B_Alvy's Profile

Responding to both the original post and the previous comment, I believe that Wealthfront is a digital winner and low end disruption to the wealth management business. However, there are some differences between traditional wealth management and services like Wealthfront/Betterment that are worth adding to the conversation.

First, looking at portfolio allocation, Wealthfront offers a set portfolio (VTI, VEA, VWO, etc) and the percentage mix of each is determined by an individual’s risk tolerance on scale of 1-10. I believe the brick and mortar wealth managers will find their value (and it’s arguable if the difference in fee will be totally justified) in the additional diversification of other asset classes available to their clients. There is also the effect of individual attention and a wealth manager’s ability to understand what their client truly wants out of their portfolio (risk tolerance beyond a 1-10 rating, expected return/required return, etc). Any brick and mortar wealth manager that doesn’t highlight their value added through services beyond the allocation of assets to standard funds/asset classes will lose significant market share to Wealthfront.

Another interesting development at Wealthfront is the recent change to the required account minimum (previously $5,000 to open, now only $500). They are very clearly moving to unserved markets, as a private wealth manager would never be focused on a $500 account. With the digital infrastructure now well established, the marginal cost of adding new accounts to Wealthfront is very small.