Wealthfront Review - Is It the Best Robo-Advisor? – The Finance Twins (2024)

Investing can seem like a daunting task for most Americans. In the past, complicated financial systems, private brokers, and high minimums kept people from taking advantage of investing. Thanks to financial tools like Wealthfront, investing’s long-standing hurdles are starting to disappear.

But what is Wealthfront, and how does it work? Is Wealthfront safe? And, most importantly, should you use it? Find out the answers to all of these questions and more in this Wealthfront review.

What Is Wealthfront?

Wealthfront is a robo-advisor geared towards helping the average person invest. By providing high-quality advice through Wealthfront’s online questionnaire, you can learn how to invest and set yourself up for financial success without a traditional financial advisor’s high costs.

One of the biggest draws to Wealthfront is its wide range of expertise. Compared to many alternatives, Wealthfront helps you plan for your future using a more complete picture of your financial life.

One of Wealthfront’s largest competitors is Betterment, and you can read our full review on that company to learn more!

How Does Wealthfront Work?

Wealthfront uses its free, online form to assess key factors that help determine how you should invest. This includes how much risk you’re willing to take, as well as what type of account you want to invest in.

After gathering this information, Wealthfront can choose a portfolio that best suits your preferences.

Although these can vary in terms of which specific assets your portfolio has, you can rest assured knowing that Wealthfront does an excellent job managing diversification. This means that regardless of how much risk you choose to take, you’ll be protected against extra unnecessary risk.

Using their computer algorithm, Wealthfront also takes care of a lot of the nitty-gritty details that come with managing an investment. Things like portfolio rebalancing and tax-loss harvesting are all done for you.

All of these services are paid based on a small percentage of your portfolio’s total worth. This is pretty standard practice across robo-advisors, but there are free options like M1 Financecurrently available.

What Makes Wealthfront Unique?

Wealthfront is likely your best bet for a robo-advisor that can help plan all aspects of your financial life.

Although Wealthfront has a $500 minimum to start investing, it also has a relatively low management fee. This means you’re paying less to invest with Wealthfront than you would with many other brokerages.

In exchange for the management fee, your portfolio gets the benefits of modern portfolio theory. This includes buying and selling investments in a way that keeps your tax bill as low as possible and buying ETFsthat have special low costs.

Plus, Wealthfront is exceptional at creating well-diversified portfolios. There’s no shortage of information about why you need to diversify, but the short answer is that it helps give you the best bang for your investing buck.

But, Wealthfront’s specialty is far and away its free financial planning service: “Path.” Path is an advice engine that acts as an automatic version of the advice you’d receive from traditional financial planners.

Thanks to this automation, Wealthfront can give you the same or similar information as an in-person financial planner without all the costs.

If you’re at all interested in learning more about best investment practices, or you like the extra flexibility given by a more traditional financial planner, you’ll love Wealthfront and Path.

They also recently announced Autopilot, which is a service which you can use to automatically invest excess cash that you have in the bank. Put simply, you can tell Autopilot that you only need $2,000 in your bank account and they’ll monitor your account and invest any extra cash that might enter your account.

But don’t worry, you’ll have 24 hours to cancel the transfer in case you decide you need the extra cash on hand.

This automatization of investing is an incredibly powerful tool, and is backed by Nobel prize winning economic research that shows that automating financial decisions like this will greatly improve your ability to invest more money over time.

Which means you’ll likely build more wealth than if you did it all on your own!

Pros & Cons Of Wealthfront

Wealthfront Pros

• Low-cost ETFs
• Tax-loss harvesting
• Portfolio rebalancing
• Accounts for 529 accounts and college funds
• Cash accounts for liquid money
• Automatic diversification
• Autopilot service

Wealthfront Cons

• Lack of flexibility in investments
• Inability to invest in fractional shares
• $500 account minimum

How Much Does Wealthfront Cost?

For Wealthfront’s standard accounts, you’ll pay a 0.25% annual advisory fee. So if, for example, your portfolio has $10,000 worth of assets in it, you would pay $25 for the year. Although these types of fees can certainly add up over time, Wealthfront has one of the lowest ones out there.

If you happen to use Wealthfront’s special Risk Parity Fund, a mutual fund that invests in assets known for higher returns, you’ll pay 0.50% annually rather than 0.25%.

Part of this fee does go directly to Wealthfront, but the Risk Parity Fund is reserved for people who have at least $100,000 in their account. So, for anyone just starting out, you likely won’t be dealing with this.

Also, if you do have at least $100,000 but don’t want to invest in this fund, you can always opt-out.

It’s worth noting that you can still use Path without having your account managed by Wealthfront. This means you always have the option to get professional-grade advice without paying anything at all. That’s a pretty sweet deal if you ask me!

Is Wealthfront Safe?

The short answer is, yes. All accounts with Wealthfront have SIPC insurance, which covers up to $500,000 in securities or $250,000 in cash. This means your investments and accounts are safe in the unlikely event that Wealthfront declares bankruptcy.

While a security breach is always possible with any company, Wealthfront encrypts your personal data via a third-party.

Plus, Wealthfront doesn’t allow its servers to store your account’s password, meaning any leaks would not compromise your account. This means using Wealthfront to invest involves minimal security risk.

How Does Wealthfront Make Money?

Wealthfront makes most of its money through its annual 0.25% fee. Though it also earns money with its Risk Parity Fund, this is a less commonly used option and doesn’t factor heavily into Wealthfront’s bottom line.

How Is Wealthfront’s Customer Service?

The bulk of Wealthfront’s customer service takes place online. This means you’ll mostly be using the FAQs on Wealthfront’s site to get help.

But, if you do find yourself in need of some more personal assistance, Wealthfront also has an over-the-phone support system that’s available from 10 am – 8 pm ET, Monday through Friday.

While the combination of these two services was enough to answer all of the questions I myself had, if you prefer speaking with an in-person advisor or want a live chat system, you’re unfortunately out of luck.

What I Wish Was Different About Wealthfront

Outside of increased ways to contact their customer service team, my main grievance with Wealthfront is their lack of flexibility in picking your own investments. In a way, this is also its strength.

Wealthfront doesn’t allow you to handle many specifics of your portfolio. This is great if you’re just looking for a way to invest passively, but for someone who wants a more hands-on approach, you may be disappointed.

How Does Wealthfront Fare Against Competitors?

Wealthfront recently made our list as one of the best Robinhood alternatives currently available. In terms of low-cost, passive investment platforms, Wealthfront is difficult to beat. The inclusion of Path as an entirely free feature also helps put Wealthfront ahead of the competition when it comes to planning out your entire financial picture.

But, that’s not to say there isn’t some great competition out there. M1 Finance has no annual fees whatsoever. Betterment is an extremely popular robo advisor as well. Robinhood offers fractional shares and no account minimums. And, Webull has a ton of technical tools for someone who wants to be a more active investor.

See how Wealthfront stacks up against Betterment: Wealthfront vs Betterment review

At the end of the day, Wealthfront is going to do well against the competition in terms of making investing easy and handling the most difficult parts. Just know that it’s not the only great option out there.

How To Get Started On Wealthfront

Getting started on Wealthfront is easy and only takes a few minutes!

When you first open Wealthfront or go to their website, you’ll create an account with a username, password, and email address. Next, include your current savings and pre-tax income and pick your investment goals. These goals can be anything from retirement to a down payment on a house.

Then, go ahead and add any of your bank accounts that you want to be included in your portfolio.

Wealthfront has many of the most popular banks to choose from, including Chase, Bank of America, and Wells Fargo. You shouldn’t have any trouble finding your accounts.

After linking your accounts, you’ll fill out a brief questionnaire to determine your risk tolerance and viola! You’re ready to use Wealthfront.

Should You Use Wealthfront

Most people will probably find Wealthfront to be a fantastic fit for their needs. You can use free tools to get high-quality financial advice. And for a low fee, you can have them manage your investments to make your life easier.

For those of you who want to handle every detail of your portfolio on your own, Wealthfront probably isn’t for you. The same goes for anyone looking for an in-person advisor or someone who is still learning how to save money.

But, if you already have $500 saved up, have good savings habits, and want a very hands-off approach to investing, you should check out Wealthfront. Even if you don’t end up having them manage your finances, you can always freely use Path!

Sign up for Wealthfront here to get started now!

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