Wealthfront is offering its planning services for free, effectively unbundling its software, and giving millions of Americans access to a financial roadmap.
The second largest independent robo is betting the firm can steer users into fee-based accounts after they interact with its software to come up with a financial plan. The freemium software uses the firm’s automated advice engine, Path, according to the firm.
“We realized we needed to get our financial planning service into more hands after we found engagement with Path is directly correlated to clients saving more of their income,” says Dan Carroll, co-founder of Wealthfront, in a statement.
The new strategy comes as competitors have created hybrid solutions, pairing traditional pure-play digital products with human advisors. Vanguard Personal Advisor Services, Schwab Intelligent Advisory and Betterment Premium have gained market share in recent years after adding a personal touch.
“The announcement comes at a pivotal time when the future of financial planning is up for grabs,” according to a company spokeswoman.
In contrast, Wealthfront remains committed to pure-play automated planning and has increased client assets to $11.5 billion, according to its Form ADV. Call centers staffed with CFPs canutizlied by other firms cost consumers upwards of 2% in management fees, says a spokeswoman.
A managed Wealthfront account comes with a 25 basis point fee, according to the firm.
“The market has been shifting toward advice and planning for over a decade,” says Dennis Gallant, a senior analyst for Aite’s wealth management group. “Firms are making adjustments to address that competitiveness in the environment.”
With lower overhead than its competitors, Wealthfront is able to bring down the cost of its products, he says. “As they achieve scale based on their model, they can effectively provide advice at a much lower cost,” Gallant says. “The move reflects the lower margins.”
As some of the largest financial institutions like Morgan Stanley and UBS tack on traditional robo services, the independents robos have added a slew of new offerings to address the competition.
In a Q&A, planner Louis Barajas explains how he wrote an interactive guide to building generational wealth and how financial advisors can learn from its universal principles.
Jon Giuliani is the chief revenue officer of
Anne Eberhardt is a senior director and forensic accountant in the New York office of Gavin/Solmonese. She is a certified fraud examiner and a certified anti-money-laundering specialist.
The Redwood City, California-based robo has added a handful of new features in the past few months to keep pace with competitors. The most recent involves a
“What’s the hook to get someone to engage?” Gallant says. “If the process is easy that usually leads to a follow through.”
In October, Wealthfront first announced it would offer free financial planning to all individuals in the U.S. The freemium service lets users that do not have a Wealthfront account sync financial information on the platform. The firm's financial advice engine, Path, can calculate ideal spending and savings rates, make savings recommendations and helps map out a plan for retirement, according to a spokeswoman.
“For most people, any planning is better than none,” Gallant says. “But, what’s convincing the client to take the first mouse click?”
