- Wealthfront announced the launch of portfolio customization tools and socially-responsible investment ETFs.
- The startup also said it would look to offer access to crypto investments later this year.
- The robo-advisory space has gotten increasingly competitive, including players like Betterment and Goldman Sachs’ Marcus.
- See more stories on Insider’s business page.
New retail investors have entered the market in droves during the COVID-19 pandemic. But despite the recent day-trading frenzy around individual stocks like GameStop, the majority of investors are interested in long-terms gains, according to one survey conducted by Charles Schwab in April.
Wealthfront, a fintech known primarily for its robo-advisory service, is expanding its offerings to give investors more customization options when it comes to their portfolios while still addressing long-term goals.
The Palo Alto, California-based startup announced Wednesday a broader range of exchange-traded funds (ETFs) and socially responsible investing (SRI) options available to users. The fintech also plans to begin offering cryptocurrencies later this year.
Wealthfront users will be able to build their own portfolios from scratch from a selection of ETF options vetted by the startup’s research team, or edit one of the startup’s recommended portfolios to gain a desired asset mix.
The new feature is a nod toward the do-it-yourself investing that surged in popularity over the past year while still maintaining Wealthfront’s core approach as a longer-term investing tool.
“We could help those clients understand the risks and buy some of the things they’re interested in and invest in what they believe in, but in a way that helps guide them toward their future,” Dan Carroll, Wealthfront’s cofounder and chief strategy officer, told Insider.
It was a sentiment echoed by Atlanta Falcons linebacker Brandon Copeland. When not playing in the NFL, Copeland is an adjunct professor at the University of Pennsylvania where he teaches a course on financial wellness called Life 101. Wealthfront said it teamed up with Copeland this April to amplify the company’s guidance around financial literacy.
“We want expert advice and guidance, but we also want to have control over the wheel,” Copeland told Insider.
“I have this robo-advisor managing my money and growing over time while I’m focusing on making more money. Now with the custom portfolios launch, you get some of the best of both worlds where you can actually say, ‘Hey, I want my money in here or in this, or invested this way,'” he added.
A crypto offering to come
While customers’ ability to customize their portfolios alongside the new SRI funds is now live, Carroll said Wealthfront’s expansion into crypto will take more time and likely involve some sort of investment cap — perhaps up to 20% of a client’s assets — on the amount customers can put into digital-currency investment offerings.
“We won’t be recommending something like crypto as part of the Wealthfront recommended portfolio, but we acknowledge that our target audience is interested in it,” Carroll said.
How Wealthfront would enable customers to invest in cryptos has yet to be determined, as some potential options still require regulatory approval.
No cryptocurrency ETFs have currently been approved for trading in the US, although several leading index managers and digital asset firms — from Fidelity to VanEck to Grayscale — have previously announced plans to launch such products, pending approval from the SEC.
“As we expand the platform to add for clients the ability to add more options, we’ll do it in a way to help them kind of understand the additional risks that they may be taking and how it fits in the overall picture,” Carroll said.
A pipeline from linked brokerage and cash accounts
Wealthfront currently oversees more than $25 billion in client assets across a range of cash, retirement, and investment accounts for close to 450,000 customers, Carroll said. Wealthfront charges clients a flat fee of 0.25% annually for its investing features.
While Wealthfront originally focused on its robo-advisor, the startup launched a cash account offering in February of 2019, followed by a move into full-service banking last summer. Carroll said that one of Wealthfront’s newest features, the ability to quickly transfer assets from a customer’s cash to investing accounts, has been a boon for the startup.
“We found this renewed interest in investing where cash is dead. What we find is actually a lot of clients are investing more and moving money from cash to investments as rates are near zero,” Carroll said.
A spokesperson for the company said March was one of the highest net deposit months in company history, buoyed in part by increased inflows from Wealthfront cash accounts into investment accounts.
Wealthfront has raised just north of $200 million to date. The company’s last fundraising round, a $75 million Series E in January 2018, was led by Tiger Global and saw participation from the likes of venture capital giants Benchmark Capital and Greylock Partners.
Carroll declined to disclose a valuation for Wealthfront, and said that the company had no plans to raise funds “for the foreseeable future.”
Competition among roboadvisors ramping
Wealthfront’s move deeper into portfolio customization across a broader range of assets, meanwhile, comes as competition remains fierce in the investment service and robo-advisory space.
In early March, Wealthfront competitor Betterment announced the acquisition of Canadian robo-advisor Wealthsimple’s US book of business in Sarah Levy’s first major move as CEO. Betterment’s president of retail, Mike Reust, meanwhile, told Insider in August 2020 that the digital wealth manager planned to integrate more portfolio customization.
And in February, Goldman Sachs announced the launch of its own retail-oriented robo-advisory service with the launch of Marcus Invest.
“We’re almost slow and methodical to launch new product areas, and the reason is it’s got to make sense within the user story,” Carroll said. “As we get into all these different services, we want to do it the Wealthfront way and help you do it responsibly,” he added.
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