In this guide, we'll walk you step by step on how to open an account with Wealthfront
Before we get to the guide, let's define what type of investment service Wealthfront is and discuss the effect of fees on investment returns.
I want to skip that, take me straight to the guide.
Wealthfront is an investment advisor that uses software to invest your money. Companies like Wealthfront and Betterment are known as "robo-advisors".
What are robo-advisors?
Robo-advisors are digital platforms that provide automated software financial planning with little to no human intervention.
They collect information from clients and use that information to automatically invest client assets.
What's the #1 advantage of using a robo-advisor?
According to Michael Kitces of Nerd's Eye View, the typical human advisor charges 1% of AUM(assets under management) for accounts less than $1 million.
Wealthfront and other robo-advisors charge fees as low as 0.25%.
Over the course of 30 years, it amounts to $30,000.
Over the course of 30 years, it amounts to $7,500.
Over the course of 30 years, you'll have savedby using a robo-advisor
• By using a robo-advisor, you'd have an extra $750/year to invest on a $100,000 account.
• What would the extra $750/year invested over 30 years amount to?
• Let's break-out our compound calculator and see.
• $750/year amounts to an extra $62.50 monthly.
Wow!!! An extra $1 million dollars?
Real life isn't as smooth as a calculator. The point of the exercise was to demonstrate the effect of fees on your investment returns.
In general, the lower the better.
So...should I not consider a human advisor?
Of course not. There are advantages to having a human advisor. CNBC points out four good ones.
• Humans have empathy
Money is an emotional subject. Algorithms aren't designed to manage the emotional components of investing and building wealth(though they are trying).
Sometimes, it's good to have someone to talk to...