You should always pay attention to fees and pricing of financial product, but now it’s more important than ever. Latest reminder: Wealthfront, the roboadvisor known for its low-fee, passive investing options, will soon start charging all new users a 0.25 percent advisory fee, and will auto-enroll wealthy investors into a new fund with 0.50 percent fee.
Starting April 1, Wealthfront will start sunsetting the advisory fee-free management on the first $10,000 in investments, and will charge new investors a 0.25 percent management fee annually, no matter the size of their account. “Any existing client that currently enjoys $10k managed for free will continue to receive that benefit for life,” wrote a Wealthfront spokeswoman in an email. Per the website, it does not charge “account-opening fees, withdrawal or account-closing fees, trading/commission fees, or account transfer fees.”
With that in mind, it might be a good opportunity to check out your other options. Robos are still one the less expensive bets if you’re a beginner investor, but you should still compare the fees: Betterment, another robo, also charges 0.25 percent, though that still puts the two at the lower end of the fee scale, per NerdWallet. WealthSimple is a robo that doesn’t charge anything on the first $5,000 managed for one year. It then charges 0.5 percent up to $100k, charging 0.40 percent thereafter. Ellevest, a robo started by former Bank of America exec Sallie Krawcheck, charges 0.25 percent on the first $50,000 in assets under management.
As I wrote here, you could also try to replicate the robo’s asset allocations for yourself for free, as they’re usually publicized on the companies’ websites.
Wired first wrote about the company’s fee change, but noted only the 0.50 percent fee attached to the company’s new “Risk Parity” fund for wealthy investors. Per the company’s website, investors with taxable investment account balances of at least $100,000 can invest in the fund, which has an expense ratio of 0.50 percent.
When asked about the article and new investment fees, the spokeswoman said that she is “not sure where some of the information from that article was pulled from.” She noted that the Risk Parity fund is part of Wealthfront’s PassivePlus investment features, which you can read about here and here. Essentially, the Risk Parity fund “aims to balance the risk budget of your portfolio more intelligently by giving your portfolio more exposure to asset classes with higher risk-adjusted returns.”
You should be wary of actively managed funds, but again, investors need a taxable account balance of $100,000 to invest. One thing to note: the spokeswoman noted that Wealthfront will automatically put 20 percent of your assets into the Risk Parity fund if you have $100k invested “so there is no work on your part, unless you tell us otherwise.” In other words, you’ll need to opt out of the fund.
So: If you’re a Wealthfront investor, be aware of the changing fee structure, and stick with passive investing. But know the fee is still low compared to similar products for investors with lower account balances.
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