Wealthfront Review – Why Should I Use Wealthfront?
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Everything You Need to Know About Wealthfront – 3 Part Series
Part 1-Why Should I Use Wealthfront?
Learn here about why you should use Wealthfront. Find out about the sign-up, costs, features of the Wealthfront robo-advisor platform so that you can decide whether this automated advisor is for you.
Learn both the advantages and disadvantages of the popular Wealthfront robo-advisor. This Wealthfront review series gives the most comprehensive overview of the Wealthfront platform available, without actually signing up.
Get the answer now to the “Why should I use Wealthfront?” question.
In Part 1 of this Wealthfront Review we answer the question, ‘Why should I use Wealthfront?” This first segment of the 3-part review drills into Wealthfront’s methodology, fees, and differentiating features. We make it easy for you to look under the hood of the Wealthfront robo-advisor platform.
In Part 2- ‘How to Sign Up for Wealthfront’ you’ll learn about the information gathering process that Wealthfront uses to craft your ideal portfolio while considering your other assets. You also learn about portfolio review feature.
In Part 3- ‘Is Wealthfront Worth It?’ discover the returns you might expect, the ETF’s Wealthfront invests in and an explanation of the differentiating features of the platform. The final analysis integrates all the components of the Wealthfront platform and gives you the confidence to answer the question, ‘Is Wealthfront Worth it for you?’
Why Should I Use Wealthfront?
“Wealthfront’s investment strategy is anchored by passive investing principles, but they go beyond that to deliver clients additional tax efficiency features developed by by renowned economist and Wealthfront CIO, Dr. Burton Malkiel. In addition to investment management, clients receive financial planning and services that traditionally are available to high net worth clients of $1M+ and for high fees.”
Wealthfront’s three core beliefs are:
- Create an automated, set it and forget it investment portfolio
- Offer low fees
- Lower your taxes with tax efficient investment management
The overriding Wealthfront answer to the “Why should I use Wealthfront” question is to give you a good return for a low fee so that you can feel confident that your money is working for you. The Wealthfront methods are created from widely accepted research confirming that a passively managed index fund portfolio beats actively managed investments.
The $500 minimum account value gives Wealthfront one of the lowest entrance fees in the robo-advisor landscape.
You’ll Benefit From Wealthfront if You’re Looking for:
A PhD level research supported robo-advisor platform with low fees and the best index matching returns for your individual risk profile.
Excellent tax efficiency for investors with less than $1 million to invest due to the combination of automated rebalancing, Daily Tax-Loss Harvesting and Direct Indexing.
A financial planning service that you can access anytime anywhere from desktop or smartphone so you can see exactly how much to save and invest for the future or how a life change will impact your account values. Path complete financial planning answers all your questions without having to talk to someone.
You’d like your first $10,000 managed for free.
You prefer a simple, low fee structure of 0.25% of AUM for all of your investing dollars, except the first $10,000, that is managed for free.
Investments in exchange-traded funds (ETFs) that track 11 major asset classes including real estate and natural resources/energy ETFs.
A diversified portfolio of investments across multiple account types.
A Selling Plan that allows you to sell your concentrated company stock tax efficiently and commission free.
- Tailored transfers moves your investments into the Wealthfront platform without selling all assets at once in a manner that minimizes taxes.
- A line of credit so that you can borrow against your Wealthfont account.
If you answered yes to at least one item, then Wealthfront may be for you.
What is Wealthfront?
Wealthfront’s research explains that their platform may increase your annual returns when compared with the returns of other advisors.
Path Financial Planning makes the future clearer.
What Differentiates Wealthfront from Betterment and other Competitors?
Wealthfront offers several unique features, some not available from competitors:
- Their unique approach to a diversified portfolio. Poor diversification could diminish your risk-adjusted return. Wealthfront’s free Portfolio Review tool evaluates your investments across key dimensions that impact future performance.
- There are no transaction fees or commissions. That means, there are only 2 cost sources; the 0.25% annual management fee and the low underlying fund expense ratios (that apply to all mutual and exchange-traded funds).
- Their ‘daily’ tax-loss harvesting claims to give investors significant savings over less frequent tax-loss harvesting.
- Their chief investment officer, Burton Malkiel, PhD, is one of the most respected investment researchers. He wrote the classic book, “A Random Walk Down Wall Street” which spurred the index fund investing revolution.
- Path, Wealthfront’s fully mobile financial planning experience allows you to access financial planning without having to talk to someone. Path, provides a suite of “what if” scenarios to help you figure out answers to questions such as, “Can I live my current lifestyle in retirement?” “How much should I save today?” and more.
- Selling plan, direct investing, tailored transfers and 529 college savings account are unique to Wealthfront.
- A college planning guidance feature.
How the Tax-Optimized Direct Indexing Increases Returns
This unique strategy, for those with accounts worth more than $100,000, boosts returns by taking the indexing approach one step farther. Instead of buying only exchange-traded funds, Wealthfront will buy hundreds of individual stocks from the S&P 500 index and smaller non-S&P 500 companies. That way the platform can sell individual holdings to minimize taxes, in lieu of selling an entire index. According to Wealthfront, this service can add as much as 2.03% to client’s annual returns. You’ll learn more about this tiered approach to maximize your returns with tax-loss harvesting in Part 3.
The Selling Plan Helps Investors with too Much Company Stock
Wealthfront developed this service for investors who have accumulated a disproportionate amount of company stock in their investment portfolio. The Selling Plan allows Wealthfront to sell your company stock tax-efficiently and commission-free. Instead of selling all your shares at once, the firm’s tailored transfer process migrates your investments tax-efficiently into your diversified Wealthfront portfolio.
Tax-Minimized Account Transfers
Another strategy to minimize taxes and increase returns is designed to help investors transfer their larger investment portfolios’ into the Wealthfront platform. They attempt to help users with the problem of large unrealized capital gains that might be realized when long-term investors transfer their existing accounts into Wealthfront.
College Planning Guidance
Wealthfront recently launched College Planning with Path. This 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.
What Accounts Does Wealthfront Support?
Wealthfront offers among the largest amount of available accounts of all of the robo-advisors. They’ve recently added the college savings 529 account so that parents and grandparents can fund a child’s college education.
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 IRAs
- Roth IRAs
- Simplified Employee Pension (SEP) IRAs
- IRA transfers
- 401(k) rollovers
- 529 college savings plan accounts
Why should I use Wealthfront? If you’re looking for a simple, research supported investment manager, you may want to consider Wealthfront. In addition to their index fund passive portfolio, they offer specialized direct indexing for greater tax benefits and other tools to transfer your funds while keeping taxes at bay.
For a comprehensive Wealthfront Review read all of the articles:
In Part 1-learn ‘Why should I invest in Wealthfront?” The first segment of the 3-part review drills into Wealthfront’s methodology, fees, and differentiating features. We make it easy for you to look under the hood of the Wealthfront robo-advisor platform.
In Part 2- ‘How to Sign Up for Wealthfront’ find out about the information gathering process that Wealthfront uses in order to craft your ideal portfolio while considering your other assets. You also find out what the existing portfolio review feature is all about.
In Part 3 – Is Wealthfront Worth it? discover the returns you might expect, the ETFs Wealthfront invests in and a detailed explanation of the differentiating features of the platform. The final analysis integrates all the key components of the Wealthfront platform and gives you the confidence to answer the question, ‘Is Wealthfront Worth it 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. That said, I never recommend anything I don’t believe is valuable.
Updated May 27, 2017