

“Our signature suite of investment features is designed to deliver higher returns without more risk.”~Wealthfront.com

Path Financial Advisor

Wealthfront’s initial questionnaire is impressive. It’s as if you’re speaking to a real financial advisor, without leaving the house.

Ultimately, an investment portfolio should be as personalized as possible and incorporate your personal situation, risk tolerance, salary, net worth and more. Wealthfront does an excellent job covering the financial planner questions, without talking to a human!

The initial Path Financial Planner questions include these topics:

  • Primary investment goal – general savings, retirement, college savings, other.
  • What are you looking for in a financial advisor? Create an investment portfolio, lower your tax bill, money management, and to match or beat the market performance.
  • Age, salary and tax bracket?
  • Net worth?
  • Investment objectives – maximize gains, minimize losses, or both equally?
  • If your investment portfolio lost 10% of its value in a month, what would you do? Sell all, sell some, keep all, or buy more.

That’s it for the initial, pre-sign up questions!

Next you receive your personalized Wealthfront investment plan.

You can also add or subtract ETFs from the recommended plan. You can focus on various sectors or strategies with the new ETFs.

Here’s a sample investment portfolio:

Wealthfront Review - asset allocation

After the initial questionnaire, you have an opportunity to answer more questions to receive additional personalized financial advice.

We like the multistep Path financial advisor, as you can get as much (or as little) help as you need.

Investment Options

Wealthfront’s core ETF (exchange traded fund) choices are divided among broadly diversified, low-fee stock, bond and alternative exchange traded funds:

Investment Fund CategoryIndex Fund Ticker Symbol
US Total Stock MarketVTI and SCHB
Foreign Stock - Developed MarketVEA and SCHF
Foreign Stock - Emerging MarketVWO and IEMG
Dividend Appreciation Stock VIG and SCHD
US Treasury Inflation Protected Bond (TIPs)SCHP and VTIP
US Government BondBND and BIV
Municipal BondVTEB and TFI
US Corporate BondLQD
Foreign-Emerging Market BondEMB
Real Estate VNQ and SCHH
Natural Resources (Energy)XLE and VDE

The core funds are well diversified.

Create Your Own Portfolio

Recently added to the platform are additional ETFs so that you can customize your investment portfolio. Or you can create your own investment portfolio, from the available ETFs, and Wealthfront will manage it.

There are scores of diversified ETFs to add to your existing portfolio or to use to create your own. The categories are good for those who want to target their investing and delve into various country and sector funds. The additional funds include:

  • Sectors like financial, healthcare, tech and more.
  • New technology like AI and robotics.
  • Gold.
  • 5 distinct ESG or socially responsible funds
  • Strategy US stock and international funds like small cap, growth, and value.
  • Bond funds like tax-exempt and government.

We believe that the fund choices are sufficiently diversified with low fund management fees and we like the opportunity to customize the ETFs.

Go directly to the Wealthfront Site now to look around and learn more. 

Portfolio Rebalancing

All Wealthfront investment portfolios are regularly rebalanced. Rebalancing involves selling funds that are above your target asset allocation and buying those that have drifted below your target percentage. This reduces risk and may also increase returns.

Not only are the robo-advisor portfolios rebalanced, but also the individual ETFs, including cryptocurrency funds can be bought and sold to keep your portfolio in line with your preferred asset allocation.

Learn more about rebalancing in our Robo-Advisor FAQ

Is Wealthfront worth it? Wealthfront review- low fees - top features

Fees

Wealthfront fees are competitive with major platforms like Betterment and Ellevest.

The Wealthfront management fee is 0.25% of assets under management (AUM) annually.

Wealthfront doesn’t charge an account-opening, withdrawal, account-closing, trading, commission or account transfer fees. The 0.25% AUM Wealthfront expense ratio is the entire account management fee.

There are no fees levied upon the Wealthfront cash account.

As with all exchange traded funds, there are investment expense ratios that go directly to the fund manager. The low fund management fees range from 0.06% to 0.13%.

 

Investment Minimum

The account minimum is $500.00. This entitles you to portfolio management which includes, rebalancing, US single stock direct investing, and tax-loss harvesting (for taxable accounts).

Free robo-advisor with $100 minimum: M1 Finance Review

What Accounts Does Wealthfront Support?

Wealthfront offers among the largest number of available accounts from the robo-advisor field including the Wealthfront 529 account for college saving. The retirement accounts can be set up directly with the firm or rolled over from another provider or 403(B) account.

The available Wealthfront account list includes:

  • Personal investment accounts (i.e. regular taxable brokerage accounts, non-IRA)
  • Joint accounts (specifically, joint tenants with right of survivorship, or JTWROS)
  • Trust accounts
  • Traditional, Roth, and Rollover IRA retirement accounts
  • Simplified Employee Pension (SEP) IRAs
  • 401(k) rollovers
  • 529 college savings plan accounts

Wealthfront Performance

Your Wealthfront returns will be determined by the date you invest and the funds in which you are invested. Thus, Wealthfront’s performance is different for each client. Additionally, during different periods of time, specific asset classes will out- and under-perform. For example, there are periods where US stocks beat international stocks and vice versa. That is the reason that diversification is important, the future is unknowable.

Robo-advisor performance is a weak reason to choose an investment manager. As asset classes drift in and out of favor, so will the returns of the portfolio.

The Wealtfront’s investment methodology is supported by Modern Portfolio Theory using index funds. This type of investing has been shown to outperform actively managed investing most of the time. We are confident that due to the low expenses, expert managers, and implementation of sound investing practices, that Wealthfront’s performance will be solid over the long term.

Wealthfront App

With an average 4.9 rating from roughly 9,000 reviews on the iOS app store, you can be confident that the all-digital Wealthfront app is great! From Wealthfront Cash on your phone to investment management, the Wealthfront App is among the best. The Wealthfront app makes it easy to see your investments, add money, borrow, and plan for your financial future.

 

Wealthfront Features Drill Down

US Direct Indexing

Wealthfront US Direct Indexing is a stock level tax loss harvesting strategy for accounts worth more than $100,000. By lowering your tax bill you will likely enjoy increased returns. It’s implemented by replacing the US stock market ETF with individual stocks. Then a stock level tax loss harvesting strategy is implemented. The automated program sells under performing stocks and offsets losses with capital gains. This enables investors to reduce taxable income in an attempt to improve the overall portfolio returns.

Tax-Loss Harvesting

Wealthfront conducted research over the past five years and found that tax-loss harvesting offset the entire 0.25% management fee in 96% of the cases. This means that within a taxable account, with tax-loss harvesting enabled, it’s as if getting free, professional, management.

 And over the last five years, Wealthfront clients with a risk tolerance score 8 portfolio have enjoyed an average estimated after-tax benefit worth between 6 and 13 times our advisory fee. Tax-Loss Harvesting pays for itself, and it is the primary reason you’re better off investing with Wealthfront instead of trying to do it yourself.”

“How Wealthfron’t Tax-Loss Harvessting Could Cover Your Advisory Fee,” Wealthfront blog, November 15, 2020.

All Wealthfront taxable accounts are eligible for tax-loss harvesting.

This tax-optimization strategy is carried out when one ETF is trading at a loss. Wealthfront sells that fund and replaces it with a similar one which keeps the portfolio asset allocation in line with your original asset mix.

The Wealthfront tax-loss harvesting is unique as other robo-advisors require a certain amount of money for tax-loss harvesting. Wealthfront’s daily tax-loss harvesting claims to give investors significant savings over less frequent tax-loss harvesting.

College Planning Guidance

The Wealthfront College Planning with Path feature helps navigate the complete college planning process. You select a college to see the total cost picture for the school, including room, board, tuition and expenses. Path calculates the financial aid your student can expect from the specific school. With the Wealthfront 529 account, you’ll find out how much your savings will grow and the amount of the expenses your account will cover.

This is an invaluable service for parents and grandparents planning for a child’s college expenses.

What is the Wealthfront Risk Parity Fund?

The Wealtlhfront Risk Parity fund is an optional strategy for your investments. The approach claims to reduce risk and deliver a small lincreased return. It involves some leverage or borrowing and higher fees, but the proponents believe that these costs are more than offset by the expected higher returns.

There’s been quite a bit of press about the Wealthfront Risk Parity Fund. Since it’s an optional service, you can follow the discussion to determine whether it’s appropriate for you or not.

Wealthfront Smart Beta

Also called Advanced Indexing, the Wealthfront Smart Beta is another feature for investors with more than $500,000 invested in a taxable account. This investment strategy adjusts a taxable portfolios asset allocation based on other factors than the typical market capitalization percentage.

Smart beta considers factors such as investment momentum, value, dividend yield, market beta and volatility.

If you’re interested in this investment strategy but haven’t yet reached $500,000, Betterment also offers smart beta investing.

Wealthfront Borrow – Portfolio Line of Credit

If you have an expense, like a vacation or wedding, and don’t want to sell investments, to free up cash, Wealthfront Borrow offers a portfolio line of credit. The loan is available quickly and with a low interest rate. Actually, you can use the money for any purpose.

The Wealthfront Borrow portfolio line of credit has no application fees and is available for all customers with an individual, trust, or joint investment account worth $25,000 or more.

Cash Management Account

Sometimes you need a cash stash. Think – rainy day fund, money for unexpected home repairs, cash for this year’s vacation, or a ‘what if’ fund for the unexpected.

For ready cash and an emergency fund, the Wealthfront Cash Management Account offers a zero fee, high yield account. The minimum deposit amount is one dollar and the value of your account is secure with up to $1 million FDIC insurance and unlimited transfers, as previously mentioned.

It’s clear that Wealthfront has a lot to offer the investor. Their features are equal to or better than the typical robo-advisor.

The combined checking/savings account offers a lot:

  • Interest paid on all deposits
  • No fees or minimum deposit
  • Free ATMs with debit card
  • Direct deposit – with access to cash 2 days early
  • Unlimited free transfers
  • Automatic bill pay-for standard bills and to friends through Venmo, PayPal and other apps
  • Mobile check deposit through app

Whether you have a Wealthfront investment account or not, you can sign up for a No Fee Cash account.

Wealthfront Self-Driving MoneyTM – Autopilot

Newly launched, Autopilot is Wealthfront’s first Self-Driving moneyTservice. We expect additional features to this suite of tools to make money management easier.  

The goal of Autopilot is to transfer money that you don’t need for current spending automatically into an investment account. This keeps the majority of your money growing for your futures. 

Autopilot works with both the Wealthfront Cash account and any external banking account.

Here’s how the Autopilot works:

  • Choose one account to monitor – any checking or your Wealthfront Cash account.
  • Set the maximum amount of cash that you need in the account. If you like to keep a robust checking balance it could be $1,000. Or you could select any amount,.
  • Select the account you want the excess from the first account transferred into – like your Wealthfront Investing account.
  • When the balance exceeds your designated maximum by $100 in the first account, it will automatically be transferred into the second.

Financial Planning and Reports

We love this feature. By linking all of your accounts, those managed by Wealthfront and those outside, you can receive excellent financial reports and advice.

You can link the following accounts to Wealthfront; checking, savings, retirement, investment, trust, mortgage, credit card, loan, health savings, and cryptocurrency.

After linking your accounts you’ll have access to the following financial planning projections (and more):

  • Retirement spending
  • Savings growth and rate
  • Investment fees
  • Home value, debt-to-income ratio, and home equity
  • Investment and account values
  • Net worth

Customer Service

This isn’t discussed frequently, as Wealthfront is an all-digital financial management and robo advisor platform, but the Wealthfront team of client services specialists have specialty credentials, not usually found among robo-advisor customer service staff.

“All our Client Services team members are Series 7 licensed professionals and several hold CFA (Chartered Financial Analyst) or CFP (Certified Financial Planner) designations. They have experience from traditional firms, but are passionate about changing financial services for the better.”

Wealthfront.com

It’s rare to find a customer service representative at a robo-advisor with an understanding of investing principles.

Is Wealthfront Safe?

We understand that security is paramount when investing. And the short answer to ‘Is Wealthfront safe?’ is yes. Let’s break down all of your questions so you can be confident in Weathfront’s security.

Basic Wealthfront Platform Security

Wealthfront partners with expert security companies to create and maintain secure, read-only links. These firms use bank-grade security and employ state of the art data protection. Wealthfront does not store your account password.

The security companies specialize in tracking financial data; they employ robust, bank-grade security and follow data protection best practices. 

~Wealtlhfront website

Your data is not shared with anyone.

You can be confident that Wealthfront is as secure as any financial institution.

Is Wealthfront FDIC insured?

The Federal Deposit Insurance Corporation is an independent agency of the federal government that banks and savings associations fund, in exchange for insurance for their customers deposits.

The Wealthfront high yield cash account is insured up to $1,000,000 by the FDIC where no insured deposits have been lost since 1933. The reason for the high cash deposit insurance amount is because your money is spread across four banks, each offering $250,000 of insurance.

Can I lose money with Wealthfront?

Consider the Wealthfront Cash Account as safe as any bank account, with a higher level of FDIC insurance. You will not lose money from your Wealthfront Cash Account (as long a you don’t keep more than $1 million in the account).

The Wealthfront money management account is as safe as your brick and mortar or online savings account.

Although, your Wealthfront investment account is subject to the ups and downs of the investment markets, and there may be periods when your account will lose value. In the past, gaining years in the investment markets are more frequent than losing years.

Is Wealthfront a legitimate bank?

The Wealthfront Cash account stores your money across several legitimate banks including Green Dot Bank. Although, the Wealthfront company is not a bank.

In sum, Wealthfront is as safe as any financial institution. Yet, realize that any money in the investment account can go up and down in value. (Although over the long-term, investment values have gone up). On the other hand, the money in the high yield cash account will not lose value.

Wealthfront Promotion

Sign up for Wealthfront with this link and you’ll receive $5,000 managed for free.

Get $5,000 managed for free when you sign up for Wealthfront with this link. 

Wealthfront Invite

Once you are a Wealthfront customer,  you’re eligible for free investment management. When a friend signs up and funds their account, you get $5,000 managed for free. And your friend also gets $5,000 managed for free! It’s a win – win.

Is Wealthfront Worth it? Pros and Cons

Pros

The Wealthfront management fee is low at 0.25% of AUM after the initial, always free, first $5,000 and the minimum $500 entrance fee is reasonable.

The opportunity to add ETFs, subtract ETFs, or create a portfolio of your own gives you more control than with most robo investing platforms.

The tax-loss harvesting offerings is a draw and daily TLH might improve performance for taxable accounts.

Loans for existing customers who have cash needs but don’t want to sell their current investments can come in handy for unexpected expenses. Personally, I prefer using the cash account to save up a substantial account which can be deployed for sudden or planned short-term cash needs.

When you transfer in your funds, Wealthfront helps minimize capital gains taxes as your existing assets are sold. For new investors or those with small portfolios, this is a benefit.

The Wealthfront Path financial planning tool is a confidence-builder when you need to understand if you’re ‘on track’ for retirement.

The high yield cash account is a strong sell, and only available at a handful of robo-advisors, including Betterment.

At present, Wealthfront is the best all-digital financial management and advice service that we are aware of.

Cons

The Wealthfront review negatives are slim.

One size fits all doesn’t fit everyone. The lack of a live advisor to consult with may be a negative for some investors. With Betterment offering both human financial advisor access and a la carte financial planning packages, Wealthfront lags in this area.

Need someone to talk to? 7 Robo-Advisors with Human Financial Planners

Wealthfront omits small cap and value ETFs from their lineup. These asset classes have long term evidence of outperforming the overall investment markets.

FAQ

How good is Wealthfront?

Wealthfront is among the oldest and most reputable robo-advisors. The fees are low and investment methods are sound. For investors comfortable with an all-digital investment platform – we recommend Wealthfront without reservation. If you prefer a robo with financial advisors, consider Betterment.

Can I trust Wealthfront?

Yes, your money is safe at Wealthfront, and the high yield cash account offers $1 million FDIC insurance. This article outlines all the risks and benefits of investing with Wealthfront. But, whenever you invest in the stock and bond markets, the value of your investments can go up and down.

Can Wealthfront Make You Money?

Investing in the financial markets has been an excellent way to grow your wealth. Over the last 100 years, investors earned an average 9+% per year investing in the stock market. But, during shorter periods you can lose money. Only invest in financial markets with money you won’t need for at least 3-5 years.

Is Wealthfront Good for Beginners?

Yes. We like Wealthfront for beginning investors. Although Wealthfront Cash has no minimum deposit, you need $500 to open an investment account. If you meet the minimum and are comfortable with an all-digital investment advisor, then Wealthfront is great.
If you don’t meet the minimum investment amount you might consider SoFi Invest which requires $1 to invest and doesn’t charge management fees.

Is Wealthfront Worth it? Final Wrap up

Wealthfront is among the largest stand-alone robo-advisors. They offer transparency, tax-sensitive investing and the PassivePlus® investing approach all for a low fee. For new investors, it’s an excellent choice. For those with larger portfolios, the tax-optimized direct indexing is a compelling feature.

Is Wealthfront worth it? Yes, Wealthfront is worth it with it’s vast array of differentiated features including the premier digital financial planner, all for a low cost.

Compare

 BettermentWealthfrontM1 Finance
OverviewA goals based robo advisor with financial planners.All digital robo advisor with opportunity to customize investments.Free robo-advisor pre-made and individual investments.
Minimum Investment AmountThere is no minimum investment amount required for Betterment Digital. Premium requires $100,000 minimum. $500$100
Fee StructureDigital-0.25% Premium-0.40% Low cost financial planning.0.25%Zero fees for investment management. $125 for more features.
Top FeaturesGoal-based ETF investment portfolio. Tax-loss harvesting. SRI, smart beta + income portfolios. Human financial advisor access.Digital investment management. Daily tax-loss harvesting. Path online financial advisor. Can add or create own ETF portfolio.Thousands of stocks and ETFs. Pre-made investment portfolios.
Free ServicesFree management promotion.First $5,000 is managed for free. No management fees for basic service.
Investment FundsLow-cost, commission-free ETFs.Diversified low-fee ETFS. Sector, crypto and strategy funds available for customization.Stocks, bonds, funds, and more.
Accounts AvailableSingle + joint taxable brokerage. Roth, traditional, rollover + SEP IRA. Trust.Single + joint taxable brokerage. Roth, traditional, rollover + SEP IRA. Trusts. 529 college account. Single + joint taxable brokerage. Roth, traditional, rollover + SEP IRA. Trust.
Visit WebsiteFree management fee promotion (time limited)WealthfrontFree investment management.

Related:

4 thoughts on “Is Wealthfront Worth it? Wealthfront Review 2021”

  1. Good review hitting on most of the points about a very diverse product. For next year’s review you might want to cover the Risk Parity Mutual Fund. That’s a huge differentiation now between WealthFront and the rest of the Robos. A very inexpensive way for investors looking for stock like returns with diversification in a structure few funds have.

    FWIW I’m not sure it wouldn’t be better to use futures to achieve the effects they are looking for but I don’t think Wealthfront’s clients would be OK with investments that can go below 0.

  2. This is a very good comprehensive review of Wealthfront. I find it easy to use, the app is great, and the promo can’t be beat! The free high interest savings account is a nice bonus for more conservative investors who seek to avoid losing their savings to inflation, but don’t want to put everything in the market.

    All that said, I do have one criticism, and that is lack of control over the composition of you investments. I feel that the risk score should be a reccomendation, with the option to adjust individual categories more to suit your wants and needs. For example, I wanted more US stock, but it plateaus at 35% as risk rises and all further increases go to foreign/emerging markets. My plan now is to hold money in both Wealthfront and M1 (where you can hand pick stocks for free, but there is no tax loss harvesting) and see which yields a better return.

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top