BI Intelligence

Robo advisors are increasingly growing in popularity, and these automated services are threatening to take huge amounts of business away from traditional financial advisors.

Multiple different segments of the investing public have already taken advantage of robo advisors for a variety of reasons. Many traditional financial advisors have decided to work cooperatively with robo advisors rather than try to compete with them directly, and this strategy has helped streamline the process and reduce costs.

Millennials use robo advisors because they remove the perceived "guess work" out of investing, which provides a measure of comfort to hesitant millennial investors. And often, robo advisors offer cheaper fees than human advisors, which also makes them attractive to this group.

And retirees and high net worth individuals can often test robo advisors because they have more disposable income.

But which robo advisor should you use?

To help you narrow down the choices, BI Intelligence, Business Insider's premium research service, has decided to review some of the most popular robo advisors on the market to help you make the most informed decision.

In this article, we'll cover Wealthfront.

• Wealthfront Review Summary
• Fees & Pricing
• AUM, Returns, & Portfolio Performance
• Services Provided
• Competitors
• More Information

Wealthfront Review Summary

Wealthfront has done an excellent job of attracting new clients by offering a 0% management fee for customers with less than $10,000 in their accounts. But arguably its biggest selling point doesn't come into play until you reach $100,000, at which point the robo advisor offers direct indexing. Wealthfront is the only major robo advisor to provide this service, which uses your individual securities to hunt for tax-loss harvesting opportunities. This, coupled with daily tax-loss harvesting on all taxable accounts, makes Wealthfront an ideal service for those with comparatively larger account balances, specifically those in taxable accounts.

• Assets Under Management (AUM): $5 billion
• Minimum Account Balance: $500
• Fee Range: 0.25% after the first $10,000
• Account Types: Taxable Accounts, IRA Accounts, Roth IRA Accounts, SEP IRA Accounts, 529 Plan Accounts, Trusts
• Services: Direct Indexing, Tax-loss Harvesting, Single Stock Diversification, Referral Program Rewards, Portfolio Review, Third-Party Account Support, College Savings Plan, Retirement Planner, Mobile App

Wealthfront Fees & Pricing

Wealthfront's minimum account requirement is just $500, which is an extremely reasonable threshold compared to most other robo advisors. Betterment, Hedgeable, and WiseBanyan each have either no minimum or a $1 requirement, but these are the only companies that beat Wealthfront in this regard.

As for management fees, Wealthfront has a structure that is sure to entice new investors. The robo advisor offers free management on the customer's first $10,000, though several promotional offers exist that bump that figure up to $15,000. After that, Wealthfront charges a flat 0.25% fee, though the original $10,000 (or $15,000 with a promotional offer) remains free.

This flat fee, particularly with the initial 0% rate, compares quite well to the other major robo advisors on the market. SigFig also has a 0.25% management fee, while Betterment has a range of 0.15% to 0.35% for their non-Plus and non-Premium accounts. And FutureAdvisor, which is on the higher end of the spectrum, charges a flat 0.5% fee. But some robo advisors offer a better rate, such as Schwab Intelligent Portfolio, which charges 0.08% for conservative portfolios, 0.19% for moderate-risk portfolios, and 0.24% for aggressive portfolios. 

Wealthfront AUM, Returns, & Portfolio Performance

Wealthfront has approximately $5 billion in assets under management, which is a far greater amount than many of the other robo advisors out there (save for Betterment, which has more than $7 billion in AUM).

As mentioned earlier, Wealthfront is the only major robo advisor to offer direct indexing, which is essentially a supplemental tax-loss harvesting service that it provides on top of regular harvesting that it offers on all taxable accounts. The company claims that these services can boost annual investment returns by up to 2%.

Wealthfront Services

Wealthfront has positioned itself as the go-to robo advisor for clients with larger account balances, specifically those with taxable accounts, thanks to its direct indexing feature and excellent tax-loss harvesting.

Here's a basic outline of what this robo advisor offers:

• Retirement Planning: Wealthfront recently launches a service called Path integrated right into the core Wealthfront interface. Through Path, the robo advisor sets up a retirement plan with savings targets after the user answers a short questionnaire. The user then links their current checking accounts to Path, which automatically analyzes their transaction history to evaluate their spending and saving habits.
• Referral Program: For every customer you successfully refer to Wealthfront, the robo advisor will manage an additional $5,000 of your money for free. Therefore, it's possible to have more than $10,000 ($15,000 with promotional offers) managed at no charge.
• Direct Indexing: We've discussed this at length already, but to reiterate: At the $100,000 threshold, Wealthfront will use your individual securities to hunt for tax-loss harvesting opportunities, which increases tax efficiency.
• Portfolio Review and External Accounts: Wealthfront has a tool that allows you pull in your other accounts, organize them all in one place, and receive feedback from the robo advisor with regard to fees, taxes, cash amounts, and more.
• 529 College Savings Plan: Wealthfront recently added a tool to help you save for your children's college fund. The plan is free for the first $10,000 (though Nevada residents get a cap of $25,000), but the robo advisor charges a fee of 0.43% to 0.46% annually for all deposits beyond that.

Wealthfront Competitors

Wealthfront is an excellent robo advisor for those who want to take full advantage of tax loss harvesting and direct indexing. The company still has plenty of competition in the broader market, but it still holds up well in this regard.

The robo advisor's $500 minimum account requirement beats almost all of its competition, aside from the trio of Betterment, Hedgeable, and WiseBanyan, which all have requirements of $1 or less. TradeKing Advisors matches this $500 threshold, but then we have companies such as SigFig ($2,000 minimum), Schwab Intelligent Portfolio and FutureAdvisor ($5,000 apiece), and Personal Capital (a whopping $25,000).

With regard to fees, Wealthfront again remains competitive. We discussed fee comparison in a previous section, but the robo advisor falls on the lower to mid-range part of the spectrum, and the free management for the first $10,000 is a wonderful selling point to get skittish investors to dip their toes in the water.

More to Learn

Wealthfront is just one of the many robo advisors on the market, and each has its own strengths and weaknesses.

That's why BI Intelligence spent months putting together the greatest and most exhaustive guide on robo advisors entitled The Robo-Advising Report: Market forecasts, key growth drivers, and how automated asset management will change the advisory industry.

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1. Subscribe to an ALL-ACCESS Membership with BI Intelligence and gain immediate access to this report AND over 100 other expertly researched deep-dive reports, subscriptions to all of our daily newsletters, and much more. >> START A MEMBERSHIP
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3. Purchase the report and download it immediately from our research store. >> BUY THE REPORT

The choice is yours. But however you decide to acquire this report, you’ve given yourself a powerful advantage in your understanding of the fast-moving world of robo advisors.