Updated: Jan 04, 2024

Wealthfront Investment Adviser 2024 Review

Find out whether Wealthfront is the right robo-advisor to help you set up an investment portfolio for retirement savings

Written By Krista Baum

Finance Expert

Contents

Having an investment portfolio isn't just for the uberwealthy or retirees. If you want to grow your money (who doesn't?), no matter how little or how much you have, investing is the way to go.

Wealthfront is a company that aims to make it even more accessible and affordable to jump into the investment world, all from the convenience of your computer or smartphone.

With a minimum investment of $500, anyone can open a Wealthfront account.

You'll answer some questions, and within minutes, you'll have a recommended personalized portfolio based on your financial goals and how risky you're willing to go.

In addition, you'll have access to world-class wealth management planning tools to set you up for financial success.

Here are the ins and outs of Wealthfront so you can decide if it's the best investment solution for you.

Wealthfront is Great for...

Beginner investors
Simple retirement planning
Mobile-centric users
Minimize tax burden on investments

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Benefits of Using a Robo-Advisor

Wealthfront is a "robo-advisor," the term for automated digital investment services that use a complex algorithm to manage investment portfolios.

Robo-advisory firms make investing more accessible by offering low initial investments and fees.

By removing the middleman, a wealth advisor or financial planner, robo-advisors help choose and manage the best investments based on risk tolerance and goals.

How Wealthfront Works

Based on the Modern Portfolio Theory (MPT), Wealthfront uses sophisticated software to build a diversified portfolio of stock, bond, and real estate Exchange Traded Funds (ETFs) based on your risk tolerance and financial goals.

Whether you're looking to increase your savings, plan for retirement, buy a home, or send your children to college, Wealthfront will invest and manage your money to help you reach these goals.

Getting Started

You'll need to answer a series of questions to set asset allocations and build a personalized portfolio. This includes six subjective questions and four objective ones.

Answers to your age, income, current investments, financial goals, and debt will be used to determine your investment needs.

Based on your answers, Wealthfront presents you with an investment plan. The plan is based on your risk profile and comprises low-cost, tax-efficient ETF index funds.

Your personalized investment plan details the type of investments that Wealthfront will buy on your behalf, the percentages each investment makes in your portfolio, and why this investment plan makes the most sense for you.

Once you're comfortable with the plan, you must invest a minimum of $500.

You have a few different ways to add money to your account.

You can:

Link bank accounts to make a one-time transfer or set up recurring deposits.
Initiate a wire transfer to your Wealthfront account.
Electronically transfer a report from another institution.
Write a check (for 539 college savings plans only)

Types of Accounts

Wealthfront manages personal investment accounts and retirement accounts, including:

Personal investment accounts
Joint accounts
Trust accounts
Traditional IRAs
Roth IRAs
Simplified Employee Pension IRAs
IRA transfers
401(k) rollovers
529 college savings plan accounts

In addition, if you need quick cash, you can take out a portfolio line of credit.

Joint and personal accounts are collateral for a line of credit should you default on the loan.

This way, you can access the cash you need without disrupting your long-term investments.

Investment Options

Wealthfront tracks thousands of ETFs to determine the best investments based on lower fees, tax efficiency, and higher liquidity.

The percentage and combination of each ETF in your portfolio depend on your risk tolerance.

You can expect Wealthfront to recommend a combination of the following primary ETFs:

Vanguard U.S. Total Stock Market Index
Vanguard Developed Markets ex U.S. Index
Vanguard Emerging Markets Stock Index
Vanguard U.S. Investable Market Real Estate
State Street Energy Select Sector
Vanguard Total Bond Market
Barclays Capital U.S. Treasury Inflation Protected Securities Index
Vanguard Tax-Exempt Bond Index
Vanguard Dividend Yield Stock Index

By investing in various asset classes, you can own thousands of financial securities at a meager cost and have a very diversified portfolio.

Fees

Wealthfront charges a simple yearly advisory fee of 0.25% on assets under management.

The fee is deducted from your account every month.

For example, if you have an account with a monthly balance of $100,000, you'll pay $20.55 in monthly fees.

In addition, you'll pay a fee for each ETF in your portfolio since all ETFs come with costs. Wealthfront focuses on funding portfolios with the lowest annual expense ratios, ranging from 0.04% to 0.35%.

They do not charge fees when you withdraw from or close an account.

In addition, there are no trading, commission, or transfer fees.

To save on your annual advisory fee, invite friends and family to join through the Wealthfront Invite Program.

Wealthfront will waive the monthly fees of $5,000 for you and your friend as long as they keep that account open.

Path

Setting themselves apart from traditional robo-advisors, Wealthfront launched "Path," a fully mobile financial planning solution.

The Path was developed by an experienced team of Ph.D. experts, including economist and investing icon Burton Malkiel, author of "Random Walk Down Wall Street."

Considering the performance of over 40,000 securities, inflation, social security administration data, academic research, and complex mathematics, Path was designed to help you understand the impact of your current financial lifestyle on your future.

To do this, you'll connect Path to all your bank and financial accounts so it can assess your financial spending and saving habits based on actual transaction history.

Additionally, Path allows you to explore "what if" scenarios and how they impact your financial future.

For example, what if you decide to quit your job and be a stay-at-home mom?

You can input this hypothetical information to see the financial impact it can have on your day-to-day living and your long-term goals.
You can set up Path in just a few minutes to answer some of life's biggest questions based on your finances.

Can I afford to pay off my mortgage early?
How much must I save to send my child to an out-of-state four-year college?
Can I live off of $50,000 a year in retirement?

PassivePlus

PassivePlus is Wealthfront's self-proclaimed "signature suite of investment features" designed to increase investment returns without increasing risk.

PassivePlus includes tax-loss harvesting, stock-level tax-loss harvesting, risk parity, and smart beta.

Essentially, they're additional benefits without associated fees or costs.

Tax Loss Harvesting

Wealthfront was one of the first robo-advisors to develop a Tax-loss Harvesting (TLH) software tool to generate more significant tax savings for clients.

All taxable accounts come with this free benefit, the Wealthfront daily TLH service.

You'll need to "opt-in" for this PassivePlus benefit once you open an account.

TLH works by checking your account daily for investments to sell that have declined in value to offset investments that have gained importance. Selling these investments below the purchase price generates a loss, thus offsetting taxable gains.

The tax savings are then reinvested in your portfolio.

Losses generated by TLH can offset up to $3,000 of ordinary income or gains in your portfolio, lowering the overall amount you pay in taxes each year.

Online Experience

Wealthfront has completely removed the human aspect of financial advising and planning.

All account management, from opening an account to learning about your portfolio asset allocation, is done on the website or from your smartphone.

You can enable two-step authentication online or on the app as an added safety measure.

Mobile Experience

The Wealthfront app is available for Android and iOS devices.

Unlike other banking or online platforms, the app offers even more features than the website.

The Path was explicitly developed to be used on the app. Although you can sign up for Path on the website, you'll find additional features in the app that you can access anytime.

Conclusion

Wealthfront leads the industry by continually expanding its fully automated financial planning services and investments.

They offer personalized, results-driven, and diversified investment portfolios and services developed by an industry-leading data science team for a fraction of the cost of traditional financial advisors.

Wealthfront is transforming wealth management services, bringing the most sophisticated platform to even the most minor investor.

Even if you're not entirely convinced, for only a $500 minimum investment, it's worth giving Wealthfront a try.

About the author Krista Baum

Krista is a freelance writer with extensive financial experience from holding management-level positions at financial institutions in New York. She still works in the financial industry with a focus on risk assessments, project management, and financial crime compliance. Krista has contributed to sites including AOL.com and The Huffington Post. Education: B.S. in Hospitality and Tourism Management from Virginia Tech.

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