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Wealthfront (The One With The Renowned Economist)
Introduction: Wealthfront is a pioneer of automated investment management. The company offers a low-cost no-frills option for managed investing.
Signing up: The initial sign-up process is very straight-forward. When you logon to the website you are asked six simple questions, only six. These range from financial fact-finders such as income level and available liquid assets to a question on what you are looking for and risk tolerance based on scenario analysis. From there, the behind-the-scenes algorithm decides your optimal allocation depending on the type of account you invest in (taxable, non-taxable, etc.).
To see a detailed look of the sign-up process, please click here.
The Investments: Wealthfront invests you into a maximum of 11 asset classes based upon your individual situation.
Cost: This is an area where Wealthfront accels. The company does not charge an advisory fee on the first $10,000 invested which is perfect for customers who are just starting out with limited capital. A 0.25% is charged on amounts over $10,000 which is more than reasonable. The only downside compared to some other firms is that the 0.25% is a flat fee and doesn't tier down as assets grow larger. Importantly, Wealthfront states that their ETFs charge fees that average out to 0.12% which is also on the low-cost end of the spectrum.
The Positives: Compared to other services we have looked at, the simplicity of the offering is a key positive. While it's important to know what you're invested in and why, there is a great value to the simplicity that is displayed. Finance is complicated so not overwhelming the customer is important.
The ability to open an account at only $500 and a low flat fee of 0.25% are the main reasons you would look towards Wealthfront. The service is targeted towards smaller accounts who might not be able to afford or reach minimums of traditional wealth managers. The low opening account balance and management fee target both of those markets.
The Negatives: The part of the service that I was underwhelmed with was the interaction with the end customer. First, only six questions were used to create your investment allocation. I am under the belief that you could better optimize your allocation if just a few more minutes were spent on questions. While "less is more" may apply here as there's a reality to keeping your customer engaged and interested, it's difficult to get the full scope of their risk constraints and tolerances in just a question or two.
Further, the software somewhat assumes you know what you want or need, as well as what type of account to open based upon that knowledge. I think a bit more guidance and direction would be immensely helpful at this stage. What happens if the customer doesn't know what they need to save for? Fortunately, I believe this is an easy fix and something that the company could address rather easily.
Overall Wrap: Overall, Wealthfront is a wonderful product and we rate is 5 out of 5 starts.
To see more on what Wealthfront has to offer, please visit: www.wealthfront.com
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