Wealthfront Review 2024 (2024)

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Introduction to Wealthfront

Wealthfront is an automated investing platform offering ETFs, index funds, crypto trusts, portfolio lines of credit, socially responsible portfolio options, and more. Moreover, Wealthfront just launched a new automated bond portfolio of low-cost bond ETFs.

While it's great for socially responsible investing and for hands-off investors who don't want to trade on their own, Wealthfront also gives you a bit more control by allowing you to customize your portfolio's ETF allocations.

It does require a high $500 minimum, which many of the top robo-advisors (such as SoFi and Fidelity) don't require. It incurs a 0.25% annual fee (not including fund fees). And you can't utilize one-on-one advisor guidance like you'd be able to with SoFi or Betterment. Plus, if you're more of a crypto-focused investor, you'll only be able to allocate up to 10% of your portfolio to crypto trusts.

How Wealthfront Works

Individual and Joint Brokerage Accounts

You can start investing with an individual brokerage account or another person for a joint brokerage account. And though its minimum is higher than many other robo-advisors (such as Betterment, or Ellevest)it offers access to the following features:

• Tax-loss harvesting: With this strategy, Wealthfront replaces any securities that have suffered loss and reinvest the funds into other assets that match your portfolio's target. You can then write off those losses on your tax return, lowering your tax bill. However, crypto trusts are not eligible for tax-loss harvesting.
• US direct indexing (formerly called stock-level tax-loss harvesting): Wealthfront says it works to harvest even more losses by searching for price changes within individual stocks in the US stock index. You'll need a minimum of $100,000 to utilize direct indexing.
• Risk parity: This approach uses an asset allocation strategy that aims to boost your risk-adjusted returns. As with US direct indexing, you'll also need a minimum of $100,000 for this strategy.
• Smart beta: Wealthfront focuses on increasing your returns by weighting your portfolio's assets more strategically. You'll need at least $500,000 in your account to use this feature.

And it currently allows for an allocation of crypto trusts of up to 10% of your portfolio to protect against risk. While its crypto offering is uncommon for robo-advisors, investors who want to solely focus on crypto should consider other platforms.

Retirement Savings Accounts

• Traditional IRA:A retirement savings account are tax-advantaged accounts that are funded by pre-tax dollars. The 2023 contribution limit set by the IRS is $6,500 if you're under 50 (or $7,500 for those 50 or older). You only pay taxes on the amount you withdraw when you're at least 59 1/2. If you withdraw funds before that age, you'll be charged a 10% penalty fee.
• Roth IRA: It's funded by after-tax dollars and unlike a traditional IRA, your contributions grow tax-free. You can start withdrawing funds when you're at least 59 1/2 years old (or you'll be charged a 10% early withdrawal penalty fee). The 2024 contribution limit is $7,000 if you're under 50 (or $8,000 for those 50 or older).
• SEP IRA:Simplified Employee Pension (SEP) IRAs are retirement savings plans established by self-employed persons or small business owners. Contributions grow tax-deferred (so you'll pay taxes when you withdraw). You can contribute up to 25% of your salary or $69,000 in 2024, whichever is lower.

Socially Responsible Portfolios

Wealthfront's socially responsible option is best for investors with long-term goals and who want to make an impact with their money. These portfolios rely on Blackrock funds that track socially responsible indices defined by MSCI. Depending on your risk tolerance, Wealthfront's robo-advisor will create a diverse portfolio of municipal bonds, US stocks, TIPS, foreign-developed stocks, emerging market stocks, and US bonds.

Stock Investing Account

You can design your own investment portfolio with the 100% self-managed Stock Investing Account, which is for advanced traders looking for DIY stock trading. With DIY stock trading, you can also invest in fractional shares (not available for automated investing), dividend blue chip stock (includes Dow 30 companies with a minimum dividend yield of 3%), as well as more than 35 pre-built stock collections.

529 College Savings Plans

You can also save toward higher education for dependents with Wealthfront's automated 529 plan. The robo-advisor simplifies this process in three steps:

• Cost layout: It uses data from the Department of Education to display how much your desired college will cost when your dependent is expected to start school. Wealthfront also says this projection accounts for inflation, including tuition, expenses, and how much financial aid may be available.
• Goal-setting: Wealthfront helps you set a monthly savings goal that aligns with your expected future education costs.
• Recommendations: If you have other goals beyond saving for education, Wealthfront will offer advice on how to successfully work toward both while staying on track financially.

High-yield Bond Portfolio

On June 8, 2023, Wealthfront expanded its robo-advising features to launch an automated, high-yield bond portfolio of personalized low-cost bond ETFs. The account focuses on recommending valuable assets and maximizing after-tax earnings. The bond ETFs are a blend of corporate bonds, floating-rate bonds, and tax-advantaged treasuries.

It pays a 5.59% yield, which is higher than Wealthfront's own cash account that pays 5.00% APY (Annual Percentage Yield). The 5.59% yield is the 30-day blended SEC yield after you pay any fees.

Options

Investment availability depends on the account and/or portfolio you are investing in. Investment options will also vary based on factors like goals, risk tolerance, and time horizon. Wealthfront offers a large selection of investment options, including municipal bonds, US stock, TIPS, corporate bonds, dividend growth stocks, US bonds, foreign developed stocks, crypto trusts, bond ETFs, and emerging market stocks.

Its new high-yield bond portfolio invests in bond ETFs, which are an accumulation of corporate bonds, floating-rate bonds, and tax-advantaged treasuries.

Wealthfront does offer crypto trading on a small selection of statuary crypto trusts, like bitcoin and ether. You can't invest in individual coins or tokens.

Wealthfront Fees

Wealthfront's automated account requires a $500 minimum to get started, and there's a 0.25% account management fee. But if you want to dodge these fees, Wealthfront's stock investing account (which is not an automated account) only requires a $1 account minimum and doesn't charge a management fee or commissions.

With Wealthfront's 529 plan, you won't have to pay any federal taxes on withdrawals you make, as long as they're for qualified education expenses. However, underlying fees (such as commissions and portfolio management) may go up to 0.46%.

Some account features require much higher account minimums. Both risk parity and US direct indexing require a minimum of $100,000, and smart beta requires at least $500,000 in your account.

Pros and Cons of Using Wealthfront

Wealthfront automated investment accounts provide multiple account options (including a 529 plan, retirement savings accounts, and more) that are great for passive investors. The platform even stepped up its game by launching its new automated bond portfolio for low-risk investing. These accounts also offer great account features like tax-loss harvesting, auto-rebalancing, and smart beta.

On the downside, Wealthfront's robo-advisor accounts have higher minimums than similar investment platforms (like SoFi, which has a $1 minimum). Also, it only has investment options for crypto trusts (not the coins or tokens themselves), and these trusts are not eligible for certain features like tax-loss harvesting.

Wealthfront Trustworthiness

The Better Business Bureau gives Wealthfront an F rating to reflect its opinion of how well the robo-advisor interacts with its customers. According to the BBB website, Wealthfront has an F because there are 11 customer complaints against the company, and it hasn't responded to six of them.

While BBB ratings don't guarantee a company's reliability or performance, they take into account several factors, including licensing and government actions, bankruptcy, advertising issues, and more.

Wealthfront does not have any recent public controversies.

Wealthfront vs. Other Robo-Advisors

Wealthfront vs. Betterment

Wealthfront and Betterment have both been in business since 2008. Both primarily offer robo-advice, and both support several account types, including individual and joint accounts, trusts, IRAs, and cash accounts.

One big difference to note is that Wealthfront offers more investment types. You can invest in ETFs, index funds, and crypto trusts (it currently offers the Grayscale Bitcoin Trust (GBTC) and the Grayscale Ethereum Trust (ETHE)). Betterment also offers ETFs, but it gives you direct exposure to cryptocurrencies by offering four crypto portfolios.

Wealthfront also offers DIY trading for stocks, but you'll need to open a stock investment account that is separate from the automated investing account.

Since you can invest in up to 23 different cryptocurrencies with some of its portfolios, Betterment is the stronger choice for crypto investors.

Betterment also has Wealthfront beat when it comes to financial advisor guidance. It offers ongoing Certified Financial Planner (CFP) access with its premium account, and digital plan users can even buy a one-time CFP consultation package if needed. Wealthfront doesn't offer advisor guidance.

Wealthfront vs. Vanguard

Wealthfront and Vanguard serve different purposes. Though it offers an ETF portfolio customization option, Wealthfront is mainly for hands-off investors who want a computer algorithm to manage their portfolios for them (unless you open a separate stock investment account). Vanguard, however, offers both a variety of self-directed brokerage accounts and automated accounts.

You'll need less money to set up an automated account with Wealthfront than you would with either of Vanguard's automated accounts; Vanguard Personal Advisor requires a $50,000 minimum and Vanguard Personal Advisor Select requires a $500,000 minimum.

Vanguard could be the better choice for those who want to work one-on-one with financial advisors. Its Vanguard Personal Advisor Services account gives you access to both automated investing and guidance from a Vanguard Fiduciary advisor.

Wealthfront — Frequently Asked Questions

Methodology: How We Reviewed Wealthfront

We examined Wealthfront automated investing using Personal Finance Insider's rating methodology for investing platforms to compare and examine account types, pricing, investment options, and overall customer experience when reviewing investing platforms. Platforms are given a rating between 0 to 5.

Investment platforms usually offer multiple assets, trading tools, fees, and other resources. Some investing platforms are better for more advanced investors or active investors, while others may better suit beginner investors and passive investors. Wealthfront was evaluated with a focus on how it performs in each category.