Advertiser Disclosure

Wealthfront Review 2019

Feb. 14, 2019
Advisors, Investing
At NerdWallet, we adhere to strict standards of editorial integrity to help you make decisions with confidence. Many or all of the products featured here are from our partners. Here’s how we make money.

Wealthfront offers the kind of holistic financial advice and automated investment management that appeals to new and experienced investors alike: helpful planning tools, diversified — and hands-off — portfolios and advanced tax optimization strategies. The robo-advisor currently has $11.2 billion in assets under management.


NerdWallet is a free tool to find you the best credit cards, cd rates, savings, checking accounts, scholarships, healthcare and airlines. Start here to maximize your rewards or minimize your interest rates. Arielle O'Shea

Quick facts

  • Management fee: 0.25%; several services are free.
  • Account minimum: $500.
  • Promotion: NerdWallet readers get $5,000 managed for free.
Get started on Wealthfront's secure site

Compare Wealthfront with other robo-advisors.

Wealthfront is best for:

  • Hands-off investors.
  • Taxable accounts.
  • Free financial tools, even if you don’t have a Wealthfront account.
  • 529 college savings plan management.

Wealthfront at a glance

Overall
5.0 NerdWallet rating
Account minimum
$500
Account management fee
0.25% (first $5,000 managed free for NerdWallet readers).
Investment expense ratios
ETF expense ratios average 0.08%.

Portfolios that include the Wealthfront Risk Parity Fund may have an overall expense ratio of 0.11%.
Account fees (annual, transfer, closing)
None.
Portfolio mix
ETFs from 11 asset classes (portfolios generally consist of 6 to 8). Individual stocks held in larger accounts.
Accounts supported
  • Individual and joint non-retirement accounts.
  • Roth, traditional, SEP and rollover IRAs.
  • Trusts.
  • 529 college savings plans.
  • Cash account (not charged management fee).
Tax strategy
  • Daily tax-loss harvesting on all taxable accounts.
  • Stock level tax-loss harvesting on accounts over $100,000.
  • Smart beta on balances over $500,000.
  • TurboTax customers can easily import tax-loss harvesting data from Wealthfront.
Automatic rebalancing
Free on all accounts.
Human advisor option
None.
Tools
  • Robust and free financial-planning tools (available even if you don't have a Wealthfront account) to help plan for life events, including retirement, home purchase, college and extended travel.
  • Ability to link outside accounts.
  • Portfolio line of credit also available.
Customer support options (includes website transparency)
Phone support Monday-Friday 11 a.m. to 8 p.m. Eastern; email support.
Promotion
NerdWallet readers get free management on the first $5,000 invested. Refer a friend and you both get an extra $5,000 managed free.

Where Wealthfront shines

Investments: Wealthfront has some heavy hitters behind its investment strategy, including Chief Investment Officer Burton Malkiel, senior economist at Princeton University and author of “A Random Walk Down Wall Street,” an investing classic. The company’s methodology includes giving investors a streamlined questionnaire to identify risk tolerance, then employing exchange-traded funds in up to 11 asset classes.

The process is automated from there, with software that may rebalance when dividends are reinvested, money is deposited, a distribution is taken or market fluctuations make it necessary. Wealthfront uses threshold-based rebalancing, meaning portfolios are rebalanced when an asset class has moved away from its target allocation, rather than on a quarterly or yearly schedule.

Wealthfront’s investment mix covers U.S. stocks, foreign stocks, emerging markets, dividend stocks, real estate and natural resources, as well as emerging markets bonds, Treasury inflation-protected securities, and U.S. government, corporate and municipal bonds. The typical portfolio includes six to eight asset classes.

In February 2018, Wealthfront added a new, proprietary mutual fund called the Wealthfront Risk Parity Fund, available to customers with $100,000 or more in a taxable account. The company says the fund offers greater exposure to asset classes with higher risk-adjusted returns.

The caveat? Though the expense ratio on the fund is lower than other risk parity funds, it is slightly higher than the other funds used in Wealthfront portfolios: 0.25%, bringing the weighted average expense ratio of portfolios that include the Wealthfront Risk Parity Fund to 0.11% (no more than 20% of a customer’s account can be invested in the fund). Plus, this is the one fund in Wealthfront’s lineup where the company itself benefits: Investors are paying that expense ratio to Wealthfront.

Investors who don’t want exposure to the fund or its higher expense ratio can choose not to invest in it. (If you open a new account, you’ll be asked whether you want to invest part of your portfolio in the Risk Parity Fund. If you don’t yet have $100,000 invested at Wealthfront and you sign up for the fund, you’ll receive emails reminding you when your account reaches that size. At any time, you can opt out of the fund by going to your account settings.)

Management fees: Wealthfront charges 0.25% for management, though the first $5,000 invested is managed for free if you sign up through NerdWallet. The company’s biggest independent competitor, Betterment, also charges 0.25% for its digital service. (For a full description of that company’s services and fees, read our Betterment review.)

Wealthfront also has a referral program. If you invite friends and they fund an account, the company will waive fees on $5,000 for each of you.

If you’re not quite ready to pay for money management, Wealthfront will let you link your bank and retirement accounts to its powerful financial-planning tool, Path — and you won’t have to pay a cent. If you decide you want Wealthfront to manage your money for you, you’ll start paying the 0.25% fee. Keep reading below for more on how Path works.

Tax efficiency: Wealthfront offers daily tax-loss harvesting on all taxable accounts. New clients who transfer in assets may benefit from its Tax-Minimized Brokerage Account Transfer service. That service incorporates existing investments into the Wealthfront portfolio where possible and holds transferred securities that can’t be incorporated until capital gains become long-term.

iOS-dashboard

For accounts with balances of $100,000 or more, Wealthfront beefs up its tax optimization services with stock level tax-loss harvesting. The basics: It’s harder to use tax-loss harvesting when you’re buying an index, so Wealthfront replicates the U.S. stocks index by buying the stocks held in it directly — up to 1,001 of them. Then its software can look for individual tax-loss harvesting opportunities. That tax savings can be reinvested, which compounds the potential impact of the service.

And for taxable accounts with balances over $500,000, the robo-advisor offers multifactor smart beta, where it weights the stocks in a portfolio based on various factors, including low volatility and high dividend yield, to further power potential returns, all for the same advisory fee that applies to all accounts.

If you’re a TurboTax user, when you file your taxes you can enter your Wealthfront account login information to import your tax-loss harvesting data. (Also, for those setting up a new account at Wealthfront, TurboTax customers can easily populate the account form using their TurboTax log-in.)

Financial planning: Wealthfront’s free Path tool (for mobile and desktop) helps people plan for buying a house, retirement, college and general savings goals — and you don’t have to open a Wealthfront account to use it.

If you’re looking to build a retirement savings plan, the tool pulls in your current spending activity from your linked accounts, analyzes government data on spending patterns for people as they age, and then crunches the numbers to estimate your actual spending in retirement. The Path tool also incorporates long-term Social Security and inflation assumptions in its retirement-plan calculations.

In addition to bank and investment accounts, you can link your Coinbase account to track your cryptocurrency holdings.

Path’s home-planning tool incorporates your financial situation, home prices and mortgage rates to give you an estimate of how much house you can afford to buy. The tool lets you adjust your savings time frame to see different results, because you’ll be able to afford a bigger mortgage, say, in 10 years than you can right now. The tool also offers tips for how much to save each month and the best accounts to save in. Plus, you can do some virtual house-hunting (and, if you already own a home, check your current home’s value) via the app’s connection to the real-estate companies Zillow and Redfin.

Wealthfront also offers Time Off for Travel, a travel-planning tool that helps investors figure out how much time they can afford to take off, how much they can spend on travel and how that spending could affect their ability to reach other goals.

iOS-college

College savings: Wealthfront’s Path tool also lets parents pick the college they want their child to go to, then projects college costs, estimates financial aid and develops a monthly savings plan. Parents can link an outside 529 college-savings account or open one through Wealthfront, which is one of the few robo-advisors to offer its own 529 college savings plan. The service will walk users through opening a 529 account, recommend a savings goal and manage the account — slowly skewing conservative as the child approaches college age — for an all-in fee of no more than 0.46%, depending on investment expense ratios. The plan is sponsored by Nevada.

Investors should carefully evaluate Wealthfront’s 529 offering compared with their own state-sponsored plan, especially if your state offers a tax deduction or credit to residents who contribute; choosing the Wealthfront 529 would mean giving up that tax benefit.

Line of credit: Wealthfront customers who have at least $100,000 in their account can borrow up to 30% of the value of their portfolio, without filling out an application, undergoing a credit check or paying any fees. Wealthfront currently charges annual interest rates of between 4.5% and 5.75%.

High-interest savings: In early 2019, Wealthfront launched the Wealthfront Cash Account, a savings account that pays 2.24% interest, competitive with many online banks. Most notable about the account is that through white-label agreements with several banks, Wealthfront is able to offer up to $1 million in FDIC coverage, four times more insurance than the average bank account. Like other savings accounts, money deposited in the Wealthfront Cash Account is not subject to investment risk. The account charges no fees, and clients who also have Wealthfront investment accounts will not pay a management fee for money in the cash account.

Where Wealthfront falls short

Cash balance: Wealthfront doesn’t buy fractional shares of exchange-traded funds, which prevents the company from investing your entire deposit. Also, it maintains a cash balance equal to the fees you’re projected to owe over the next year, so accounts are likely to experience a small level of cash drag. The percentage held in cash isn’t nearly as high as Schwab’s allocation, which is a minimum of 6%, but it’s worth noting for investors who would prefer the fractional shares offered by other robo-advisors.

How Wealthfront stacks up

Wealthfront is a key force in the online advisor industry and offers competitive fees, free management of balances under $5,000 (with NerdWallet’s reader promotion) and one of the strongest tax-optimization services available from a robo-advisor. It’s also one of the only online advisors that has remained strictly a robo-advisor, with no human advice offering.

The comparison to Betterment — which offers human advice via in-app messaging, along with a premium plan that includes phone support from human advisors — hinges on what kind of advice you’re looking for. Wealthfront is likely the best choice for clients who don’t need or want human advisors. And keep in mind that Wealthfront has been expanding its digital advice offering; their retirement, home and college tools are robust and entirely free. Still, for clients who do want the option of speaking with a human advisor, Betterment is worth considering.

Wealthfront vs. similar robo-advisors

"Wealthfront has built client trust by offering free management on the first $5,000 — with NerdWallet’s promotion — but the company’s direct indexing service really shines, adding as much as 2% to annual investment performance for eligible accounts. "

Arielle O'Shea, NerdWallet Investing

Read Full Review

Management Fee

0.25%

0.25%

Account Minimum

$500

$500

Promotion

$5,000

$5,000

amount of assets managed for free

Management Fee

0.25%

0.25%

Account Minimum

$0

$0

Promotion

Up to $750

Up to $750

cash bonus with qualifying deposit

Management Fee

0.25%

0.25%

Account Minimum

$0

$0

Promotion

Up to 1 year

Up to 1 year

of free management with a qualifying deposit

Is Wealthfront right for you?

Wealthfront is one of the lowest-cost online advice solutions, and giving it a try comes with little commitment thanks to the company’s offer to manage $5,000 free of charge for NerdWallet users. The stock level tax-loss harvesting service also makes it worth a look for high-balance taxable accounts, and its digital financial planning tools are both useful and easy to use.

We also appreciate the addition of 529 plans to the account roster, as parents could benefit from college savings guidance. But investors should thoroughly investigate whether they’re passing up tax perks offered in-state before using an out-of-state alternative like this.

About the authors