Wealthfront Review

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What are you saving up for?

Whether it’s retirement, time off for traveling, or sending your child to their dream college, long-term passive investing can help you reach these goals. But hiring a financial advisor gets pricey, while self-managing can be risky and stressful. Consider a robo advisor as a low-cost, high-quality investing alternative.

In this Wealthfront review, we take an in-depth look into one of the leading companies in the robo advising space.

Wealthfront Review - Company Logo

Editorial Rating

Pros

  • Diversified portfolio adjusted to your risk preferences
  • Dynamic planning to reach your financial goals
  • Financial tools available even with no account
  • Withdraw your money anytime with no fees
  • High-interest Wealthfront checking account
  • Low-interest rate portfolio line of credit
  • Low investment expense ratios (averaging 0.08%)

Cons

  • No human advisor option
  • $500 account minimum (some competitors offer $0)
  • Up to 11 asset classes (some competitors offer over 20)

Wealthfront Overview

Account minimum:

$500

Management Fee:

0.25

Automatic rebalancing:

Yes

Tax-loss harvesting:

Yes

SIPC Protected:

Yes

Fiduciary:

Yes

Everything You Need to Know

With automated investment management, you can get the same results while keeping fees at a minimum. Wealthfront has been leading the future of finance for savvy digital natives with fully automated long-term investing in diversified portfolios.

Wealthfront can build a portfolio made for you with a minimum investment of just $500 and adjusted to your risk preferences. They also offer high-interest checking accounts (0.35% APY) and a low-rate line of credit products.

Still, you might be asking yourself:
Can I trust Wealthfront? Are they the best choice for me?
Our Wealthfront review has everything you need to know.

What Is Wealthfront Best For?

The Wealthfront robo advisor service simplifies investing with a tried-and-tested automatic algorithm. Their suite of investment strategies (PassivePlus) is grounded in research and then applied by software to manage your portfolio.

This model has two major perks:

  • The strategy is based on time-tested foundational research by a team of PhDs (learn more about their process here.)
  • Since there is little to no human supervision, the Wealthfront advisory fee can stay as low as possible.

So, Wealthfront is perfect for people who want to grow their wealth but can’t afford traditional investment advisors. Even if you’re brand-new to investing, Wealthfront can provide automated expert advice to help you achieve your goals safely and it is cheaper than hiring an advisor.

Best for:

  • Novice investors
  • Hands-off investment
  • Long-term financial goals
  • Low management fees
  • Reducing the tax burden
  • Low-interest loans and high-APY cash accounts

Service Overview

Wealthfront offers three main lines of service:

  • Investing in a long-term diversified portfolio
  • Borrowing with a portfolio line of credit using your investments as collateral
  • Banking with a high-interest checking account insured up to $1 million

The minimum amount to open a cash account is $1. You’ll enjoy 0.35% APY (five times more than the industry average,) unlimited transfers, and no market risk. While Wealthfront isn’t a bank, your money is FDIC-insured through partners for up to $1 million.

Once you’re ready to invest, the Wealthfront minimum investment is $500.

If your portfolio is worth over $25,000, you’ll have an automatic line of credit with no application or credit checks. Since the portfolio secures your credit, you can enjoy rates between 2.45% and 3.70%, much lower than personal loans or even credit cards.

Setup & Ease-Of-Use

To open a Wealthfront investment account, you need:

  • US social security number
  • Permanent address in the US
  • Current residence in the US

The only exception is for government employees and active-duty military, who can contact Wealthfront and open an account.

There are three steps to get started with investing:

  • You need to fill out an automated questionnaire about your goals and risk preferences. Once you’ve done that, Wealthfront will come up with a personalized portfolio and send you to the investment plan page.
  • The investment plan page gives you suggested assets and percentages. This portfolio is based on your risk preference, but it’s still important to take your time and explore it. Wealthfront does a great job explaining what they chose, even if you have minimal investing experience and knowledge.
  • Open your account once you make sure you’re comfortable with the risk score.

Your funding should come from a US-based financial institution. You can link a bank account (for one-time or recurring deposits) transfer your account (or roll-over your 401k) wire transfer, or deposit a check (for 529 college savings plans only).

Portfolio Options

Overall, Wealthfront offers a diverse and well-balanced portfolio mix. They have 11 different asset options, with most accounts usually featuring six to eight asset classes:

  • US stocks — a core asset present in almost all portfolios
  • Foreign stocks which can balance out the overall risk of your portfolio since they respond differently to market events
  • Emerging markets stocks which are volatile, but provide high returns
  • Dividend stocks from well-established companies with a history of increasing dividends
  • Real estate investments that give your portfolio real estate exposure without having to purchase a property
  • Treasury inflation-protected securities, issued by the federal government, which provide returns and protect you from inflation-related losses
  • Municipal bonds (by US states and local governments) — stable and exempt from federal taxes, with tax-efficient returns
  • Corporate bonds that are higher risk than government bonds, but come with higher profit
  • US government bonds which are stable and have very low volatility
  • Emerging market bonds which provide high yields, but they have a higher risk
  • Natural resources investments which provide steady income, inflation protection, and some tax benefits.

If you have over $100,000 in taxable investment amount, you can also put up to 20% in Wealthfront’s Risk Parity Fund. Risk parity uses passive asset allocation similar to modern portfolio theory, but it has a history of better returns than MPT.

The downside is you can’t use the money in the fund to secure loans. Tax-loss harvesting for the income you make from the fund is also complicated. This is why Wealthfront limits the amount you can put towards this investing strategy.

Portfolio Management

The Wealthfront robo advisor automatically rebalances your portfolio to meet your risk preference and optimize tax efficiency. You can manually change your risk score, too. It’s a straightforward process and, once you’ve adjusted the risk tolerance, Wealthfront’s algorithm will change the exchange-traded funds to meet your new preference.

That said, changing your risk tolerance isn’t always a good idea. Wealthfront does a great job of educating less confident investors on market change and portfolio rebalancing.

Making other changes to your investment portfolio is also easy with Wealthfront. While the premise of their services is automation, they do give you flexibility.

Other Financial Services

Other than investment management, Wealthfront also offers banking and lending solutions. Here’s what you need to know about them:

Checking Accounts

Wealthfront reviews praise their cash account as one of the best high-interest accounts in 2020. They work with partner banks to make sure your cash earns an interest rate, but it’s also FDIC-insured. You only need $1 to open an account, and your money stays in completely liquid assets. Unlike your investment portfolio, cash accounts aren’t exposed to market changes but generate some income (more than regular banks give you.) There are no fees for this account, and you get unlimited withdrawals.

For your Wealthfront checking account, you can expect a 0.35% APY (the weighted APY average for all deposits,) which is five times higher than the industry average.

Borrowing

If you’re investing with Wealthfront, your portfolio can serve as collateral for a loan. The portfolio line of credit is fast, convenient, and cheaper than personal loans or credit cards. The Wealthfront interest rate currently ranges between 2.45% and 3.70%. The exact rate will move as US interest rates change.

Anyone with over $25,000 automatically qualifies for a loan, no application or credit checks. You can borrow up to 30% of your portfolio value and receive it in one business day. Since there’s no credit check, your credit score won’t be affected.

On the flip side, since your investments back up the credit, if their value falls significantly, you might have to repay part of the loan or sell some assets. Wealthfront has several buffers to prevent this, and limiting your loan to 30% of the portfolio is one of them.

Wealthfront Cons

Virtually every Wealthfront review in 2020 praises their efficient system for managing your portfolio. That said, we also found some recurring Wealthfront complaints.

Poor customer service is a major Wealthfront review negative. From long wait times to less-than-friendly agents, customers are often unhappy with their experience.

Wealthfront doesn’t offer consultations with a personal advisor to keep costs low. But, while their investment algorithm works just as well, there isn’t a specialist you can contact with your questions. The lack of person-based service interaction can lead to misunderstandings, and that’s where this complaint comes from.

The $500 investment minimum is another downside. While it’s not a large amount, some Wealthfront competitors will open an investment account for you with no minimum amount.
Finally, even though Wealthfront invests in various asset classes, they could diversify even more. Competitor Ellevest, for example, covers 21 asset classes.

Customer Service

Wealthfront reviews often mention poor customer service as the main downside of their service. Long wait times, less-than-friendly employees, and confusing information are just a few of the common complaints.

So, what is their customer service like, objectively?

You can contact customer support through a message form or on the phone. When we made a general inquiry through the form, they were quick to respond and resolved it in a single interaction.
But, if you do want to call them, you’ll have to log into your profile to even see the number. They provide support during business hours and wait times seem to vary a lot throughout the day.
Overall, they’re not impossible to contact, nor is their customer service terrible. Given the number of negative reviews, however, maybe they could stand to improve client support.

Wealthfront Fees & Commissions

The Wealthfront pricing is refreshingly simple:

  • 0.25% Wealthfront advisory fee
  • 0.06-0.13% expense ratio

You can calculate exactly how much you’ll pay for investing on the Wealthfront website. For instance, a $25,000 investment portfolio will have a $5.21 monthly fee.

The Wealthfront expense ratio doesn’t go to the company but rather to the investment fund. It’s taken directly out of your portfolio’s performance and varies between funds. Wealthfront tends to choose low-cost funds to keep your expenses as cheap as possible. The 0.06 to 0.13% ratio is the weighted average for all investment accounts.

The only case where the expenses go to Wealthfront is for the risk parity fund, and they’re still lower than similar third-party funds.

Mobile Apps

Wealthfront does have a mobile app for both Android and iOS. It’s free, user-friendly, and it worked smoothly on my Android device.

Use it to access your Wealthfront investing account, cash account, and even request loans. You can see all of your assets under management and link other accounts to see your overall financial situation and how you’re doing on your financial goals.
If you qualify for a portfolio line of credit, you can apply from your phone and get the money in as little as one business day.

Wealthfront Customer Reviews

Wealthfront reviews online are overwhelmingly positive, with customers praising the ease-of-use and excellent performance. Some downsides, however, also tend to crop up.

The Positives

Wealthfront is perfect for novice investors, people who prefer a hands-off approach, as well as those who want to save on taxes. The robust tax-optimization services draw a lot of users in. The Wealthfront review consensus on Reddit is that this is one of the best services for low tax burdens and affordable management fees.

Investors also enjoy the clean, user-friendly interface and clear explanations that help you make financial decisions. The overall ease-of-use, from setup to long-term investing, is one of the main perks of choosing the company.

How good is Wealthfront?

Most reviewers report a high Wealthfront average return, and they’re happy with their results. That said, how much you make will depend on the risk preference you set, your initial investment amount, and plenty of market factors.

The Negatives

Virtually every Wealthfront user that had to deal with customer service was unhappy with the experience. From long wait times to lack of expertise, client support seems to be a major weak point for the company.

The Wealthfront BBB rating is also worrisome. The Better Business Bureau rates how businesses interact with their customers. Wealthfront got an F for failing to respond to four complaints filed against them.

So, while Wealthfront offers excellent low-cost robo-advising, it seems they can improve their human interactions with clients.

Is Wealthfront Right for You?

Wealthfront is a digital investment advisor based on tried-and-tested investment strategy research. They are at the forefront of the financial technology revolution, providing professional investment management at a fraction of the price of hiring a consultant. With a diversified portfolio, robust tax optimization strategies, and just 0.25% in management fees, they’re a cost-effective alternative to help you save money for any goal. Still, there are some downsides to their service, like poor customer service and no financial advisor option. Overall, we think Wealthfront is an excellent service to make your money work for you, but it would be great to see them improve in these areas.

Alternatives of Wealthfront

While Wealthfront is one of the best robo advisors to automate your investing, they’re far from the only option. Here’s how they stack up to Betterment, their biggest competitor:

Wealthfront vs Betterment

Both Wealthfront and Betterment offer automated financial planning services with a research-based algorithm. Both charge an 0.25% management fee, and Betterment has no account minimum.
So, which is better? Let’s look at the results:

Wealthfront vs Betterment Performance

Both Wealthfront and Betterment publish their historical performance rates.

Betterment recorded an average annual return of 6.3% between 2004 and 2020. This outperformed the average private investor by 70.4%.

The Wealthfront annual returns are even better, with 7.41% since inception. Their tax-privileged accounts like IRAs did even better with 8.36%.

Comparing Wealthfront vs Betterment on returns is just one part of the equation. Pre-tax returns are the industry standard. Your actual income depends on taxation, and Wealthfront is a champion at optimizing this. Strategies like daily tax-loss harvesting, investing in dividends, and choosing funds with a low turnover index ensure your real earnings are as high as possible.

Final Thoughts

Our Wealthfront review shows that the company is leading the robo advisor way with affordable fees and impressive results. In addition to their financial planning and investment tools, extra services like the line of credit and high-interest checking account make the deal even sweeter.

Wealthfront Review - Company Logo

Editorial Rating

Wealthfront FAQ

What is Wealthfront?

Wealthfront is an online investment advisor that helps you grow your money and save up for big financial goals. Harnessing the power of research, they’ve developed an algorithm to automatically create a diverse portfolio based on your risk tolerance. Their robo-advisory service can invest your funds, optimize taxes, and increase your earnings. Their results are impressive, while their management fee makes investing accessible to everyone.

Is Wealthfront safe?

Yes, Wealthfront is a safe and efficient instrument to improve your investments and reach your financial goals. You receive a portfolio recommendation based on a standardized questionnaire to define your risk tolerance. While this can seem “less than” hiring an actual advisor, it has been shown that a monkey throwing darts can be just as good as predicting market movements as a trained expert. Wealthfront has developed a statistics-based strategy. The algorithm applies it to your investments, saving money in management fees. At the same time, Wealthfront’s annual returns prove that their strategy works and makes you money.

Is Wealthfront good for beginners?

Yes, Wealthfront is perfect for inexperienced investors. It’s affordable, easy to set up, and optimized for hands-off earnings. The investment algorithm does everything for you — from selecting the stocks and bonds to ensuring you pay as little as possible in taxes.

Are Wealthfront fees worth it?

Our conclusion is that they are. The Wealthfront management fee is more affordable than an advisor, and their investments outperform the majority of private investors. You pay an annual 0.25% fee and enjoy no hidden costs and high-yield investing. If you want to save on the fees, use the Wealthfront referral code promotion to get your first $5,000 managed for free.

Can Wealthfront make you money?

Yes, Wealthfront uses research-based algorithms to come up with the perfect investment portfolio for you. Then, they apply tax-optimization strategies to minimize the tax burden on your earnings. Historically, annual returns range from 4.23% (for the lowest-risk portfolios) to up to 8.06% for higher-risk investments.