Wealthfront vs Ally Invest – Lower Costs or Less Effort – Which Is Better?

Wealthfront vs Ally Invest

Two companies with two different strategies – Wealthfront has better prices and more detailed planning while Ally Invest lets you put your savings on autopilot and enjoy life.

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Entrusting a company with your retirement or your kids’ college fund is one of those decisions where a lot of research is needed beforehand, and even then, it’s not an easy one.

It’s just so important to choose the right financial manager to fulfill your long-term goals.

Luckily, that’s exactly what this article is here for.

Robo-advisor is a wealth management service that uses machines that don’t need a paycheck to lower the cost of investing for clients, as well as save time for everyone involved.

These two companies offer some of the most popular robo-advisor services around today and do a very good job of making you money with little effort on your part.

However, Wealthfront and Ally are two quite different companies for different types of investors.

In a moment, we will see how each robo-advisor can help you with your long-term plans, how much money that can make for you, and most importantly if it’s safe to deposit your money with them.

Let’s take a better look at these two money-makers and see if either one ticks all the boxes for you.

Wealthfront Overview

Wealthfront Logo

Fast Facts and Features

  • Account Minimum: $500
  • Fees: 0.25% annually
  • Ideal for: New investors
  • Automatic rebalancing: Yes
  • Tax-loss harvesting: Yes
  • Advice: No human-assisted consultations

Wealthfront has established a powerful presence in the investing world after it transformed from a mutual fund analysis service to a full-fledged wealth management service in 2012.

The company’s robo-advisor service was among the first to enter the market, and Wealthfront is currently considered as one of the top players in the automated wealth management world.

This household name currently has over $20 billion in assets under management and offers competitive prices and innovative software solutions to attract even more new investors to its side.

Ally Invest Overview

Ally Invest BannerFast Facts and Features

  • Account Minimum: $100
  • Fees: From 0 to 0.3%
  • Ideal for: New investors
  • Automatic rebalancing: Yes
  • Tax-loss harvesting: Yes
  • Promotion: No management fees for users with 30% of their portfolio in cash savings
  • Advice: No human-assisted consultations

Ally Financial, formerly known as GMAC Inc., has a long history dating back to 1919 when it was founded by General Motors. It is now a bank holding company that provides numerous financial services but is most well-known for its online bank and brokerage.

The company bought TradeKing in 2016, which allowed the creation of Ally Invest brokerage and robo-advisor services.

Soon after, the company managed to adapt to its new environment and to become one of the most popular brokerage services in the US.

The robo-advisor service is the latest addition to the gigantic Ally family, which holds $180.844 billion in assets and has more than 8,700 employees.

Now, the company is trying to make a competitive financial management service, suitable for clients who want to make long-term returns on their investments with little effort and worry.

Goal Setting and Planning

Investing a ton of cash without a plan was never a good idea, which is why all financial advisors have systems in place to help you set goals before putting your money to work.

Like many robo-advisors, these two companies strive for a simple, fully-digital, and yet comprehensive planning system that will let you get started quickly and effortlessly.

Let’s take a good look at these planning systems and see if they are a good fit for your investing aspirations.

Wealthfront

With its audience in mind, Wealthfront has created a planning system that is a great combination of accessibility and flexibility. This system is called Path, and here is how it works.

Wealthfront Path Planning ToolOne of the first things you will do on the platform is make a strategy by inputting parameters like your age, desired income, annual expenses, etc.

The dashboard will then recommend a strategy and show you a projection of how your plan looks in the long run. If you aren’t amazed by the strategy, you can tweak it until the platform gives you a projection that you feel good with.

When all that is set up, just make a deposit and your money will get to work, bringing you closer to buying a house or saving up for retirement.

If your portfolio isn’t growing as anticipated, the platform will alert you and recommend a solution like changing your plan or pooling more cash into your account. That way, you don’t need to check on your portfolio every day, and you can live your life as usual.

Wealthfront Financial Data ExampleThe combination of accessibility and effectiveness is what earned this company its status as one of the top robo-advisors in the country. If you like their offer thus far, check out the full Wealthront review to see the company with all its perks and flaws.

All in all, Wealthfront offers a good-looking, easy-to-use platform that allows for a more detailed investment planning system than Ally, as we will see in a moment.

Ally Invest

One of the main perks of robo-advisors is that they’re usually very accessible, even for new investors. Ally’s service is no different as it provides clients with a very simple, yet effective planning system that’s very easy to use and understand.

When making an account with Ally’s robo-advisor, it will ask you general questions about your long-term goals and recommend one of 5 portfolio management strategies:

  • Conservative – Very low risk
  • Moderate – Low risk
  • Moderate Growth – Moderate risk
  • Growth – High risk
  • Aggressive Growth – Very high risk

The most conservative option is great for preserving your money, rather than growing it, whereas the aggressive option can generate more profits in the long-run.

Portfolio Strategy Returns

The best part of this portfolio system is that it’s very easy to use and you can also change it on a moment’s notice whenever you want. What’s more, these portfolios were created by experts to suit most investors’ wishes, so they’re worth checking out.

The downside of the 5 portfolio system is that it offers very little flexibility, as the asset allocation in these portfolios is fixed.

For example, the most aggressive option isn’t all that aggressive, as it holds a lot in government bonds. Therefore, investors who are looking for a very stock-heavy portfolio may find this offer lacking, and will probably prefer Wealthfront.

It’s worth noting that you can easily switch to self-directed investing with Ally Invest’s brokerage service. This is great if you decide to take matters in your own hands, as you don’t have to move your assets to another company or pay any transfer fees.

WINNER: Wealthfront. Ally’s super simple approach is proven and easy to get used to, however, Wealthfront offers more planning features. Wealthfront’s platform is also very user-friendly but lets you make more detailed plans, projections, and custom portfolios. This level of comprehensiveness is more suited to long-term planning, which is why Wealthfront comes out on top here.

Pricing and Fees

Robo-advisors may cost less than traditional financial advisor services, but they aren’t free.

The largest expenses clients have to worry about are the management fees that go to your advisor and the taxes that go to the government.

However, these two companies offer banking services and other solutions that can improve the growth of your portfolio. Let’s which option will incur fewer taxes and fees.

Wealthfront – Lower Fees and Tax Reduction

As one of the top robo-advisors in the industry, Wealthfront prides itself on its competitive 0.25% annual management fee, as well as advanced investing and tax-loss harvesting strategies.

Direct Indexing is one such advanced investing strategy. Instead of buying a reasonable selection of index mutual funds or ETFs, the company will make an index that’s just for you.

This means that they will buy individual stocks that incur fewer taxes than ETFs and mutual funds, helping you save more money long-term.

Wealthfront DigestUnfortunately, the full spectrum of tax-loss harvesting and advanced investing services isn’t available to all users, as you need a portfolio of $100,000 to get access to most of these perks,

However, the basic offer also has a tax-loss harvesting program and proven investing methods that should give you a good return for your money, so no worries. Wealthfront’s offer tends to be good for new investors.

The minimum initial investment is $500, which is not the lowest you’ll come across but also isn’t so high as to turn away new users.

Wealthfront Cash Account

Wealthfront also has a high-yield cash savings account, but there’s a catch. The Federal Reserve has lowered interest rates recently, and it seems they won’t be rising them any time soon.

Consequently, most banks, including the Ally Bank have followed suit, but Wealthfront is an exception, kind of. Wealthfront has held a 2.57% interest rate up until very recently. To the disappointment of clients, the company has dropped its APY to 0.26%, which is well below the 2.5% inflation, as well as Ally’s interest rate.

Increasing the APY in a low-rates environment was a powerful move, but it was short-lived. As we have seen with Wealthfront, these rates tend to jump up and down a lot in today’s turbulent market. Make sure to check the exact rates beforehand if you’re looking to store your cash in one of these services.

Ally Invest – Good Prices And a Banking Service

Ally also offers tax-loss harvesting and automatic portfolio rebalancing services to increase returns and lower risks for the user. Also, new investors will likely find it very easy to get started here as the minimum initial deposit is $100.

Like many robo-investors, Ally will buy ETFs for your portfolio. Moreover, ETFs are in right up Ally’s alley. The expense ratios for these ETFs range from 0.10% to 0.17% which is slightly weaker than Wealthfront, but still quite competitive.

What makes this robo-advisor very interesting, though, is that it is part of the Ally family which includes one of the most popular online banks, the Ally Bank.

Having a bank and an investment advisor under one roof sure is handy, especially if you want services like the Ally debit card or a quick loan.

The bank was rated as the “Best Online Bank” in 2018 by Money Magazine, and now, it offers a special discount for Ally’s robo-advisor users.

Ally Bank Promotion

As a service integrated with the Ally Bank, this robo-advisor has a special discount that’s best suited for conservative clients.

If 30% of your portfolio is in cash savings, then you don’t have to pay the monthly management fee of 0.3%.

Since Ally is also a bank, they will use your cash to give out loans, which will make them a profit. That’s why all management fees are 0 if you keep 30% of your portfolio in cash.

Ally Bank Cash BufferPaying 0 fees sounds great, but does it pay off? Well, that depends. We did the math and it turns out that keeping 30% of your money in cash will yield a better return if you choose one of the conservative portfolio options.

This means that using this discount will only benefit investors who are looking to safeguard their wealth, rather than grow it.

On the other hand, should you choose one of the more aggressive portfolio options, keeping 30% of your money as cash will slow down your growth. In part, That’s because your deposited cash will grow at a rate of 1.5% per year, which is lower than the current 2.5% inflation rate.

In the end, the 0.3% maintenance fee should leave you with more money at the end of the year if you want more profits, so keep that in mind if you’re looking to grow your portfolio.

WINNER: Wealthfront. This is a decisive victory by Wealthfront, as the company has a lower account management fee, more tax-loss harvesting, and direct indexing, which means higher returns. However, Ally Bank will give you a better APY if you want to save your cash.

Other Features

These two companies both strive for a fully-digital service that’s user-friendly, and accessible from a mobile device.

This method means their offers are cheaper and more simple than the traditional financial advisor service, but with one drawback.

You can’t get personal assistance from an actual human advisor on these platforms, however, there are many other perks to look forward to with these two financial giants. Let’s take a look.

Wealthfront – Extra Perks For Large Portfolios

A fully-digital financial service works best when you have information about all your finances in one place.

Luckily, Wealthfront is good at account aggregation, which means you can link all your financial accounts, like your banking account, to Wealthfront’s platform. This gives users a holistic view of their assets and helps with all investing endeavors.

Wealthfront PassivePlus EdgePassivePlus is Wealthfront’s signature set of features that’s available to all clients with taxable accounts and includes many interesting perks.

For example, clients with $5,000 or more get basic tax-loss harvesting services through PassivePlus to help their growth, but the real bonuses will cost a bit more.

Users with a portfolio of $100,000 will get advanced tax-loss harvesting and risk parity, which will leave you with bigger returns at the end of the year.

Moreover, if you pass the $500,000 mark, you get Smart Beta. This is an advanced service and it means that your money will be invested with more analysis and care, providing even more profit for you in the long run.

Wealthfront offers a suite of great features that can save users a lot of time and money, which is why this company is one of the industry’s leaders.

However, it’s not like Wealthfront doesn’t have fierce competition. If you want to see how a battle of two robo-advisor giants looks like, check out our Betterment vs Wealthfront comparison and see which one suits you more.

Ally Invest – Access to The Ally Family

Ally Invest Managed Portfolios is a service closely connected to the Ally Bank and Ally Invest brokerage.

For one, this means that you can use the bank for your banking needs, which will make keeping an eye on your money much more simple.

Using the bank with the investment service will give you a holistic view of your finances, as well as the ability to take out loans and make quick, easy transfers if need be.

Ally Invest Platform on iPadAccount aggregation is one of the most desired features among investors, so this is definitely a plus for Ally.

Moreover, if you feel like you don’t need to use an advisor anymore and decide to invest on your own, you can easily switch your portfolio to Ally Invest’s brokerage.

Many robo-advisors have transfer fees if you want to move your assets to a brokerage, but since Ally provides both services, the switch to self-directed investing is quick and free.

This is worth considering because Ally Invest has a good trading platform and offers great prices for trading stocks, options and ETFs for free.

Check out the full review of Ally Invest brokerage to see if trading with this broker is something you would like to do in the future.

What’s more, much like Wealthfront, Ally offers socially responsible investing, which allows you to buy and sell shares from a select list of “green” companies.

WINNER: Wealthfront. Ally has a lot of handy features like a bank and a brokerage. However, Wealthfront is very focused on wealth management and the features they offer will help you quickly grow your portfolio, which is kind of the point of having an advisor in the first place. Both companies are on equal footing when it comes to socially responsible investing and basic tax-loss harvesting, but Wealthfront has advanced features for customers with large balances, which help it come out on top.

Customer Service

Wealthfront has a quick and reliable email and phone service, however, there’s no live chat on their website. Unfortunately, the customer support representatives are only available 5 days a week from 7 a.m. to 5 p.m. PT.

The phone service agents are licensed professionals and will usually answer in less than two minutes. They can help you with all kinds of problems, from a forgotten password to complex technical issues.

You can also reach the agents through Twitter, but it’s a lot quicker to simply send them an email. The email we sent them got a very helpful answer in as little as 3 hours which is above-average and praiseworthy. Here’s our little chat.

Wealthfront Customer Email and Reply

Ally Invest has a 24/7 customer service that’s always there if you need it. You can reach Ally by phone, email, or live chat, which is only available to clients.

The customer support representatives are courteous and respond fairly quickly. The average response time for live chat and phone is less than 2 minutes, which is not super quick, but not bad either.

Email inquiries usually get a quick response too. We sent an email with a simple question and the customer support got back to us in 23 hours, which is quite satisfactory.

However, the agent wasn’t very helpful as he didn’t answer our question. Rather, he told us to go and start making an account to get the information we want. He might’ve had a point, but that answer wasn’t helpful at all.

Ally Invest Email Reply

WINNER:Ally Invest. Although Wealthfront’s customer support is great and quick, they simply lack 24/7 coverage and live chat capabilities on their website and mobile platform. Ally has a non-stop customer service, so they are more likely to help you promptly, especially if you forget your password during the weekend.

Security

Wealthfront’s users are protected with $500,000 by Securities Investor Protection Corporation (SIPC) in case the company goes bankrupt or mismanages your assets.

On top of that, if you’re a Wealthfront Cash Account user, you get up to $1 million coverage, courtesy of the Federal Deposit Insurance Corporation (FDIC).

Keep in mind that this protection is provided only if of the case of Wealthfonrt’s failure. If you lose money because of your portfolio drops in value, it’s considered your personal loss. This is the case with all advisor services.

Ally Invest robo-advisor is offered by Ally Invest Securities, LLC., which is also a member of the SIPC and offers protection of up to $500,000, including $250,000 in cash in case the company goes bust.

Moreover, the company is partnered with Apex Clearing, which covers users with cash and assets up to an aggregate of $150 million, which is a very reassuring added layer of security.

Therefore, your money is protected, but so is your account. Ally’s platform has multi-factor authentication and 256-bit encryption, which is what most high-level advisors offer, including Wealthfront.

WINNER:Ally Invest.Ally has the edge over Wealthfront because of the huge $150 million protection provided by Apex Clearing. Wealthfront definitely does a good job protecting most investors, but Ally is safer if you have a very sizeable portfolio.

Bottom Line – Which Investment Service Is Better for You?

Ally Invest is made for clients who want their investing journey to be as simple and effortless as possible, and yet, with good results at the end of each year. Those who decide to take matters into their own hands can easily transfer to Ally’s brokerage and use the Ally Bank, which is one of the perks that make this robo-advisor interesting.

Wealthfront is a bit different as it is focused on automated investing and offers better prices and cost-reduction features than its competitor. Planning is a bit more time consuming, but much more flexible, which means Wealthfront can make a portfolio you want.

Choosing between these two is mostly a matter of preference. Ally is great at making things as easy as possible, while Wealthfront offers better prices and more planning capabilities.

About Author

Tim Fries Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim is also the co-founder of Protective Technologies Capital (protechcap.com).