2017 Comparison: Wealthfront vs. FutureAdvisor
Robo-advisors are online wealth management services that offer automated portfolio management by using advanced computer algorithms, giving you the convenience of having your investment managed online.
They also come with especially low-cost investments, tax-loss harvesting on taxable accounts, and portable access through the Wealthfront app and FutureAdvisor app.
These online investment management firms offer more affordable services and require lower account minimums compared to services that use human financial planners.
FutureAdvisor vs Wealthfront: which one is the better option for your investment needs?
You may be wondering “Is FutureAdvisor safe?” or “Is Wealthfront a credible service?” You may also want to know about potential Wealthfront returns.
We’ve reviewed and compared these two robo-advisors to help you understand your choices and make an informed decision.
Read on to know more about Wealthfront and FutureAdvisor fees, FutureAdvisor and Wealthfront performance, and which of these online advisors better fit your investment management needs.
Comparison Review List
The list below is sorted alphabetically (click any of the names below to go directly to the detailed review section):
High Level Comparison Table
Best Robo Advisors
0.5% of directly managed assets
0.25% on assets over $10,000
Table: The above list is sorted alphabetically
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Wealthfront vs FutureAdvisor: Company Overview
Before diving into our FutureAdvisor vs. Wealthfront detailed review, it may be helpful to begin with a brief background about each company.
Future Advisor Overview
FutureAdvisor touts itself as an award-winning investment advisory firm with an investment council composed of savvy finance experts and scholars.
Backed by billions of dollars and decades of operation, the company aims to help people attain long-term financial goals through a sophisticated investment management process that involves both automated software and human investment advisors.
Photo courtesy of: FutureAdvisor
FutureAdvisor boasts holistic wealth management, tax efficiency, low-fee index funds, and diversification.
The online investment advisor offers automatic investment management through the use of highly-respected academic research in the field, including Modern Portfolio Theory (MPT), the Black-Litterman Model, and the Fama-French Five-Factor Model.
These dyamic approaches help you build a strong portfolio and attain maximum return based on your investor profile’s indicated risk levels.
Photo courtesy of: Wealthfront
Wealthfront focuses on a core set of investment products, including:
- Individual accounts
- Joint accounts
- Trust accounts
- Traditional IRA
- Roth IRAs & SEP IRAs
- 401(k) rollovers
- 529 College Savings Plan
When stacking up FutureAdvisor vs Wealthfront, the latter features low-cost, hassle-free investment management and advice with low account minimums.
Wealthfront invests in exchange-traded funds, or ETFs, and index funds and features diverse investment management through constant, tax-efficient rebalancing.
The online advisory service manages personal and retirement accounts, whether investors have individual retirement accounts or 401(k) rollovers.
In 2017, Wealthfront became the only company to offer both investment management and financial planning fully through software, making them a competitive option for the younger generation seeking a online financial advisor.
FutureAdvisor vs. Wealthfront Review
While both of these best robo advisors have some similarities and common threads, there are certainly some differences in their investing models.
Here, we will discuss how FutureAdvisor works as an online investment manager, including a custom analysis of their management process.
How Does Future Advisor Work?
FutureAdvisor evaluates your financial situation and designs a financial plan that fits your long-term goals. If you’re asking, “Is FutureAdvisor safe?” the answer is: yes.
Both a team of human advisors and the company’s Recommendations Engine monitor your portfolio on a daily basis. Whether you aim to reach an early retirement or finance the college education of your children without racking up hefty debts, the company comes up with a distinctive solution.
This solution is backed by a six-point strategy, which includes:
- 401(k) advice
- Holistic approach
- Tax-loss harvesting
- Consistent monitoring
- Expert advice
- Tax-efficient methods
FutureAdvisor manages joint and individual taxable investment accounts as well as IRAs, such as traditional, rollover, Roth, and SEP IRAs. Direct management means you authorize the company to trade in your accounts.
They can also help you rollover your 401(k) if you no longer work with your employer. If your 401(k) is currently on the Fidelity platform and enabled with BrokerageLink, FutureAdvisor can directly manage it. They can also mange funds at TDAmeritrade.
The online advisory firm automatically monitors, rebalances, and tax-manages your investment. Low-fee index funds are added where needed to strengthen your portfolio.
Image Source: FutureAdvisor vs. Wealthfront
Custom Analysis of FutureAdvisor
Once you create your FutureAdvisor account, you may connect your investing accounts or report your holdings manually.
On your dashboard, you’ll see a personalized analysis along with recommendations that suit your investment portfolio and particular financial goals. This trusted automated service makes the company a sizable robo-advisor compared with FutureAdvisor competitors.
FutureAdvisor’s advanced software breaks down your suggested retirement plan into several easy steps, assesses your performance, and identifies potential areas for improvement. You’ll get real-time updates and clear explanations as to why certain changes are recommended.
Depending on your chosen plan, FutureAdvisor offers the following comprehensive wealth management services. Premium accounts involve FutureAdvisor fees.
- Dynamic fund selection based on portfolio size, expense ratios, current holdings, and unique investment horizon
- Index-fund investing favoring low-fee index funds
- Smart rebalancing to decrease volatility of returns
- Tax harvesting to decrease tax bills and preserve wealth
- Global investments for diversification across countries, regions, and currencies
- Balancing risk and return with the Fama-French Five-Factor model
FutureAdvisor Review: Key Features
FutureAdvisor primarily focuses on retirement planning, college savings, and investment management. Here are the main benefits of using this robo-advisor:
This free service evaluates your funds, offers sound recommendations, and provides custom advice to improve your portfolio and holdings.
This includes 9 simple steps and real-time updates. As a free service, this makes FutureAdvisor a best robo advisor for cost-efficient retirement planning.
You’ll have to pay an annual fee of 0.5% to use this service. You may choose which assets the online investment advisor will directly manage for you. The annual fee covers the following services:
- Comprehensive portfolio management
- 24/7 online investment managers
- Easy-to-navigate dashboard and FutureAdvisor app
- Accountability as fiduciary
- Professional advice
- Automatic algorithms to monitor for opportunities
Photo courtesy of: FutureAdvisor
Free Investing Educational Materials
If you want to increase your knowledge regarding investing, FutureAdvisor offers a large library of free financial content through their Investing Library. Topics include:
- Getting Started
- Reach Your Goals
- Inside the Algorithm
- Money Blog
FutureAdvisor gives you mobile access through its iOS app, which provides a free custom plan and financial advice. Currently, the FutureAdvisor app does not have enough ratings to provide an average score, but there are over 180 ratings with 3.5 stars.
Basically, do-it-yourself investment planning is free of charge. After registering a FutureAdvisor account, you can access custom account-by-account portfolio suggestions.
The firm doesn’t charge anything for assets they do not directly trade in, including retirement planning, college savings, investment advice, 529 account management, and portfolio suggestions. Moreover, 401(k) advice is available for free.
FutureAdvisor charges an annual management fee of 0.5 percent of your directly managed assets. When you become a Premium client, FutureAdvisor manages your assets directly.
You’ll also have to pay FutureAdvisor fees associated with low-cost ETFs if you have 529 accounts. During the first rebalancing of your portfolio, you may have to pay for certain trading commissions.
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Wealthfront vs. FutureAdvisor Review
When comparing FutureAdvisor vs. Wealthfront in terms of financial planners and online investment managers, Wealthfront uses top-class economists and PhDs to create and fine-tune their investment software.
These include the renowned economist Burton Malkiel, who authored the revolutionary investment book Random Walk Down Wall Street and became the Chief Investment Officer at Wealthfront.
How Does Wealthfront Work?
If you're wondering, "How does Wealthfront work?" the process is relatively simple.
Before creating a Wealthfront account, you’ll have to answer a questionnaire that consists of objective and subjective queries, enabling the robo-advisor to assess your risk tolerance and create a personalized investment plan.
The online investment manager–in this case, the robo software– then maintains constant asset allocations regardless of your investment amount, potentially improving your Wealthfront performance and giving you significant Wealthfront returns.
Custom Analysis of Wealthfront
Wealthfront oversees your portfolio on a daily basis and rebalances or harvests tax losses whenever there are opportunities. The company’s software performs automated processes, including rebalancing upon reinvestment of dividends, account rebalancing, and tax-loss harvesting.
The robo-advisor applies threshold-based rebalancing, in which rebalancing of portfolios occurs whenever an asset class deviates from its target asset allocation instead of relying on a yearly or quarterly schedule.
Their proven methodology involves employing ETFs that track indexes for the 11 major asset classes in their portfolios. Each ETF is selected by an investment research team based on cost, tracking error, market liquidity, and securities lending policies.
Wealthfront Review: Key Features
The major features offered by Wealthfront include the following:
Passive Investing for Maximum Wealthfront Returns
Wealthfront invests your funds in rarely traded index funds and strives to follow the market instead of timing it through frequent trades.
Wealthfront offers automatic investment, which involves automated monitoring and rebalancing of your portfolio based on your risk score. This leads to optimal Wealthfront performance.
Tax-Efficient Asset Allocation
Wealthfront considers your accounts’ tax statuses and puts bonds and property assets to your retirement accounts for tax-free compounding. The robo-advisor focuses on using tax-efficient stocks in taxable accounts.
Photo courtesy of: Wealthfront
Zero Commission Fees
The only fee Wealthfront charges is a 0.25% flat annual advisory fee. While it takes a $500 minimum to open an account, your first $10,000 are managed for free, and there are no trading commissions or hidden fees.
The online investment firm diversifies your portfolio by building it from 11 asset classes, including U.S. and international bonds and stocks.
Tax-loss Harvesting for Low Taxes
Wealthfront’s Tax-Loss Harvesting feature seeks to help you save on taxes, thus improving your Wealthfront performance by up to 1.5 percent annually.
Like FutureAdvisor, Wealthfront provides easy, on-the-go access through their Wealthfront app, available on both iOS and Android. The iOS app has an average rating of 4 stars, while the Android app has an average rating of 4.6 stars.
Wealthfront vs. FutureAdvisor: Pricing
When comparing Wealthfront vs. FutureAdvisor in terms of investment management fees and costs, a major benefit offered by Wealthfront to new clients is free advisory for your first $10,000 in your account.
After that amount, Wealthfront continues to manage the first $10,000 for free but charges a monthly advisory fee for your additional investment. The fee is based on a flat rate of 0.25% per year.
Wealthfront prorates and withdraws the yearly fee every month. Other fees incurred by Wealthfront clients include ETF fees, which average 0.12%.
There are no account-opening fees, account-closing fees, trading fees, commission fees, or any other type of fees.
Wealthfront vs. FutureAdvisor: Pros and Cons
When looking for the best robo advisor– particularly when choosing between two online investment managers–it's important to weigh the pros and cons of each robo advisor.
After comparing FutureAdvisor vs. Wealthfront, there are a few specific benefits of each best robo advisor that our review would like to point out.
Pros of FutureAdvisor
Below, please find a detailed list of the specific advantages of using FutureAdvisor that our FutureAdvisor vs. Wealthfront review has identified.
FutureAdvisor does not charge for retirement planning analysis and recommendations, making the company stand out among Future Advisor competitors, although Wealthfront does offer similar retirement planning services.
Linking Your Brokerage Account
After linking up your account and transferring investments to TD Ameritrade or Fidelity, the firm performs trades automatically so your account is managed according to FutureAdvisor’s recommended asset allocation.
The automatic tax-loss harvesting feature of this best robo advisor software makes it possible for investos to reduce their taxes by pairing up investment losses with gains.
FutureAdvisor analyzes your current investments to come up with optimal suggestions. Tax implications are also reviewed when considering selling your trades.
Cons of FutureAdvisor
Although there are plenty of positive features about using this best robo advisor, there are a few potential downfalls that consumers should be aware of when choosing between FutureAdvisor vs. Wealthfront.
Relatively More Expensive Management Fee
Compared to FutureAdvisor competitors, the annual management fee of 0.5% for premium clients is a little higher. The benefit, of course, is that this fee only applies to assets that are directly managed, and 401(k) advice is still free.
To be eligible to use FutureAdvisor, you must meet the following criteria:
- Between 18 and 68 years of age
- U.S. resident
- Have at least $10,000 in investable assets
- Have a valid Social Security Number or Tax Identification Number
FutureAdvisor’s minimum account balance is considerably higher than similar services, although the account minimum is still lower compared to similar investment services that enable you to access human financial advisors.
It's also worth noting that the maximum age limit of 68 could certainly limit potential investors from using FutureAdvisor's online investment managers.
Pros of Wealthfront
Below, please find a detailed list of the specific advantages of using Wealthfront that our Wealthfront vs. FutureAdvisor comparison has identified.
Excellent Investment Strategy
Wealthfront employs some of the brightest minds in the financial planning industry, especially Chief Investment Officer Burton Malkiel, to solidify the firm’s investment strategy.
The use of a streamlined questionnaire to determine risk tolerance and the use of ETFs in asset classes help provide maximum Wealthfront returns.
Low-Cost Management Fees
The free advisory for your first $10,000 is a notable advantage of using Wealthfront, and is certainly a rarity amongst online investment managers.
Tax-Efficient Investment Management
Daily tax-loss harvesting is available on your taxable accounts. Wealthfront provides tax-optimized direct indexing at no additional charge if your accounts have balances exceeding $100,000.
Wealthfront is the only automated investment service to offer direct indexing.
529 College Savings Plan
Wealthfront offers the lowest cost 529 college savings plan from an advisor that offers more diversification for higher returns.
The after-tax returns from investing in this college savings account have the potential to be worth 16% more when compared to a taxable account, making the Wealthfront 529 College Savings Plan into a notable benefit.
Cons of Wealthfront
Although there are plenty of positive features of using Wealthfront as an online financial advisor, there are a few cons to this FutureAdvisor competitor, listed below.
One difference between Wealthfront vs. FutureAdvisor is the availability of professional advisors. While Wealthfront does have client support available by phone or email, their goal is to make account management simple, convenient, and entirely online.
For their target audience, millennials, this is a perfect strategy. For older investors who prefer to have consistent contact with an advisor, this may be a downfall.
No Fractional Shares
Because Wealthfront doesn’t buy ETF fractional shares, it’s possible for cash to sit untouched in your account, as the company cannot invest all of your deposit.
Conclusion: Wealthfront vs. FutureAdvisor
Overall, Wealthfront and FutureAdvisor are both ideal for investors who don’t want to spend too much time managing their portfolios or don’t like handling complicated financial matters.
Wealthfront is a great choice if you’re searching for free management on small balances, automated rebalancing, and excellent tax efficiency for your taxable accounts. The Wealthfront app is an extra perk that gives you access on the go.
However, Wealthfront may not be a good option for DIY investors or older people with more complex investment needs.
Between the two robo-advisors, you may benefit from using Wealthfront if you’re about to open your first brokerage or retirement account or if you’re searching for free management for your initial $10,000 from a trusted industry leader.
If you’re a DIY investor who wants free custom advice, FutureAdvisor is an excellent option. This online investment firm is also best for existing TD Ameritrade or Fidelity account holders and people who want personalized 401(k) advice.
Like Wealthfront, FutureAdvisor is ideal for hands-off investors, and the service is also accessible through the FutureAdvisor app. Still, this online wealth management service may not be useful for retirees who need constant advice and management.
If you need dedicated help from human financial planners, robo-advisors are likely not for you. Otherwise, both Wealthfront and FutureAdvisor offer valuable investment management services to help you achieve your financial goals.
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