Wealthfront Review 2021: Pros, Cons and How It Compares

With Wealthfront, you get low-cost access to a diverse investment lineup, excellent planning tools and a variety of tax-saving strategies.

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Our Take

5.0

NerdWallet rating 

The bottom line: Wealthfront is a force among robo-advisors, offering a competitive 0.25% management fee, free management of balances under $5,000 (with NerdWallet’s promotion) and one of the strongest tax-optimization services available from an online advisor.

Wealthfront

on Wealthfront's website

on Wealthfront's website

Fees

0.25%

management fee

Account Minimum

$500

Promotion

$5,000

amount of assets managed for free

Pros & Cons

Pros

  • First $5,000 managed free (NerdWallet promotion).
  • Low ETF expense ratios.
  • Daily tax-loss harvesting.
  • Automatic rebalancing.

Cons

  • No fractional shares.
  • No large-balance discounts.

Compare to Other Advisors

Wealthfront
SoFi Automated Investing
Vanguard Digital Advisor
NerdWallet rating 
NerdWallet rating 
NerdWallet rating 
Fees

0.25%

management fee

Fees

0%

management fee

Fees

0.15%

per year (approximately)

Account Minimum

$500

Account Minimum

$0

Account Minimum

$0

Promotion

$5,000

amount of assets managed for free

Promotion

Free

career counseling plus loan discounts with qualifying deposit

Promotion

No advisory fees

your first 90 days of Vanguard Digital Advisor investment management (Enrollment requires a Vanguard account with a minimum of $3,000)

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Full Review

Where Wealthfront shines

Comprehensive offerings: Wealthfront provides 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.

Investments: The company’s methodology includes giving investors a streamlined questionnaire to identify risk tolerance, then employing exchange-traded funds in up to 12 asset classes.

Where Wealthfront falls short

Risk Parity: Risk parity is a strategy for allocating capital across multiple asset types, with the aim of giving your portfolio some added diversification. Wealthfront's Risk Parity Fund is a proprietary mutual fund the company says offers greater exposure to asset classes with higher risk-adjusted returns. Morningstar data show that the fund has underperformed.

Fractional shares: Wealthfront doesn’t buy fractional shares of ETFs, which prevents the company from investing your entire deposit.

Large balance discounts: The robo-advisor also lacks large-balance discounts, an incentive that could be appealing to investors who intend to carry big balances.


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

Account minimum

$500 for investment accounts, $1 for cash accounts, $0 for financial planning.

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 have an average expense ratio of 0.11%.

Account fees (annual, transfer, closing)

None.

Portfolio mix

  • ETFs from 12 asset classes (portfolios generally consist of 6 to 8). Recent additions of sector-based ETFs (tech, healthcare) and two cryptocurrency trusts (Bitcoin, Ethereum).

  • Clients can customize their Wealthfront portfolio by adding or deleting certain ETF holdings or building their entire portfolio from scratch.

  • Taxable accounts can opt-in for WFRPX, the Wealthfront Risk Parity Fund. Accounts will hold a mix of three ETFs (VTI, EMB, BND) until balances reach $100,000, at which point the Risk Parity Fund replaces these ETFs.

  • Portfolios over $500,000 are eligible for smart beta.

Socially responsible portfolio options

Clients can choose to invest in Wealthfront’s SRI portfolio or customize any other Wealthfront portfolio to include socially responsible options for no additional fee.

Accounts supported

  • Individual and joint non-retirement accounts.

  • Roth, traditional, rollover and SEP IRAs.

  • Trusts.

  • 529 college savings plans.

  • High yield cash account (not charged management fee).

Tax strategy

  • Daily tax-loss harvesting free for all taxable accounts.

  • Stock level tax-loss harvesting (direct indexing) can be selected. Balances under $100,000 will hold a particular ETF, VTI.

  • TurboTax customers can easily import tax-loss harvesting data from Wealthfront.

Automatic rebalancing

Free on all accounts.

Human advisor option

None.

Savings account/cash management account

The Wealthfront Cash Account offers high interest checking. The cash account offers a competitive yield and is covered by up to $1 million in FDIC insurance. The account requires just $1 to get started.

Customer support options (includes how easy it is to find key details on the website)

Licensed product specialists (have Series 7 & 66 and some are CFAs/CFPs/CPAs) available to provide support or product information via phone or email (they do not make recommendations or give advice). Phone support Monday through Friday 8 a.m. to 5 p.m. Pacific; and all emails are responded to within one business day.

More details about Wealthfront's ratings

Account minimum: 4 out 5 stars

Some providers require an account minimum — the least dollar amount you can open an account with. Wealthfront’s minimum is $500 for investment accounts, $1 for cash accounts and $0 for financial planning.

Account management fee: 4 out of 5 stars

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. We also have a full comparison of Wealthfront vs. Betterment.)

If you're not quite ready to pay for money management, Wealthfront will let you link your bank and retirement accounts to its financial-planning tool, Path, for free. If you decide you want Wealthfront to manage your money for you, you'll start paying the 0.25% fee.

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.

Investment expense ratios: 5 out of 5 stars

An expense ratio is an annual fee mutual funds, index funds and ETFs charge as a percentage of your investment in the fund. Expense ratios are paid in addition to your asset management fee. If you invest in a mutual fund with a 1% expense ratio for example, you’ll pay the fund $10 per year for every $1,000 invested.

If high, these fees can significantly drag down your portfolio returns, but the expense ratios of the funds used in Wealthfront’s portfolios are low. Wealthfront’s  ETF expense ratios average 0.08%. Portfolios that include the Wealthfront Risk Parity Fund have an average expense ratio of 0.11%.

Account fees: 5 out of 5 stars

Wealthfront charges no annual or inactivity fee, and does not charge for transferring money, trades, account maintenance or setup. Some other robo-advisors do charge additional fees.

Portfolio mix: 5 out of 5 stars

The company’s methodology includes giving investors a streamlined questionnaire to identify risk tolerance, then employing exchange-traded funds in up to 12 asset classes.

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.

Its  investment lineup includes socially responsible ETFs and sector-based ETFs, such as technology and health care, as well as cryptocurrency options.

Investors can allocate up to 10% of their total portfolio to Bitcoin or Ethereum using two crypto trusts, Grayscale Bitcoin Trust (GBTC) and Grayscale Ethereum Trust (ETHE). Also, clients now have access to customization — they can edit their Wealthfront portfolios by adding or deleting certain ETF holdings or build their portfolio from scratch.

As we noted, Wealthfront doesn’t buy fractional shares of ETFs. 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.

Socially responsible portfolio options: 5 out of 5 stars

Wealthfront has its own Socially Responsible Portfolio that includes a range of SRI investment options. This is an ideal fund for investors who only want investments that align with their values.

Its diversified portfolio screens for business involvement in civilian firearms, controversial weapons, tobacco, thermal coal and oil sands. Clients can also customize non SRI portfolios to invest in what they believe in most, including renewable energy, gender diversity, minority empowerment, animal welfare and more.

Accounts supported: 5 out of 5 stars

Individual and joint non-retirement accounts; Roth, traditional, rollover and SEP IRAs; trusts; 529 college savings plans; and high-yield cash accounts.

Tax strategy: 4.5 out of 5 stars

Wealthfront offers daily tax-loss harvesting on all taxable accounts. Tax-loss harvesting is an investment strategy that can significantly reduce capital gains taxes. In taxable accounts, the practice involves selling losing investments to offset the gains from winners.

New Wealthfront 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.

Wealthfront beefs up its tax optimization services with stock level tax-loss harvesting or direct indexing. 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 1,000 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. To use direct indexing with account balances under $100,000, customers must hold a particular ETF, VTI.

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.

Automatic rebalancing: 5 out of 5 stars

Automatic rebalancing is regular rebalancing of your portfolio in response to market fluctuations or other factors that shift your portfolio out of its intended investment allocation. 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 software may rebalance your portfolio when dividends are reinvested, money is deposited, a distribution is taken or market fluctuations make it necessary.

Other instances in which Wealthfront will rebalance your portfolio are when deposits, withdrawals and reinvestment of dividends take place. It uses these as opportunities to minimize the taxable gains that can arise from threshold-based rebalancing.

Human advisor option: 1 out of 5 stars

Some robos offer financial planning advice from a licensed professional, sometimes for an added fee. Wealthfront does not.

Savings account/cash management options: 4 out of 5 stars

Wealthfront offers the Wealthfront Cash Account, a savings account that currently pays 0.10% 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. If you also have a Wealthfront investment account, the investment management fee doesn't apply to money in the cash account.

Wealthfront Cash has many features, including a debit card, bill pay and automatic payments. Users who direct deposit their paycheck can get paid up to two days early and those using their Wealthfront Cash Account to invest in a Wealthfront Investment Account can get their funds invested within minutes.

One thing to keep in mind: It's possible to open a joint cash account, but only one owner will be able to log into the account; the other person will have read-only access. (Wealthfront says it plans to roll out joint access on cash accounts in the future.)

Customer support options: 3.5 out of 5 stars

Wealthfront has licensed product specialists who can answer questions regarding products and services. Its product specialists have Series 7 & 66 and some are CFAs/CFPs/CPAs, but they don’t give investment advice or suggestions. Customer service phone support is available Monday through Friday, and emails are responded to within one business day.

Other details you should know

Risk parity: In taxable accounts, customers can select Wealthfront's Risk Parity Fund, a proprietary mutual fund the company says offers greater exposure to asset classes with higher risk-adjusted returns.

The fund’s expense ratio is lower than other risk parity funds, but as it is a more actively managed fund its costs are slightly higher than the other index funds Wealthfront employs, bringing the weighted average expense ratio of portfolios that include the Wealthfront Risk Parity Fund to 0.11%. Clients who select risk parity will hold a mix of three ETFs — VTI, EMB, BND — until their account balance reaches $100,000, at which point these ETFs will be replaced with the Risk Parity Fund.

The fund uses complex financial instruments called total return swaps and leverage (borrowing power) to adjust and respond to volatility in an effort to generate better returns for a given level of portfolio risk. Morningstar data show that the fund has underperformed against both comparable funds and its own benchmark index over the past three years.

Wealthfront says its risk parity strategy is appropriate for investments with a time horizon of five years or more, as it tends to smooth out in the longer term. And since the fund would make up only a piece of your investment portfolio, Wealthfront says performance should be evaluated on the overall portfolio instead of on the fund itself.

As with any investment, past performance is not indicative of future results. Still, you might not want to pay extra for that track record so far. Investors who don't want exposure to this fund can opt out or choose not to invest in it in the first place.

Travel planning: Wealthfront 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.

Financial planning tools: 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. The Self-Driving Money™ tool allows users to set up categories to save for specific goals in their Wealthfront Cash Account and automatically move excess cash into a Wealthfront taxable investment account, traditional IRA, Roth IRA, or 529 college savings account.

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. Some other functions of the Path tool include:

  • Home buying: 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 may 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.

  • 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 0.42%-0.46%, depending on investment expense ratios. The plan is sponsored by the state of Nevada. You should carefully evaluate Wealthfront’s 529 offering compared with your 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.

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. Especially for customers with taxable accounts, Wealthfront offers compelling tax strategies to help enhance your tax efficiency. It also offers digital financial planning tools that are both useful and easy to use.

How do we review robo-advisors?

NerdWallet’s comprehensive review process evaluates and ranks the largest U.S. robo-advisors by assets under management, along with emerging industry players, using a multifaceted and iterative approach. Our aim is to provide an independent assessment of providers to help arm you with information to make sound, informed judgements on which ones will best meet your needs.

DATA COLLECTION AND REVIEW PROCESS

We collect data directly from providers, and conduct first-hand testing and observation through provider demonstrations. Our process starts by sending detailed questionnaires to providers to complete. The questionnaires are structured to equally elicit both favorable and unfavorable responses from providers. They are not designed or prepared to produce any predetermined results. The questionnaire answers, combined with product demonstrations, interviews of personnel at the providers and our specialists’ hands-on research, fuel our proprietary assessment process that scores each provider’s performance across more than 20 factors. The final output produces star ratings from poor (one star) to excellent (five stars). Ratings are rounded to the nearest half-star.

RATING FACTORS

Evaluations vary by provider type, but in each case are based upon the weighted averages of factors that include but are not limited to: advisory and account fees, account minimums and types, investment selection, investment expense ratios, trading costs, access to human financial advisors, educational resources and tools, rebalancing and tax minimization options, and customer support including branch access, user-facing technology and mobile platforms.

Each factor can involve evaluating various sub-factors. For instance, when gauging the investment selections offered by robo-advisors, 80% of the score is based on the potential for diversification (how well-diversified a resulting portfolio of investments could be) combined with the availability of specialty portfolios and level of customization for investors. Expense ratios form an additional 10% of the score, and low or no management fee the remaining 10%.

FACTOR WEIGHTINGS

The weighting of each factor is based on our team’s assessment of which features are the most important to consumers and which ones impact the consumer experience in the most meaningful way. The factors considered, and how those factors are weighted, change depending upon the category of providers reviewed.

INFORMATION UPDATES

Writers and editors conduct our broker reviews on an annual basis but continually make updates throughout the year. We maintain frequent contact with providers and highlight any changes in offerings.

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The review team comprises seasoned writers, researchers and editors who cover stocks, bonds, mutual funds, index funds, exchange-traded funds, alternative investments, socially responsible investing, financial advisors, retirement and investment strategy on a daily basis. In addition to NerdWallet, the work of our team members has been published in The New York Times, The Washington Post, Forbes, USA Today, Bloomberg News, Nasdaq, MSN, MarketWatch, Yahoo! Finance and other national and regional media outlets.

The combined expertise of our Investing team is infused into our review process to ensure thoughtful evaluations of provider products and services from the customer perspective. Our writers and editors combine to have more than 70 years of deep experience in finance, ranging from a former Wall Street Journal reporter to a former senior financial advisor at Merrill Lynch.

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on Wealthfront's website