Wealthfront Online Banking Is It Worth Switching To? – A Simple Guide
Earlier this year I opened up a Wealthfront account. It was my first online robo-advisor account of this type so I didn’t know what to expect. After some time using the product and all of its offerings I can happily say it’s amazing.
When people hear robo-advisor they tend to get a little freaked out. I believe they think the Terminator or the robots from I, Robot are going to be managing their money. I can happily report it is nothing like that. My experience so far has been nothing but smooth sailing and straight forward advice. A little different than the normal procedures in the financial industry.
This article isn’t just about robo-advisors though. I want to focus on one in particular and that is Wealthfront. Wealthfront has been around for over 10 years now but only become extremely popular in the last 3-5. This is because they pivoted and made an incredibly easy to use product coupled with a clean design that I cannot recommend enough.
I’m enjoying this product so much that after you read this article I’ll have a special link you can use to sign up for yourself. This link will waive all fees on your first $5,000 that you invest through Wealthfront. Not a huge amount of money but any chance I get to save money I’m going to take it.
In this article, I want to take you through what Wealthfront is. The pros and cons, as well as some related questions to help you get a better idea of the platform. In the end, I’m confident you’ll be able to answer the question: Is Wealthfront right for you?
What is A Robo-Advisor
Over the last 5 years, robo-advisors have become extremely popular. The combination of superior technology and people taking control of their own finances has led to this revolution. I purposely mean revolution because it has completely overthrown some of the giants in the financial industry.
Robo-advisors are digitally based financial advisors that use algorithm-based technology to help people make decisions with their money. In simple terms, you input your information then the computer processes it and tells you how you should invest it.
The algorithm begins by asking you some simple questions like these:
- What is your age?
- What is your net worth?
- What is your primary investment goal? Retirement, savings, college, etc.
- How do you feel about risks?
- What do you need help with the most when it comes to financial planning?
There are of course more questions than this but you get the idea. The platform then builds an online profile for you that can then start building the best setup possible for you.
To be honest (this is sad to admit), when it comes to money and helping me manage it I trust a computer helping me more than a human. I have heard too many horror stories of people getting taken advantage of. In fact, that was me when I was 19 years old. I know for a fact that these algorithms are built with specific rules and it’s much harder to hide hidden motives that a person may have.
Enough with my uneasiness, let’s get into the robo-advisor Wealthfront and why you may want to add it to your financial plan.
Why Should You Use Wealthfront
To start out with why you should open up a Wealfront account I want to present to you a table of all of the system’s features. After that, I’ll go over the highlights that will bring you the most value.
|Minimum Account Balance||$500|
|Fees||.25% of AUM. 0% for Cash Accounts|
|Account Options||Online Savings Account, Traditional & Roth IRA, Trusts, |
SEPs, 529 College Saving Plans
|Top Features||High Yield Online Savings Account, Robo-Planner, Tax Loss Harvesting|
|Support||Phone and email support available 24/7|
|Funds Offered||Low fee, diversified index funds (a mixture of stocks and bonds)|
|Other features||Phone app, ability to track wealth over multiple account from multiple banks.|
|Insurance||Accounts FDIC insured up to $1,000,000|
As you can see from the chart above Wealthfront has a ton going on for it. These are the reasons I think it is such an attractive option when looking for a different, yet effective, investment option.
My favorite of these top features is the .25% fee of AUM (assets under management). The .24% is the yearly fee rate but it is taken out throughout the year in pieces. No big deal there. What is a big deal is that this is a relatively low fee in comparison with Wealthfront’s competitors.
In addition, Wealthfront’s offering of products is the perfect mix. All too often you see companies offering dozens of products. I honestly believe this is just a ploy to get more money out of you. Instead of doing what is normal in the industry Wealthfront only offers 6-10 products that will fit 99.99% of all needs. I push people to open up some sort of online savings account as well as a Roth or Traditional IRA and Wealthfront offers all three.
The one item above that people may seem as a negative is the $500 minimum to open an account. There are lower in the industry ($100) but those platforms lack some of the major benefits in the chart above. If you are one of those people then I would suggest saving until you reach $500. Or if you can’t wait then look elsewhere.
When I went looking for a robo-advisor the three things I wanted were this:
- A company with an easy to understand, no BS, way to invest.
- A company with an array of products and investments that I can easily choose from and switch when needed.
- Lastly, a company with a well-designed website and mobile app that allows me to track my money and progress without having to dig for the numbers.
Wealthfront does all 3 of these and more and that’s why I can’t highly recommend it enough.
If you want to open a Wealthfront account right now and get your first $5,000 managed for free (no .025% AUM fee) then click the link below. It will take you directly to the Wealtfront website.
The Cons Of Using Wealthfront
Wealthfront, like any other product in the world, does have some drawbacks to it.
The first and probably the biggest by far is the lack of advisors that are actual people. You now understand that Wealthfront is a Robo-advisor and they are able to charge you such a low fee because everything is done by a computer. In some eyes, this is a huge negative. They need to be able to talk to someone on the phone and get advice and I totally get it.
On top of that, most people have trouble trusting a computer to make financial decisions with their money. I think as years go on this fear will phase out but today it is still very real.
The second flaw I can see is their lack of fund choices. Yes, Wealthfront does offer many different types of funds to invest in and they are spread out over all the different classes. But the list is small in comparison with competitors. To some, this may actually be a positive though. For example, Vanguard offers over 1,800 products to invest in. Personally, I’m a fan of Vanguard and what they do but 1,800 is absurd.
With that many options, people will usually get confused and end up not investing. When in reality, they need to focus on 3-8 different funds, put their money there, and be patient.
1) Is a Wealthfront cash account safe?
Yes, Wealthfront is as safer if not safer than any other bank you can think of. Like most banks, Wealthfront has FDIC insurance up for $250,000 per qualified customer account per banking institution. What takes Wealthfront safety to the next level is that they use multiple banks to bring that insurance up to $1 million for cash accounts.
To be honest, this is one of the first times I have even heard of insurance this high so that’s a huge perk for me.
2) How much should I invest in Wealthfront?
How much you invest is going to differ depending on your situation. Some people have extra cash while others have debt that needs to be paid down. How much you invest and what type of account you open is a question you are going to have to answer for yourself.
I always suggest people start with a Roth IRA (Wealthfront offers these) and contribute the maximum every single year. That will give you a solid base that you can then branch off of.
3) Which is better Wealthfront or Betterment?
Wealthfront and Betterment are both classified as Robo-advisors but have some obvious differences. The most obvious being the lack of human interaction you get from Wealthfront. They truly are 100% based on a computer’s algorithm which may or may not be right for you.
In addition, to open an account with Betterment you only need $100 while Wealthfront is $500. A small difference but a difference none the less. Lastly, the products offered aren’t exactly the same. Yes, you can open up almost any account on either side but the funds you buy with those accounts will differ.
For example, Wealthfront offers real estate investing in the form of REIT (Real Estate Investment Trusts). On the other hand, Betterment allows you to invest in funds that own bonds which Wealthfront doesn’t.
At the end of the day, they both have their ups and downs and you’ll need to decide what works best for you.
The Bottom Line
As time goes on I can only see the popularity of online robo-advisors getting more and more popular. They are taking the investment and banking industry and turning it upside down and personally, I’m all for it.
For too long people have been getting scammed out of their hard-earned money by people that know how to sell. Robo-adivors and competition will make it much harder for people to get taken advantage of, thus making them much more successful financially. Moreover, this competition will keep fees as low as possible giving you the best situation possible.
There will inevitably be some downside to all of this in the future and new technology will step in but I can’t see that in my lifetime. I think Wealthfront is here to stay and something that I will use for a long time. Maybe even my whole life.
Lastly, if you are interested in getting that first $5,000 managed free then click the button below to go directly to Wealthfront’s site.
If you liked this post then please share by hitting the icons above and if you want to read more articles here are my latest:
- Most Financial Advice Is Terrible and Here’s Why
- Reflections on 2022 And What I’m Focusing On In 2023
- The Best Financial Advice You’ll Ever Get – *Not Financial Advice*
- Having People Work For You Is the Ultimate Privilege – It’s Time To Realize that
- Why I’m Terrible At Spending Money And How I’m Going To (Try) Fix It