Wealthfront Review: Online Financial Advisors a Click Away
This is one of the best platforms in the robo-investing field. It is great for both experienced investors and newbies alike. Wealthfront is most famous for its well-balanced portfolio, customized to individual goals. This is especially important for those of you who are new at this. If you are one of the larger-portfolio investors, then you will be pleased to find out about this platform’s automated tax-loss harvesting option. Here are some more details about the company, in this Wealthfront review.
What Is Wealthfront and How Does It Work?
Wealthfront is one of the most popular robo-advisors that uses MPT to develop an automated asset allocation. It was launched in 2011. MPT stands for Modern Portfolio Theory. Although it works similarly to other online brokerage companies (see our Betterment vs Wealthfront comparison), Wealthfront provides only low-cost liquid ETFs, which means exchange-traded funds. Using this platform, you will gain exposure and diversification.
Even though the company doesn’t give you an individual stock trading option, it provides something even better: creates a long-term portfolio customized to your life goals. Their team has world-class financial experts who are always ready to support and guide you in the investment industry.
This platform has a lot of similarities to other robo-advisors, as you were able to observe from our comparison, linked above, but it is also quite distinctive on its own. Wealthfront is most popular and famous for the following things:
- Investors have autonomy and flexibility.
- Small balances accounts receive free management.
- Those clients with taxable accounts receive a superior tax efficiency.
- The platform offers an automatic rebalancing feature.
Wealthfront Account Types and Minimum Deposit
The minimum account deposit for a new basic membership is only 500 dollars, while the management fee is 0.25 percent. The platform provides the following account types:
- Classic IRAs.
- SEP IRAs.
- Roth IRAs.
- Non-profit memberships.
Recently, the company has added a new type of membership, the 529 College Savings Plan.
Wealthfront has one standard fee of 0.25 percent of a client’s account balance. On the other hand, until your membership reaches 10,000 dollars, the account management is free of charge. An additional appealing pricing feature is the platform’s Invite Program. This means that whenever you recommend Wealthfront to one of your friends, both you and your friend receive 5,000 dollars each. This sum will be managed for free.
1. Quick Customizable Portfolio
To launch your new account and for the platform to assign you to a certain allocation, you must first answer a couple of questions regarding your risk tolerance as well as life stage and goals. Wealthfront will then create a personalized portfolio that contains the proper number of bonds, stocks, and real estate ETFs. This way, you will gain a lot of exposure and have access to several opportunities. Further on, you will be able to adjust these portfolios.
2. Automated Portfolio Rebalancing
Your allocations will be kept in balance over time, due to this platform’s automated portfolio rebalancing option. It is a great way to ensure diversification. The automated software will do this every day, updating your portfolio. This means it will continually purchase different assets when their price is low and sell them when the price is high.
3. Automated Tax-Loss Harvesting
Every year, you will be able to use your capital losses in order to lower your taxable income in that particular year. Usually, this amount is situated around 3,000 dollars, but yours might vary depending on your income level. This automated tool is highly effective, and its results are quite accurate. However, it applies only to taxable memberships, providing significant advantages.
4. Tax-Optimized Direct Indexing
Those of you who have taxable accounts can optimize your earnings using this direct indexing tool. It is basically improving the results of the tax-loss harvesting feature. Also, it keeps fees at their minimum levels. This tool buys individual securities for you, instead of using Index Funds or ETFs. This and the above-described tool can add to your yearly earning up to 2.03 percent.
5. Dividend Reinvestment Rebalancing
Normally, you would cash or reinvest a dividend. However, this automated tool will take your dividends and smartly invest them in a bond ETF when its price is low. If you want to use your account’s cash in an efficient way, you should definitely opt for this feature.
6. Wealthfront Invite Program
As I mentioned before, Wealthfront has an attractive Invite Program that adds 5,000 dollars to both your account the to your friend’s membership. All you have to do is to encourage your friends to join this platform. Moreover, if one of your friends join in, you will also receive free management for your account.
If you have read our Wealthfront vs Betterment comparison, you know by now that all these tools are not provided by all the online investment platforms. Wealthfront is definitely a great choice to make when you select your desired robo-advisors. Not even Wealthfront vs Vanguard reviews cannot state the fact that other platforms work better, have lower fees, or provide more features that this one. Although Vanguard has low costs, it doesn’t offer the same options and tools as Wealthfront.
- It has a quick account setup that takes only five minutes.
- There aren’t minimum limits for deposits or withdrawals.
- The minimum account deposit is only 500 dollars.
- It provides automatic deposits option.
Is Wealthfront Legit?
Wealthfront is totally legit, being a reliable and trustworthy investment platform. Moreover, it is regulated and registered by SEC. The platform uses Apex Clearing to process its trades, which is a member of both FINRA and SIPC.
Wealthfront Pros and Cons
- Wealthfront offers a diversified portfolio.
- The portfolio is customized based on your life goals.
- The account management fee is lower compared with other robo-advisors.
- You will gain access to a tax optimization option.
- There is a low account minimum of only 500 dollars.
- Those clients that have large balances accounts will not receive any discounts.
- There is no fractional shares option.
Putting It All Together
As you can see, the pros and strengths of this platform are far more powerful and outweigh the weak sides of the company. Wealthfront is a great choice for both newbies and large-balance experienced investors. If you are searching for an affordable automated solution, this platform is the right choice for you. Wealthfront has proved to be a leader in the investment industry due to its many features as well as free active management access for a balance of maximum 15,000 dollars.
Some say that if you want a larger balance, you should opt for another platform, one that provides lower fees. However, taxable memberships that are higher than 100,000 dollars will benefit from direct indexing outweigh. This makes the company the perfect choice for huge accounts.