Wealthfront Review – 100% Another Solid Robo-Advisor!
Welcome to my Wealthfront review!
This is one of the top performing robo-advisors on the market today, and provides a service that once needed an expensive personal financial advisor to receive.
They’re quite popular and manages close to $11.5 billion in assets since its release.
This is Wealthfront.
First of all, I must Congratulate you for taking your time to do your own research before buying into any "seemingly good" product.
That's the way to avoid scams and find the legitimate way to make money online!
Let me be completely transparent with you, I'm not associated with Wealthfront in any form.
So, rest assured that I'm not here to pitch or sell anything to you.
Instead, I'm here to reveal why this is a good robo-advisor and why it's one of the best in the industry today.
Wealthfront Review Summary
Product Name: Wealthfront
Founder: Not disclosed
Product Type: Financial Investment and Wealth Managment Platform
Price: 0.25% management fee for accounts in excess of $5,000.
Best For: People looking for an accessible robo-advisor.
Summary: Wealthfront is considered to be one of the best robo-advisors in the market today and is also one of the most accessible ones at that. With low management fees, a great referral program, and access to emergency cash funds, Wealthfront gives you long-term financial flexibility and security. That's why if you're serious at investing your money, Wealthfront is worth the consideration.
What is Wealthfront?
Wealthfront is a robo-advisor that provides you with automated investment features that would normally require a human personal advisor to do so.
They’re quite popular because all you have to do is invest your cash in a Wealthfront account. You can also opt for a tax-deferred Individual Retirement Account or IRA.
Like most robo-investing services, Wealthfront uses MPT or Modern Portfolio Theory to automate the asset allocation process.
This takes into account your risk tolerance and financial goals to continually ensure that allocations are correct with automatic rebalancing.
Similar to Betterment, which is another robo-advisor investment platform, Wealthfront also works with human financial experts, led by legendary economist Burton Malkiel.
Much like other robo-advisors, Wealthfront has you filling up a questionnaire to help assess your risk tolerance and to determine your asset allocations.
Wealthfront will then proceed to create a portfolio of stock, real estate ETF’s, and bond that get you a broad financial exposure.
Simply put, Wealthfront makes sure that your money is allocated into the best possible way to keep you profitable at all times.
In the next section, I will be going over real quickly on what features you can expect from Wealthfront:
Automated Portfolio Rebalancing
Your portfolio is automatically rebalanced by keeping your allocations amongst stocks, bonds, and other sectors in balance.
What this means is that your portfolio is not intended to just be invested into one sector alone. You’re going to have portfolio diversification through the Automated Portfolio Rebalancing.
This is done on a daily basis, so it continually buys assets when they are low and sells when they are high.
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Automated Tax-Loss Harvesting
You’re allowed to take some capital losses to reduce your taxable amount for that year each year.
The amount that you can write off depends on your income level, but you’re probably looking at $3,000 most of the times.
Financial advisors from Wealthfront (human ones, by the way) will review your portfolio at the end of the year and will sell some losers (stocks that were once high when you bought them but are now priced low) to help you meet the deduction.
This is done automatically through their Automated Tax Loss Harvesting feature.
Stock-Level Tax-Loss Harvesting
To optimize your earnings via taxable accounts, Wealthfront focuses on Stock-Level Tax Loss Harvesting as a way to improve the results of tax loss harvesting while keeping the fees minimal.
Here’s how it works:
Instead of using ETFs or Index Funds to invest in US Stocks, Wealthfront directly purchase up to 1,001 individual securities on your behalf.
This allows them to take advantage of the tax loss harvesting opportunities available through the movement of these individual stocks – something that will lead to greater gains in the long run.
Stock-Level Tax Loss Harvesting gets you up to 2.03% increase in your annual earnings.
Dividend Reinvestment Aids Rebalancing
Normally, when you get dividends from a traditional human broker, the only choice is to take the dividend in cash or to reinvest in the same mutual fund. This allows you to get more dividends in the long run.
Wealthfront gives you this feature by taking your dividend payment from a stock ETF and invest it in another bond ETF that’s priced too low.
This is a more efficient use of your cash generated from your account.
Wealthfront Invite Program
You can join Wealthfront’s referral program by inviting friends to sign up for the service and fund their account.t
The current program offers free management to referees of an additional $5,000 in assets for every person invited into the service that funds their account.
To get into Wealthfront, a minimum deposit of $500 is required to avail of all their features.
Then there are the fees that you’ll need to pay every year.
The fee structure is straightforward. The first $5,000 in your account is managed for free.
Anything in excess is charged 0.25% management fee.
So a $10,000 investment would get me $12.5 per year.
This is how I did the math:
$5,000 (freely managed) is deducted from the $10,000, and then multiplying the balance by 0.0025.
Another fee that you have to pay is the ETF’s themselves. The average ETF fee is at 0.12%, which is lower than industry standards.
Who's Wealthfront For?
Wealthfront might be appealing for three different kinds of user groups:
- Long-term passive investors who want to set and forget and are patient to wait for their money to grow.
- Novice investors looking for a stable platform to automate and simplify their investing.
- Everyday Joe and Jane who want to use a robo-advisor that’s easy and affordable.
What I Like About Wealthfront?
#1 – Reasonably Priced Fees Make This Program Affordable
Based on the math that I showed you above, their fees are lower than most robo-advisors.
You’re looking at spending only $12.5 a year to manage $10,000 in assets, but note that’s going to go higher if your balance goes up too.
#2 – Access To A Portfolio Credit Line
This gives you to borrow money against your portfolio with ease, and represents a form of margin investing.
This allows you to loan an amount less than or equal to your entire portfolio without taking the cash out from your portfolio.
So, if I have a portfolio of $25,000, I can get a loan of let’s say $10,000 or up to $20,000. This allows me to have some form of extra cash lying around or for those rainy days.
#3- Great Referral Program!
Their referral program is what helps you invest larger amounts while paying minimal fees.
Again, you get an extra $5,000 managed for free for each time a person signs up through your referral URL and funds their account.
Your friends, or the people who sign up through your account, also get an extra $5,000 managed free.
Wealthfront Ugly Truths Revealed!
#1 – No Fractional Shares!
This is where Betterment does better than Wealthfront.
Wealthfront doesn’t do anything about the cash sitting in your account, unlike Betterment where anything extra is invested automatically.
#2 - $500 Minimum Deposit!
To be honest, it is a small issue but I would address that Wealthfront’s competitors don’t require a minimum deposit.
This might put off people to use Wealthfront since there are others out there that are quite similar to the platform.
If you’re quite tight for funds, then you’re probably not going to want to use Wealthfront.
Is Wealthfront a Scam?
Wealthfront is a legitimate robo-advisor that’s been around for 8 years and is managing billions of dollars in assets.
Much like Personal Capital and Betterment, Wealthfront is right up there with platforms I would recommend for investing.
Wealthfront makes it quite accessible to others because of its minimal fees and it provides you with financial flexibility through its credit line.
Their referral program also makes it possible for you to invest larger amounts while paying less fees at that.
I would personally recommend this platform if you’re looking at robo-advisors for long-term investing.
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