At Wealthfront, we’re on a mission to build a financial system that favors people, not institutions. This mission informs every aspect of how we interact with clients, including how we charge fees for our products and services. Wealthfront’s fees are low, simple, transparent, and consistent. We’ve charged the same low, 0.25% annual advisory fee with no minimum fee since our founding 11 years ago, and we plan to keep it that way.
In this post, we’ll explain our philosophy on fees. We think this is important information for all Wealthfront clients to have, and we hope it will also be instructive in thinking about your relationship with other financial institutions.
Wealthfront’s fees are based on long-term alignment of your interests and ours
Wealthfront’s approach to fees is simple: we make money with you, not from you. Our choice of business model has always been rooted in our desire to put our clients’ interests ahead of our own.
For our Investing accounts, we charge a 0.25% annual advisory fee based on a percentage of assets for a fully automated, customizable, diversified portfolio that helps maximize your risk-adjusted returns and minimize your taxes. We charge based on a percentage of assets rather than transaction volume because we want to align our interests with yours in building long-term wealth. Companies that charge transaction-based fees, on the other hand, are incentivized to encourage people to trade frequently which academic research consistently finds is likely to hurt clients’ long-term wealth but help the company’s bottom line. While many fintechs and incumbents charge transaction-based fees or hidden fees that allow them to make a quick buck at their clients’ expense, Wealthfront takes the opposite approach. Wealthfront doesn’t charge any hidden fees, and the fees we do charge are transparent and based on the growth of your wealth over the long term.
We have charged the same 0.25% advisory fee (which is about a quarter of what traditional advisors charge) for every Wealthfront Investing account client regardless of account size since we started 11 years ago. We don’t increase our advisory fee when we add new features and improvements, and we don’t penalize clients for having a smaller account with us. This is in stark contrast to the frequent fee changes, minimum fees, and hidden surcharges (like fees for closing your account and moving your funds elsewhere, which can be as high as $100) you are likely to find elsewhere in the industry.
For our Cash Account, we charge absolutely no account fees and we pass along far more interest than many of our competitors in the form of a high APY (which means our net interest margin, which is what we earn on client deposits, is comparatively low). We’re focused on earning your trust, not earning as much as we can on your deposits. This allows us to build a long-term relationship with you so we can grow together.
Many people have asked us how we can afford to take such a long-term view. The answer lies in our focus on automation. We run Wealthfront as a technology company, not a financial services company. Over half our employees are engineers, and they take pride in only building products and services that can be fully automated. This approach leads to an extremely low marginal cost to add new clients and very few human errors. The end result is a more delightful user experience at a very low cost. And because the cost to operate the business is so low, we can keep our fees low, too, and focus on the long term.
In order for this unique approach to pay off, a company needs to have consistent revenue growth over a long period of time. Our relentless focus on delighting clients builds trust and encourages them to consistently deposit more money with us as they continue to save. As a result, our revenue compounds continuously over the years and builds a better business in the long term — much in the same way our clients’ wealth compounds over time and helps them reach their financial goals.
Wealthfront’s promise to you
Our long-term focus has enabled us to build a self-sustaining business by making money with our clients, not from them. Unlike others in the industry, we don’t need to generate additional revenue by penalizing smaller accounts, charging hidden fees, or encouraging excessive trading. That would be antithetical to our reason for being, which is to help our clients grow their long-term wealth on their own terms. Doing the right thing for clients is at the heart of what we do. You can always count on us to charge low, simple, transparent, and consistent fees in an attempt to pass along as much value as possible.
The information contained in this communication is provided for general informational purposes only, and should not be construed as investment or tax advice. Nothing in this communication should be construed as a solicitation, offer, or recommendation, to buy or sell any security. Any links provided to other server sites are offered as a matter of convenience and are not intended to imply that Wealthfront Advisers or its affiliates endorses, sponsors, promotes and/or is affiliated with the owners of or participants in those sites, or endorses any information contained on those sites, unless expressly stated otherwise.
Investment management and advisory services–which are not FDIC insured–are provided by Wealthfront Advisers LLC (“Wealthfront Advisers”), an SEC-registered investment adviser, and financial planning tools are provided by Wealthfront Software LLC (“Wealthfront”). Brokerage products and services are offered by Wealthfront Brokerage LLC, member FINRA / SIPC. All investing involves risk, including the possible loss of money you invest, and past performance does not guarantee future performance. Please see our Full Disclosure for important details.
Wealthfront Advisers, Wealthfront Brokerage and Wealthfront are wholly owned subsidiaries of Wealthfront Corporation.
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About the author(s)
David Fortunato is Wealthfront’s Chief Executive Officer. He joined Wealthfront in 2009 as the company’s inaugural CTO and was instrumental in launching the company to its first clients in 2011. Previously to his role as CEO, David was the President of Wealthfront. David holds a BS in computer science and economics from Amherst College. View all posts by David Fortunato