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When it comes to robo-advisors, Wealthfront is typically considered one of the front runners. A quick look through the internet will yield countless five-star reviews of the robo-advisor, lauding the low management fees and the tax-saving tactics. But is Wealthfront really what all these sites make it out to be?

Here, we will give you our full, unguarded opinions on whether or not Wealthfront is a safe bet. We will present you with the hard numbers so you can make the decision on your own, but will also give you what we think. Read on to learn the ins and outs of this up-and-coming wealth management app.

What You Need to Know About Wealthfront

First and foremost, you need to understand that Wealthfront is a robo-advisor, meaning it uses algorithms to determine where it should invest your assets. There aren’t any human supervisors pulling the strings in a back room, and these robo-advisors automatically invest the assets. If this makes you feel squeamish, don’t worry—real-life-human investors have been using automated systems for asset allocation since the early 2000s.

Wealthfront was founded in 2008 by Andy Rachleff, co-founder of competitor Benchmark, and Dan Carroll. It started under the name kaChing and just handled mutual fund analysis. After some success, the company quickly pivoted to offer many other services. Here’s a brief timeline of the years each service was introduced:

  • 2008: company founded
  • 2012: tax-loss harvesting
  • 2013: direct indexing as part of their tax-loss harvesting service
  • 2018: home ownership planning
  • 2019: high-interest cash account
  • 2020: checking features added to cash account

Wealthfront uses Modern Portfolio Theory (MPT) to determine which assets you should invest in. Users of MPT evaluate risk and return to create a comprehensive investing plan.

One of the key assumptions of MPT is that investors are risk-averse and should therefore invest in a variety of classes of assets, meaning that you don’t have to worry about Wealthfront making overly risky choices with your money. MPT largely fuels Wealthfront’s heavy emphasis on diversifying assets.

A figure on average risk and return from Common Stocks and Government Bonds, 1926-2016

[Wealthfront uses MPT to evaluate the amount of risk you should take on in order to maximize your returns. Image from]

The Facts: Low Fees and Goal-Setting

Here’s the shortlist of what you need to know about what putting your money in Wealthfront looks like:


  • 25% management fee
  • $5,000 worth of assets managed for free
  • $500 account minimum
  • Tax-loss harvesting every day
  • Goal-setting advice
  • Big-picture financial planning tools
  • Portfolio line of credit
  • High-yield cash management
Wealthfront ranks #1 for robo-advisors by Nerdwallet and Investopedia.

[Wealthfront has ranked #1 on many laudable sites. Here, we give you our view on all those #1s. Image from ]

The Setup: Five Steps

Wealthfront has five key components to it, all of which work together to help you manage your wealth.

1. Path: This is a free financial planning tool that comes with your account set-up. It uses a combination of your information and data from other parties to determine what you should do with your money, whether that’s investing more heavily, completing an Emergency Fund, or taking a big life step such as buying a house.

2. Invest: The main draw to the app, which works alongside Path. After you take a risk-tolerance test, the Invest section automatically invests your money in a combination of 10 categories:

    • S. Stocks
    • Foreign Stocks
    • Emerging Markets
    • Dividend Stocks
    • Municipal Bonds
    • Real Estate
    • Treasury Inflation-Protected Securities (TIPS)
    • S. Government Bonds
    • Emerging Market Bonds
    • Corporate Bonds

Note: You can manually change your risk-tolerance score if you’re unhappy with the score they assign you after your brief test

A screenshot of the results of a risk assessment score. Change your risk tolerance manually with the plus or minus button.

[A screenshot of the results of a risk assessment score within the app. The score is an 8.0 out of 10 with the option to change the risk level. The data output includes asset class and percentage of allocation the app would put into each.]

3. Cash: You get 0.35% APY for a cash management account. You can use a debit card or ATM to access your cash, all of which is kept separately from your Investment account. (Unless you allow the Auto-Pilot investing. More on that later.) You only need $1 to open a cash account, there are no fees to open the account, and you do not need an investment account to use the Cash account.

4. Borrow: You can take out loans via Wealthfront with the Porfolio Line of Credit. This means that you have a low interest rate and are borrowing against your stock portfolio. If you have a minimum of $25,000 in your account, you can borrow up to 30% of your investment account.

5. Save: Reach your liquid saving goals, such as completing a six-month Emergency Fund, with the Save portion of the app.

You can move money between all of the different components of Wealthfront, meaning you can move Cash into the Investment account or the Save account and vice versa.

The Benefits: Hands-Off Investment and Superior Goal-Setting

Wealthfront promises to “put your savings on Autopilot” by investing any extra money you have on hand and don’t need for daily expenses, putting your money to work for you.

Wealthfront also automatically rebalances your portfolio without you having to press a single button. Rebalancing is critical to ensure your risk level does not vary beyond the degree you want it to.

You should rebalance when the stocks, bonds, and any other assets you’re investing in change in value significantly. Because the market is complex and constantly changing, many busy investors want a hands-off approach to rebalancing. Robo-advisors rebalance your portfolio by buying and selling stocks and bonds for you automatically. This helps you improve your returns on investment and manage the risk to the level you want it to be.

The robo-advisor does not follow a set schedule to rebalance. Instead, they rebalance them as needed, when they drift too far away from your risk preferences.

Autopilot savings are a key benefit of using Wealthfront as you would a bank account, by depositing money into the Cash account.

[A screenshot of the sign-up process of the Wealthfront mobile app. The text reads: “Put your savings on Autopilot.”]

Another major benefit of Wealthfront is the customized goal-setting. Whether you’re saving for a college fund, planning an early retirement, trying to buy a house, or taking a major vacation, Wealthfront creates a customizable path for your money to get there.

Ask your robo-advisor hyper-specific questions and get the answers you need to make big life decisions. Image from

[An image of the output Wealthfront gives when you ask a questions such as “Can I buy a home in this city?” The results are, “Buying a home for 1.10M in Park Slope, NYC would be manageable and won’t affect your long term plans.” “Manageable” receives a yellow category. The smaller text elaborates on how much money the user has available to buy their dream home.]

You can type in questions such as “Can I buy a home in my zip code?” or “Do I have enough to send my daughter to Harvard?” The Path service will show you exactly how comfortably you could reach your biggest goals by factoring in things such as inflation, your current spending habits, investment returns, and Social Security.

It also gives you an analysis of how much this big expense would affect long term plans. You can be as specific as the exact college you’re saving money for and the zip code you want to buy a house in. The specificity of this tool is a key advantage of using Wealthfront.

What is Tax-Loss Harvesting and Why Do I Need It?

The purpose of tax-loss harvesting is to pay the least amount of taxes that you can on your non-tax sheltered accounts. Wealthfront optimizes this for you by selling securities at a loss, which will then offset the taxable gains you made.

Tax-loss harvesting is a complex process that involves an in-depth understanding of the markets and the rules of the IRS. Everything from the 30-day wash-sale rule to the complex and sometimes vague definitions put forth by the IRS need to be taken into account when tax-loss harvesting.

Because of these complexities, we do not recommend attempting tax-loss harvesting on your own. (Unless, of course, you eat, sleep, and breathe investment news. Trust us, we’ve been there, too.)

That’s why Wealthfront’s built-in tax-loss harvesting, with the rules of the IRS written directly into the algorithm, is such an advantage. The money you save on taxes also offsets the 0.25% management fee. Sleep soundly at night knowing you won’t have to worry about getting audited.

 If you are investing a large amount of money into your account (think anywhere from $100,000 to $1 million) you get added benefits to maximize tax-harvesting, such as Smart Beta portfolio weighting.

Does Wealthfront Work on Phones and Desktops/Laptops?

Wealthfront is a native app available for iOS and Google Play. You can also access your account on a desktop by going to

Is Wealthfront safe?

The Wealthfront Cash Account is insured for up to $1 million by FDIC. Banks normally insure just up to $250,000 per depositor, so Wealthfront is giving you four times the security of your bank down the street.

As for your investments, you get SIPC insurance for assets up to $500,000.

Finally, they have an internal security team, an external firm, and a third-party all checking on their processes to ensure your money is safe.

What type of customer service system does Wealthfront have?

Wealthfront has a customer service line that you can call to get any questions answered. In our experience, they are friendly, knowledgeable, and fast. You can also send them an email through this service.

Their Help Center is also stocked with articles answering common questions.

As for your investments, you get SIPC insurance for assets up to $500,000.

Finally, they have an internal security team, an external firm, and a third-party all checking on their processes to ensure your money is safe.

The Cons

Algorithm-based investing has a few cons to be aware of:


  • There are no options for human advisors.
    • Note: Many human advisors use robo-advisors to help them make their decisions.
  • In order to access the Risk Parity service and more customizable features beyond risk settings, you’ll need to invest a minimum of $100,000.
  • No fractional shares are available.

The Horizon: Self-Driving Money

Wealthfront plans to move toward a Self-Driving Money model, where extra money in your Cash account that you don’t need for expenses is automatically invested or put into a higher-yield savings account.

Self-Driving Money is another key component to Wealthfront’s strategy. They don’t want to allow your money to sit in accounts, losing value over time due to inflation.

[An explanation of Self-Driving Money from the Wealthfront website. The bolded text reads “Our vision of Self-Driving Money starts with the Cash Account.]

This means you will have to think about your money even less, because you won’t need to constantly monitor your checking account to move extra money into investment and savings. Once you deposit your paycheck into your account, you can select an option to automate the movement of the money into investment and savings.

Our View

Wealthfront is a fantastic option for investing your money without you needing to study the markets every day. We love that they only charge a 0.25% management fee and that they make investing easy and simple, no matter what you know about the markets.

We also like that their tax-loss harvesting service can make back the money you pay on the management fee and more. With a respected and knowledgeable founder, friendly customer service, and a well-thought-out business model, Wealthfront is our go-to robo-advisor recommendation.