Is Wealthfront Legit?
Wealthfront offers brokerage services and more. But are its claims true? Keep reading to find out.
Is Wealthfront Safe?
There are two organizations that regulate America’s securities industry: FINRA and the SEC. These groups enforce rules through various measures. Wealthfront is registered with both and operates under their guidelines.
Wealthfront’s SEC number is 801-69766, and its FINRA number is 148456. Besides being an investment advisor, it’s also registered as a broker-dealer with the SEC (number 8-68534) and FINRA (number 153407).
Wealthfront’s BrokerCheck profile shows that it has been registered as a broker-dealer since 2010 and has zero disclosures.
Wealthfront Better Business Bureau
Registration is just the start for any brokerage. What matters most is performance, and that’s where the Better Business Bureau (BBB) comes in. This group monitors customer satisfaction for companies in North America.
Since Wealthfront is based in California, it falls under BBB’s purview. Currently, it has an average customer review of 3.4 out of 5.0 on its BBB profile:
see it here.
This score is higher than what we’ve seen for other firms, but it’s based on only 5 reviews. Wealthfront
serves over 307,000 accounts, making this sample size very small.
The BBB gives Wealthfront a C- for its operations. This middle grade is based on several factors, including the number of complaints and how long the firm has been operating.
Wealthfront and Competitors
Is Wealthfront Insured?
Wealthfront brokerage accounts are eligible for SIPC insurance. Generally, this provides coverage up to $500,000 per customer.
Besides investing, Wealthfront also offers a bank account with FDIC insurance. Although Wealthfront itself isn’t a direct member of the FDIC, it partners with banks that are. Free cash balances are moved to those banks, making Wealthfront customers eligible for $1 million in FDIC insurance through this program.
Is Wealthfront Safe: Assessment
Wealthfront is legitimate and not a scam. There are several protections in place for its customers. Still, investing always carries risks, and these can be difficult to eliminate. Wealthfront’s robo service offers strategies (like increased allocation to bonds) to help reduce risk.
Wealthfront Review
Now that we’ve established Wealthfront’s legitimacy, let’s take a closer look at its performance.
Investment Lineup
Wealthfront is a robo-only brokerage, meaning it uses software to make all trading decisions. There’s also an option for self-directed trading.
Within these automated accounts, only exchange-traded funds (ETFs) are available. This excludes other investment types. However, Wealthfront allows customers to customize portfolios with options like crypto funds and socially responsible assets. Accounts with more than $100,000 can even add individual stocks.
Automatic rebalancing and tax-loss harvesting are included as part of Wealthfront’s digital service.
Wealthfront offers tax-deferred and taxable accounts in individual and joint formats. Trust accounts are also available.
Wealthfront Fees and Minimums
Wealthfront charges 25 basis points annually for managing portfolios, which is billed monthly. There are no commissions on the trades made by its automated system.
Any type of account (individual, joint, retirement, etc.) can be opened with a $500 deposit or more.
Website
Because Wealthfront initially only offered automated investing, its website doesn’t have great
self-directed trading tools. Resources are limited. For example, ETF profiles show basic details like dividend yield and expense ratio, but not much else.
Each fund profile has a chart with up to 10 years of price history, but there are no other tools. Stocks and funds not traded by Wealthfront’s robot have no profiles.
One tool we found helpful is the Path builder, a calculator that estimates if you’ll have enough money to retire at a certain age. It shows a graph of your projected nest egg up to retirement.
Mobile App
The mobile app keeps things simple, similar to the website. The Path retirement calculator is also available here. ETF profiles are present but brief.
The Profile section, accessible by tapping on the person icon in the bottom-right, has a Settings menu. Here, features like Touch ID can be enabled. Account documents can be downloaded, and there’s an ATM locator map.
The app has a funds transfer tool but no mobile check deposit or streaming financial news.
Other Software
Wealthfront, being a hands-off brokerage, has no advanced trading tools or desktop platform. It also doesn’t have an app for Apple Watch.
Wealthfront Margin Borrowing
Wealthfront allows using securities as collateral for loans, but it’s not a traditional margin service. Loans can’t be used to buy more investments. Instead, proceeds can be withdrawn to a linked bank account. Repaying the funds will pay off the loan.
Funds arrive within a day or two. Approval is automatic, and there’s no repayment schedule.
Wealthfront has a tiered interest rate based on the total assets held in taxable accounts. At least $25,000 is required to start borrowing. Per IRS rules, assets in IRAs don’t count towards this minimum.
|
Debit Balance
|
Wealthfront Margin Rate
|
|
$25,000 to $499,999
|
5.91%
|
|
$500,000–$999,999
|
5.91%
|
|
$1,000,000 or above
|
4.66%
|
Research and Education
Wealthfront knows that many of its clients will be beginners. It provides decent educational content through a Help Center with FAQs covering various topics, including investing, taxes, and financial planning.
The company also has a blog with articles on different financial topics, such as:
Is a Recession Bad for Investors?
What Is Compounding and Why Is It Important?
8 Ways To Get Ready To File Your Tax Return
Miscellaneous Services
DRIP Availability: Wealthfront’s advisor uses dividends to rebalance accounts, so dividends won’t necessarily be used to buy more shares of the paying funds.
Initial Public Offerings: Wealthfront doesn’t offer access to new stock releases.
Cash Management Features: Wealthfront’s cash account is linked to the robo account. It offers a
debit card and high APY.
Fractional Shares: Not available at Wealthfront.
Individual Retirement Accounts: Wealthfront offers SEP, Roth, and Traditional IRAs. Other IRA types are not supported.
Recommendations
Retirement Savers and Long-Term Investors: While Wealthfront has IRAs, it lacks comprehensive retirement-planning services. Annuities, target-date funds, self-employed 401k accounts, and more are missing. These can be found at
Charles Schwab.
Beginning Investors: Wealthfront’s robo account is good for beginners. However, Charles Schwab offers more for free.
ETF and Stock Trading: While Wealthfront supports individual stock investments for some accounts, it doesn’t offer a full lineup of ETFs and stocks. We suggest
Webull, which has self-directed accounts and automated investing.
Mutual Funds: Wealthfront offers no mutual funds. Consider
Firstrade, which has over 10,000 funds.
Small Accounts: Wealthfront’s $500 minimum deposit is a bit steep. We recommend
Charles Schwab, which has no minimum for self-directed trading or robo investing.
Wealthfront Review Conclusion
Wealthfront is a legitimate company with a good robo-investing program and a solid cash account. However, it lags
behind competitors in most other areas.
Updated on 10/7/2024.
Chad Morris is a financial writer with more than 20 years experience
as both an English teacher and an avid trader. When he isn’t writing
expert content for Brokerage-Review.com, Chad can usually be found
managing his portfolio or building a new home computer.
|