About Wealthfront

By J.R. Duren
HighYa Staff Updated on: Apr 18, 2017

Wealthfront is an online financial services company that runs their retirement, trust and investment accounts via a robo-advisor app that distributes your money in ETFs.

What sets Wealthfront apart from other robo-advisors is their fee structure: free account management for balances up to $10,000 and a 0.25% annual fee for accounts at $10,000 and above.

The company’s founders, Andy Rachleff and Dan Carroll, launched a financial startup called kaChing in 2008. After a few years, Rachleff and Carroll decided to change their focus to wealth management, and Wealthfront launched in 2013.

Rachleff is the company’s president and CEO and has a business degree from Stanford University. Carroll is the company’s CSO and graduated from the University of Arizona’s Eller College of Management.

In the world of robo-advisors, Wealthfront is right at the top with Betterment, a company we’ve also reviewed. If you aren’t sure of what “robo-advisor” means, it’s a series of mathematical equations (algorithms) that manage the money you invest in your ETFs (one collection of different types of investments like stocks and bonds).

So, what makes Wealthfront a leader in the robo-advisor world? Well, a lot of that has to do with the types of investments they offer, the fees they charge and the opinions of experts and consumers.

We’re going to work through each of those topics, then conclude with a few general thoughts about Wealthfront, if it’s right for you and alternatives in the robo-advisor world.

What Does Wealthfront Offer?

Wealthfront’s menu of financial services includes personal and joint investment accounts, retirement accounts, trusts, stock selling plans and 529 college savings plans.

Each of the investment options (doesn’t include stock sales or direct indexing) are managed through the Wealthfront robo-advisor, which is, in simple terms, the app you download to your phone. You can use the app to adjust your investment options, monitor your growth and make deposits or transfers.

Investment Accounts

Individuals and their partners can sign up for an investment account with Wealthfront. This is the most basic feature and is what usually comes to mind when someone says, “robo-advisor”.

You download the Wealthfront app, answer questions about your income, risk preference and financial goals, and then receive a recommended investment strategy. You can choose this strategy or go with another option.

To actually start investing, you’ll need to deposit at least $500. When you do, you’ll start to get data on how your ETF investments are doing.

What are ETFs?

As we mentioned earlier, the money you invest will be put into exchange-traded funds, or “ETFs”. These investment vehicles (stuff you invest in) are patterned to bring you the same returns you’d get from a collection of reliable assets (index funds) like the S&P 500.

If you were to go to a brokerage firm (people who sell and manage stock/investments), the fees for investing in a traditional index fund would be really high.

So, ETFs were created as a low-cost way to offer people like you and me a way to invest in a fund that performs well.

Wealthfront recommends 18 different ETFs based on their research of more than 1,400 ETFs on the market.

How Does the Wealthfront Robo-Advisor Work?

I’m going to veer off Wealthfront’s product line for a moment to explain how robo-advisors work, mainly because you’ll be using their robo-advisor if you open an investment, retirement or trust account.

As I mentioned earlier, a robo-advisor is a series of algorithms that manage your money. Basically, automatic mathematical processes replace humans.

These algorithms perform two main functions: rebalancing and tax loss harvesting.


Average people like you and me have limited knowledge of stocks, bonds and other investment types. It would be pretty hard for us to keep track of how our ETFs are doing, and to make changes on the fly.

So, Wealthfront’s robo-advisor does it for us. It tracks how each part of our ETFs are performing and makes minor adjustments here and there to where our money is invested to ensure we’re getting the best returns.

Tax Loss Harvesting

Whenever you earn money from your stocks, the IRS classifies it as “capital gains”. When you lose money, it’s called “capital losses”. If you have losses, you can claim those as deductions on your tax returns.

Wealthfront’s robo-advisor does tax loss harvesting calculations and factors them into the tax information they send you at the end of the year.

Pro tip: Wealthfront’s tax-loss harvesting is available, free of charge, for all non-retirement accounts. The company also uses something called “direct indexing” to set up your portfolio for optimum tax-loss harvesting.

Wealthfront’s Retirement Accounts

As a Wealthfront customer, your retirement options are limited to individual retirement accounts (IRAs). There are three main types of IRAs:

  • Traditional: Not taxed until withdrawal
  • Roth: Taxed each year
  • SEP: For self-employed individuals

Wealthfront also gives you the option of a “rollover” IRA, which is financial talk for transferring assets to your Wealthfront IRA from a 401(k), which is, in most cases, a retirement plan offered by an employer.

The IRA is the industry standard for retirement accounts. There’s been tons of debate about whether traditional IRAs are better than Roth IRAs.

The general rule of thumb is that, if you expect to earn less when you retire, Traditional is the way to go. Why? Because your tax rate will be lower, which means you’ll pay fewer taxes on your IRA earnings.

Just like Wealthfront’s investment accounts, you can choose the level of risk you want to take on. Higher risk means better chances of big profit and big losses, whereas a low-risk strategy reduces the rate or return but decreases the amount of loss.

Remember, you’ll need to deposit at least $500 and, at the time of publishing, the maximum yearly contributions to an IRA were $5,500.

Wealthfront’s Trust Accounts

Ever heard of a trust fund? Wealthfront sells them, and they’re pretty simple to understand. Let’s say you (the investor) hires Wealthfront (third-party) to manage a trust that you’ll one day give to your child (beneficiary).

That’s the perfect example of a trust. An investor hires a third-party to manage an investment account that will be, at a certain time, given to a designated beneficiary.

Wealthfront’s Selling Plan

This Wealthfront feature is designed to sell off any stocks you own based on the timeline you give them.

In the meantime, Wealthfront works out all the tax implications and will even set aside money for the upcoming year’s tax return. The proceeds from your stock sales are then reinvested in Wealthfront’s mix of ETFs.

You can change or pause your selling plan whenever you want.

Wealthfront’s College Savings Plan

Wealthfront’s college savings plan is a 529, which is a savings plan the government created to allow people to save up for a college education for themselves, their children or someone else.

There’s no cap on how much you can save, and there are no federal or state taxes on the money as long as you use it for “qualified higher education expenses”:

  • Tuition
  • Room & board
  • Mandatory fees
  • If required, books and computers

If you use the 529 funds for anything else, you’ll pay income tax on the withdrawal and an additional 10% on the corresponding earnings, the SEC says.

Wealthfront’s Fees

In the days before robo-advisors, humans managed (and still manage) investment and retirement accounts. They often charged an overall annual fee of between 3% and 6%, which equals out to $3,000-$6,000 for an account with $100,000.

Aside from making investing easy and simple, Wealthfront makes it really affordable, too. Accounts under $10,000 have no annual fees. Any investment balances about $10,000 are charged a 0.25% fee.

Some of the ETFs you invest in may have some maintenance fees included in the cost of their shares. These fees are usually low – Wealthfront estimates 0.12% – and are imposed by the firm who created the ETF, not Wealthfront.

What Other People Are Saying About Wealthfront

Wealthfront gets good reviews from experts in investing.

Investment Zen

Investment Zen’s Miranda Marquit wrote that “Wealthfront is a good robo-advisor that provides you the opportunity to invest a small amount of money without hassle.”

Investor Junkie

Investor Junkie’s Larry Ludwig gave Wealthfront 4.5 stars, saying it’s an excellent service and “will be a superior vehicle for investors who prefer truly passive investments since selection and maintenance of individual securities is completely unnecessary.”

Larry’s critique of Wealthfront is similar to what he wrote about Betterment, noting that you can’t use Wealthfront’s algorithms to manage non-Wealthfront investment accounts.


Investopedia is one of the most popular investment sites. We use their explanations of investment terminology when we research financial products.

Like the other two sites above, Investopedia gives high marks to Wealthfront’s investment services.

“Wealthfront is a perfect starting point for beginner investors. Like other robo-advisors, Wealthfront’s management fee is tiny — only a few tenths of a percentage point per year,” contributor Trevir Nath wrote. “The fee is kept so small because of the low-cost of operating an online software-managed investment firm.”

Better Business Bureau

We checked out Wealthfront’s Better Business Bureau page, but the company only had one review and there were no complaints.

Our Conclusions About Wealthfront

Based on our research, we think Wealthfront is an excellent choice for consumers who want a reliable robo-advisor.

A Top-Notch Robo-Advisor

In the world of robo-advisors, Wealthfront is right at the top of the list along with Betterment, another full-service financial firm whose robo-advisor manages investment, retirement and trust accounts.

Wealthfront’s tax-loss harvesting and rebalancing ensure that you’re maximizing your investments without lifting a finger.

Average Educational Resources

If you want to learn more about the world of investing, the company has a few posts and videos on their websites to supplement your knowledge. Betterment has a much better educational section on their site, so if learning while you invest is what you’re looking for, take a look at our review of Betterment.

Really Low Fees

Wealthfront’s 0.25% flat fee for accounts over $10,000 is a much better deal than what you’d get at a traditional brokerage firm. Betterment’s fees are 0.25% for all accounts under $100,000, 0.40% for accounts between $100,000 and $250,000 and 0.50% for accounts above $250,000.

The one thing that makes Betterment’s higher fees more valuable is that their customers get yearly (0.40% fee) or unlimited (0.50% fee) meetings with Betterment’s team of CFPs and financial experts. You also get advanced oversight from their experts.

Are those perks worth the extra $1,500 to $2,500 a year? We can’t say for sure. Betterment’s website doesn’t indicate what those meetings and oversight include.

Investment Allocation

This is just a fancy way of saying, “this is where Wealthfront puts your money”. Of course, we know the money goes into ETFs. But what are those ETFs made of? Do they focus on big or small companies? Are they heavily invested in U.S. or foreign companies?

The answers to these questions can be really complex, and, for the average consumer, a little heady if you’re just starting out.

For the purposes of this review, we’ll say that Wealthfront’s assets differ from Betterment. To get a technical explanation of how they differ, head to Marc Gerstein’s “Evaluating the Wealthfront and Betterment Portfolios” article in Forbes.

The Big Picture: Use the Right Tools for Your Needs

Let’s wrap up by taking a step back and looking at your life now and your financial plans for the future. Did you recently get married or have kids? Are you in debt and wondering how you’ll get out of it? Did you get a nice pay raise and are wondering what to do with the extra cash?

These kinds of questions will help you decide if a robo-advisor fits in with where you are now and where you want to be in the future.

If you think you want to start using a robo-advisor but aren’t sure if it’s the right choice, read our guide to figuring out which financial professional or service is right for you.

In the article, we talk with a financial expert about how to determine when you’re ready to hire a financial pro and when you should stick with a robo-advisor.

We’ve also written a great article about how robo-advisors came into being and why they’re popular with consumers. Reading this article will give you a better sense of what robo-advisors are intended for and why they might or might not be a good fit for you.

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