Wealthfront vs. Vanguard: Comparison and Review
Two different investing platforms, Wealthfront and Vanguard, look very different on the surface, but are ultimately competing in the same game.
Wealthfront offers a 100% digital service, whereas Vanguard recently released a robot-assisted human advisor service… but that’s not the biggest difference.
In this Wealthfront vs Vanguard comparison, we show you what is.
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They say that robots can’t feel love and empathy like us humans do. However, if a machine helps me make money with almost no effort on my part, I consider it a friend.
Nowadays, we have access to friendly programs who can help manage and invest our money, preparing it for the future, and keeping away the universally-dreaded inflation.
Robo-advisors are the most disruptive trend in the finance industry in recent years because they have democratized financial management. Even if you don’t have much to start off with, you can prepare for retirement or buying a new house for a very low price and zero hassle.
Making money without doing anything sure sounds great, however, there’s a bit more to it than that.
Wealthfront and Vanguard are two very different robo-advisors for different kinds of investors. Although they’re both very big players with clients in the hundreds of thousands, one might suit you perfectly while the other might seem lacking.
This article will get into more detail as to which one suits you best by exploring their pricing, security, ease-of-use, and overall competence. Is Wealthfront better than Vanguard? The answer will ultimately depend on a number of factors regarding your own financial situation.
Now, let’s get into it, shall we?
|Annual Fees||0.25% annually||0.3% for assets under $5m; 0.2% for assets $5-10m; 0.1% for assets $10-25m; 0.05% for assets over $25|
|Tax Loss Harvesting||Yes||Yes|
|Provision of 401(k) Assistance||No||Yes|
|Ideal For||Beginning investors, Intermediate investors, Young investors, Smartphone users, IRA investors, and Goal-oriented investors||Investors who want direct help from professional human advisors, Investors with large account balances|
|Promotions||$5,000 in assets managed for free||None|
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
Even amongst the top robo advisors, Wealthfront was one of the pioneers. The company was founded in 2008 as a mutual fund analysis company but transitioned into a full-fledged wealth management firm in 2012.
Since then, Wealthfront increased its profits and client base, introducing one of the first robo-advisor platforms shortly after Betterment, which is the first robo-advisor provider and one of the industry leaders.
Wealthfront is currently one of the most popular companies in its field, with more than $20 billion in assets under management and continues to make improvements to its offer with new inventive technologies, which we will talk about in more detail soon.
Fast Facts and Features
- Account Minimum: $50,000
- Fees: 0.3% annually.
- Ideal for: Investors with substantial balances
- Automatic rebalancing: Yes
- Tax-loss harvesting: Yes
- Promotion: None
Founded many years ago, in 1975, Vanguard is a reputable company that has grown into the Godzilla of the wealth management world, with around $5.6 trillion in assets under management and more than 16,000 employees at the current moment.
During its long history, Vanguard has been a brokerage focused on managing the wealth of its clients, mainly through mutual funds and ETFs, which are the company’s specialty.
They say you can’t teach an old dog new tricks, but this 55-year-old brokerage has decided to stay on top of new trends by launching its robo-advisor service in late 2019, integrating it into its personal financial advisor program.
At this moment, Vanguard’s hybrid advisor service seems like a very promising enterprise that could bring this household name broker into the new age of automated wealth management.
Goal Setting and Planning
A well-made algorithm can make trades for you, and keep your portfolio nice and diversified.
However, no matter how great the bot is, it needs some human guidance in order to work optimally.
Before letting the machine take care of business, you must construct a plan to guide your trusty robo-advisor in its endeavors.
This plan can include parameters like retirement spending budgets and college cost estimates. You can also decide whether the bot shall make high-risk, high-return investments or vice versa, and you can also tell it to prioritize certain investment types over others.
Good automated trading algorithms are common among great wealth management firms, but the planning systems are where most companies are very different. Let’s see how these two compare starting with Wealthfront.
Wealthfront – Fully Digital And Beyond Effortless
A few investment advisors take their planning service more seriously than the innovative robo-advisor provider that is Wealthfront.
When you open an account with Wealthfront, you immediately gain access to Path, a great comprehensive planning tool that can synchronize all your financial data and give you a holistic picture of your finances.
The dashboard is super handy as it displays assets and liabilities, as well as projections for all your individual financial plans, so you can see if you’re on track with your goals.
To keep you on the right path, Wealthfront will regularly notify you if you should take action. For example, if your retirement plan isn’t going as expected due to a shift in the markets, you’ll be alerted so that you can relocate funds into the retirement fund quickly.
To make a good plan, you need a full picture of all your finances. Wealthfront’s platform enables you to link all of your online banking and other financial accounts thus having an aggregated view of your assets.
Inputting parameters like your age, desired income, current funds, etc. is effortless on the well-designed dashboard. What’s more, you can make quick projections to see what long-term plan looks best before you start investing in it.
Planning with Wealthfront is fully digital, comprehensive, and easy to use and understand, which is a very pleasant combination. On top of that, it looks nice too.
Wealthfront has been near the very top of the robo-advisor game for some time now, and an important factor in that is the great planning service they provide.
Not sure what to look for when it comes to automated investing? Learn how to choose a robo-advisor.
Vanguard – A Hybrid Advisor Service
The brokerage veteran offers a combined human advisor and robot advisor service. This doesn’t mean a cyborg will manage your money (as far as I’m aware… 🤖).
Rather, one of the company’s experts will help you set up your plan, while the trading bot does all the manual labor.
First, the advisor will help you make a financial goal, like retirement. After that, you’ll get information like, how likely your goal is, how much money you need to save yearly, how much you can spend annually when you retire, etc.
When you choose a plan you like, it will be put into action. The algorithm will trade your assets according to your desires, while a human advisor is there to help and inform you in case the plan isn’t going as expected.
However, there is no need to call the advisor all the time, as Vanguard’s dashboard lists all the info you’ll need to keep an eye out on your investments’ progress very clearly.
Vanguard doesn’t allow users to link all their financial accounts to the platform like Wealthfront, so it’s harder to see a full picture of your assets. Luckily, the dashboard is well-designed, and all other data is very accessible and easy to understand.
Be it saving for retirement, college, or a family vacation home, a human advisor will make this process feel safer and more controlled, meanwhile, the robot will do the manual labor efficiently and quickly, keeping the prices down for everyone involved.
Speaking of price tags, let’s see how much all these services cost.
Wealthfront vs Vanguard Fees
The difference between a traditional financial advisor and a robo-advisor is that the latter doesn’t need a paycheck.
Robo-advisor technology is the most disruptive trend in the financial management industry in recent years because it allows more people to have their money managed at a lower price and with less effort than ever before.
When it comes to Wealthfront vs Vanguard on fees, let’s find out how much it will cost to have one of these two financial management giants take responsibility for the growth and safety of your money.
Wealthfront – Smaller Fees And Taxes
The company offers a plentitude of accounts that are specialized for different kinds of saving strategies like Trust, Roth IRA, 401(k) Rollovers, etc. What all these accounts have in common is that they all incur a competitive annual fee of 0.25%.
To further decrease your expenses, Wealthfront uses several investing interesting strategies like Direct indexing. But what does this mean exactly?
Basically, instead of investing money in a sensible combination of ETFs or index mutual funds, the advisor will create an index just for you. Thus, Wealthfront is buying individual stocks for you, and this becomes very important when it’s time to pay taxes.
In essence, direct indexing will incur lower taxes than simply buying up mutual funds or ETFs, which is a great way to save money and help your long-term goals.
The difference this makes is not huge, but when it comes to long-term retirement goals, every little bit helps. Since these small gains stack up over time, it’s worth mentioning that you’ll lose less money on taxes as Wealthfront’s client.
Wealthfront provides more assistance with taxes than most robo-advisors, including Vanguard. Unfortunately, the full set of tax-loss harvesting features is only available for accounts with $100,000 or more.
The minimum initial investment with Wealthfront is $500, which isn’t the lowest requirement you’ll find among leading robo-advisors. However, this number is exactly 100 times lower than what Vanguard requires.
Vanguard – A Safe Bet For Serious Investors
Signing up with Vanguard will get you a top-level financial advisor. But as the saying goes, all good things in life come with a price.
The minimum initial deposit you need before you can open a savings account with Vanguard is $50,000. That’s a lot of dough, especially when you consider that many great robo-advisors require $0.
The annual fee is higher as well at 0.3% but Vanguard claims that its advisors make up for that higher fee with superior tax-loss harvesting strategies. The company does a good job here, as a typical high-income earner can save around $1000-$1500 per year on tax, just by having Vanguard manage their money.
There is a way to lower your annual fee, and that is depositing a lot more money. Clients with more than $5 million on their accounts are charged 0.2% per year, clients with over $10 million lose 0.1% per year, and finally, clients with $25 million or more are charged a tiny annual fee of 0.05%.
Compared to Wealthfront, Vanguard’s tax-loss harvesting and yearly fee are lacking, but that doesn’t mean this company is the weaker link.
Clients who want to deposit a few million will find this robo-advisor’s discounts amazing, and the company offers some of the best-priced mutual funds and ETFs you’ll find anywhere.
So, if you’re interested in a broker with a fantastic offer for long-term investing, check out Vanguard’s brokerage. The company has a lot more to offer than personal advisor services.
Wealthfront vs Vanguard Performance
Both these companies offer an impressive suite of features, however, they are different. Choosing one advisor over the other will be a matter of personal preference and your desired investing strategy.
A fully digital service that requires almost no effort from the users is exactly what many investors are looking for. The ability to put your account on autopilot is something you definitely get with Wealthfront, among other things.
A fully automated service needs account aggregation, which means having all your financial data, including banking data, available on your Wealthfront account. This feature is not provided by Vanguard to the same extent, so Wealthfront gets points here.
There is no concrete portfolio rebalancing schedule, rather Wealthfront automatically rebalances your assets whenever they start drifting away from your desired goal.
Furthermore, users with a balance of $100,000 or more can get socially responsible investing services, which means their money will be invested in stocks belonging to “green” companies. However, this requires a bit of work on the client’s part since you have to personally choose the green companies you like.
PassivePlus is Wealthfront’s signature suite of features that includes tax-loss harvesting and can save you a bundle. Direct indexing and risk parity also become available when your account balance reaches $100,000, saving you even more money.
Moreover, if you have $500,000, you get Smart Beta, which is a service that can increase your returns by weighting your stocks more sensibly, increasing profits.
All in all, Wealthfront’s systems are top-notch and definitely worth checking out if you’re looking for a reliable no-hassle financial management service.
Few companies can play this game at such a high level, but Wealthfront is not untouchable, as another wealth management giant, Betterment, arguably offers an even better automated investing service.
If you want to cover all the bases before investing, check out the hottest rivalry among robo-advisors today, namely, Wealthfront vs Betterment.
Although it falls short in many ways, Vanguard has the edge when it comes to expert human advisors, which are not provided by Wealthfront.
Unsupervised algorithms usually don’t make mistakes, but there are some examples of robo-advisors making wrong decisions, so it’s safer to sit in a car with a human in the driver’s seat.
Moreover, in case the market goes off the rails for a while (which happens every few years anyway), Vanguard’s advisor will serve as a coach and help you adjust your plan to the turbulent market conditions. A robot would likely fail at doing that since it lacks experience.
Vanguard doesn’t have a fancy set of features, rather, the advisors are there to help with just about anything.
What’s more, accounts with more than $500,000 will get a dedicated advisor instead of being managed by a team of advisors, which is one more reason why the seasoned broker seems like a good choice if you’re sitting on a sizable amount of money.
The robo-advisor will also rebalance your portfolio on a regular basis, keeping your assets safe and in line with your long-term goals.
The company follows the principles of Modern Portfolio Theory (MPT), which means they will focus on low-cost stocks, indexing, and diversification, without basing decisions on short-term goals.
Confused about investing? Learn about how to research stocks.
Vanguard has higher requirements and demands a bit more effort from the client, but seems to offer a more reliable service all-around, so keep it in mind if you’re a high-income investor with an ambitious savings plan. When it comes to Wealthfront vs Vanguard on performance, the two are neck-and-neck.
It seems that Wealthfront is really trying to cut down on the human workforce. There is no live chat function on their platform or website, and the phone service only works 5 days a week from 7 a.m. to 5 p.m. PT.
Luckily, the phone representatives are licensed pros, so they’ll have no problem answering any of your questions. Aside from the phone service, the company’s representatives can be reached via Twitter, or better still, via email.
We sent an email with a very simple inquiry and got a helpful response in mere 3 hours, which is a blink of an eye in customer support terms.
Vanguard is pretty much the same when it comes to customer support. You can reach the representatives quickly by phone, and emails will get answered in 1-2 days. The phone service is available 5 days a week from 8:30 a.m. to 9 p.m.ET, and the support agents are just as professional as Wealthfront’s.
Basically, the two robo-advisor providers are equal when it comes to customer support, as both have the same 5-days-a-week phone and email support.
Is Wealthfront better than Vanguard? When it comes to customer service, we say yes.
Wealthfront offers users protection up to $500,000 in case the company goes bust or mismanages your assets, courtesy of Securities Investor Protection Corporation (SIPC).
What’s more, if you have a separate cash account with the company, you are eligible for protection of up to $1 million, guaranteed by the Federal Deposit Insurance Corporation (FDIC).
Keep in mind that this protection is provided only in case of the company’s bankruptcy or some other dramatic failure. On the other hand, if you lose money due to some sort of change in the markets, it’s considered your own loss, and won’t be refunded.
Vanguard is also a member of SIPC, which provides protection of up to $500,000 for all clients under the same terms as they do for Wealthfront.
The human advisor can add a layer of safety in case there is a shift in the markets that a robot advisor can not react to, but both companies are considered equally safe otherwise.
Wealthfront vs Betterment: Which Investment Service Is Better for You?
When it comes to new technologies, fancy algorithms, design, and many other features, Wealthfront has the upper edge. The low initial deposit requirement and prices make it easy to get an account, and the company’s robo-advisor system is a proven, well-oiled money-making machine on the top of its game.
On the other hand, if you’re a high-income earner, and want to invest a serious amount of cash, Vanguard’s experts will probably seem like the more prudent option. On top of that, if you have a high enough balance, you’re eligible for a discounted annual fee that makes Vanguard one of the profitable personal advisor services in the world.
Is Wealthfront better than Vanguard? It’s almost impossible to answer without the details of a particular financial situation.
All in all, young investors who don’t intend on depositing tens of thousands right at the start will have a great time with Wealthfront, while Vanguard will attract customers who will appreciate having a financial expert on their side at all times.