Robo-advisor Wealthfront has announced the launch of a new portfolio analysis tool, Wealthfront Portfolio Review, that will provide detailed advice and analysis to investors, including those who are not Wealthfront clients.
In a Jan. 12 blog post on the company’s website, CEO Adam Nash wrote that Wealthfront developed the tool to help investors minimize fees. He cited State Street and Boston Consulting Group data that show U.S. investors spent more than $277 billion on fees related to managing their investments in 2014. Wealthfront estimates that investors can avoid 80% of those costs by moving into low-cost index fund portfolios like the ones it builds for its clients out of exchange-traded funds.
Wealthfront Portfolio Review is offered, in part, to help the company attract more such clients. Once the largest independent robo-advisor, Wealthfront was passed by competitor Betterment in assets under management last year.
The review tool looks only at taxable brokerage accounts, but a note on the website indicates that the ability to analyze tax-advantaged accounts is on its way.
The tool evaluates portfolios based on four factors: fees, taxes, cash drag and diversification. Once a user creates a free account on Wealthfront, he can plug in the username and password for his brokerage account, then answer a series of questions related to goals, assets and risk tolerance. The tool will then return a customized report.
The fee analysis includes all of the fees paid by the account, including product fees, transaction costs and advisory fees, and reports how current fees paid compare to Wealthfront fees over a 30-year time horizon. The cash drag component helps investors determine how much of their portfolio should be held in cash for emergencies and calculates the value that investing extra cash could add to the portfolio.
The hope is that a user will take that information and be motivated to open an account with Wealthfront. Wealthfront Portfolio Review is integrated with the company’s Tax-Minimized Brokerage Account Transfer service, which helps customers minimize taxes when transferring assets to the robo-advisor by incorporating existing investments, waiting until capital gains become long-term, and using Wealthfront’s tax-loss harvesting and direct indexing services.
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