Investing for your future has always been important. And if you’re just now getting interested in having more control over your money, managing your investments, and keeping on top of your finances, then using a robo-advisor such as Wealthfront or Vanguard may be right for you.
There are many different software options you can choose from to manage your money nowadays. But these two titans are some of the most popular and, therefore, ones that many people turn to when getting started with managing their investments.
In this article, I'll compare Wealthfront and the newer Vanguard Personal Advisor Services. This will provide you with the information you need to choose the right company for you.
All About Wealthfront
Wealthfront is much newer than Vanguard - founded in 2011. This doesn’t mean you can’t have a great experience with Wealthfront, or that it will offer a lower-quality experience than Vanguard, though.
The company provides software that manages your funds 24/7 and will monitor your investments for you. This is perfect if you're new to investing, as you won't have to hire an advisor. So you can instead use affordable and reliable software to help you with your investing needs.
Wealthfront makes it incredibly easy to quickly diversify your portfolio, so you don’t accidentally invest too much money in one area. This is especially helpful for people who are new to investing and can easily make a mistake in knowing where to put their money and how much they need to invest in a specific stock which, as you know, can cause significant problems in the future.
Read more: Full Wealthfront Review
Enjoy Expert Experience and Advice
One great thing about this platform is that they have relied on the experience and knowledge of CFAs, Ph.D. advisors, and data scientists to create an investing platform that isn’t just powerful but is also user-friendly.
It can be really overwhelming to start investing, especially when you are given a platform to use that just doesn’t make sense. Generally speaking, you won’t have this problem with the Wealthfront platform.
One thing that really sets Wealthfront apart from its competition is that they have strong and educated financial investment leaders running the company. This is obvious in their easy-to-use, automated management software.
Unlike other companies and software that just don’t make a lot of sense, Wealthfront has designed theirs to be intuitive, simple, and to offer plenty of support during the investing process.
The Overall Process of Investing with Wealthfront
Understanding how Wealthfront works will give you a better overall understanding of how it works compared to Vanguard, and which one is right for you to use.
I love how quickly you can open an account with Wealthfront, as long as you are 18 or older and a U.S. citizen. You can quickly open multiple accounts if you want to save both for a child’s education, as well as for your own retirement. This makes keeping money separate and safe more accessible than ever and is a great feature.
After you open your account, you will have a risk score assigned to you and given a custom portfolio that matches your risk tolerance, as well as your personal goals. This takes a lot of the stress and pressure off of new investors who may not be able to identify their risk tolerance clearly.
Once your account is set up and you are ready to invest, you can rely on the automatic investing software to manage and rebalance your portfolio. Because you have access to constant monitoring, individual investment plans, and regular rebalancing of your funds, you will know exactly how your money is being used, where it is going, and the performance of your investments.
The Advantages of Wealthfront
There are several advantages you'll get when you invest with Wealthfront instead of with other companies such as Vanguard. One of the top reasons I think that Wealthfront is a great idea is because the robo-advisor is incredibly easy to use.
This means you don’t have to worry about whether or not the software truly understands your needs and ambitions. And you won’t have to worry about finding the time in the day to monitor your accounts as closely as they need to be watched.
Additionally, Wealthfront has done a fantastic job making sure that accounts will be accessible at all times, so you never have to fret about your money and feel like you cant check on it. Even though your portfolio is being monitored for you, you have complete control over it at all times and can make changes 24/7.
There are meager advisory fees when you use Wealthfront, which makes investing more affordable for everyone. And if you refer a friend, you can even qualify for a discount.
Finally, this is the only automated investment company that offers its users Stock-level Tax-Loss Harvesting. If you have more than $100,000 in your accounts, then this is a valuable feature that you wouldn’t be able to enjoy with other investment brokers. So if you have a lot of money invested, you’ll want to check out and take advantage of this feature.
Wealthfront also has a cash account where you can earn a modest APY. Currently, Wealthfront Cash offers a 3.30% APY on funds in the account, and it comes with a lot of nice benefits. Like other savings products, you’re FDIC-insured for up to $2 million.
What’s better, though, is you can open an account with just $1, there are no other minimums, and you get unlimited, free transfers in and out of the account. Plus, Wealthfront just launched a checking feature for their cash accounts--which allows you to get a debit card for purchases, direct deposit your paycheck, pay bills, and more.
The checking feature of Wealthfronts cash account is a real game-changer. You’re able to get paid up to two days earlier (via your paycheck direct deposit), pay others using certain apps, get cash from ATMs, and deposit paper checks with your phone.
As you’ll see below, Vanguard is a great investment platform but it does not offer any type of account like this.
Read more: Wealthfront Cash Account full review
All About Vanguard
This is probably one of Wealthfronts largest competitors, even though it is not fully automated. Vanguard has been around longer than Wealthfront and was founded in 1975.
While in the past they didn't offer digital investing, they do now. And they're currently expanding across the globe, with offices not only in the U.S. but throughout the world.
While you may think you'll get the same service from Vanguard that you would from Wealthfront, there are a few key differences you need to understand, so you choose the right option.
The main difference between Vanguard and Wealthfront is that when you work with Vanguard, you’ll be able to work with a human advisor. This person is trained and educated to help you make the right investment decisions for you, which is a feature that isn’t offered through Wealthfront.
Having access to a professional who can offer you advice about your investments is essential. Advisors can help make sure you aren’t making mistakes by putting too much money in one area or opting for riskier investments than you are prepared for. This can reduce a lot of the stress you feel, especially when you are first learning how to invest.
How to Invest with Vanguard
Once you are ready to open a Vanguard account, you have to choose the type of account and plan that you need. I love that there are options such as setting up savings for a child’s education, your retirement, or even opening an IRA or rollover a 401(k).
The online application only takes around 10 minutes, and you do have to have access to employer information, as well as information about your bank accounts to be able to complete the process.
When you've set up your account and chosen your investments and funds, you then add money to the account. At this point, you have a choice of either customizing your investments yourself or allowing the automated software to do this for you.
I think it’s a good idea for people who are just starting out to allow the software to complete the work for you, but if you want to have more control over your investments and you have done your research on the ones that you want, then choosing your own investments can be enjoyable.
If you're ready to invest and want to learn more about the different types of retirement funds open to you, then check out what Michael Foster at Forbes has to say to help you make the right decision.
The Advantages of Vanguard
I really like that the Vanguard app offers the same control and accessibility to your money and your investment accounts as the Wealthfront app does. There are a few features that really set the Vanguard app apart and make it easier to use, including:
- The ability to sell, buy or exchange your investments
- You can check balances, prices, performance, history, and returns
- It’s easy to research stocks, funds, and ETFs and also to get financial news
- Invest via mobile with a check, easily adding more money to an existing account, but not funding a new one
Comparing the Fees
I find that while both of these companies have fees for users to use their services, Wealthfront is generally considered to be much more affordable than Vanguard. They charge an annual fee of 0.25% on all accounts, no matter their size. However, you can have part of that fee waived when you refer a friend, and they create an account.
You do need to have at least $500 to open an account with Wealthfront, and this money will allow you access to low-cost index funds.
Vanguard, while it doesn’t charge commission fees when you buy or sell ETFs or mutual funds, still has some fees that you need to be prepared to pay. They charge $20 per year for mutual funds unless you meet specific criteria including receiving electronic documents or being a particular type of Vanguard client.
They also charge 0.19% for age-based 529 portfolios or 0.19-0.49% for individual portfolios. Balances below $3,000 are subject to a $20 fee.
Finally, the service of working with a professional costs 0.30%. While many people think that this service is a huge draw for people to choose Vanguard, less than 1/3 of all customers take advantage of this service, according to Vanguard.
Wealthfront vs. Vanguard - Bottom Line
The battle of Wealthfront vs. Vanguard can be tricky and will end up being a personal decision that will primarily be based on whether or not you want to work with a financial advisor. Having that extra advice when making investment decisions is really important to some people, which is why Vanguard is so famous. While both companies offer the services that you need to start investing, it’s vital that you decide what services you will best benefit from.
You need to consider not only the fee structure but also how quickly you can access your accounts and the control that you’ll have over your investments. Make sure that you keep an eye on the minimum balances in your accounts so that you aren’t charged extra fees, which Vanguard is known to do.
Additionally, decide whether or not you want to be able to invest and forget your money or have more control over it, as Vanguard offers a service that allows you to invest your money and rely on automatic rebalancing.
Have you ever used either Wealthfront or Vanguard to stay on top of your investments and take better control of your money? Wed love to hear about your experience in the comments below!
DoughRoller receives cash compensation from Wealthfront Advisers LLC (“Wealthfront Advisers”) for each new client that applies for a Wealthfront Automated Investing Account through our links. This creates an incentive that results in a material conflict of interest. DoughRoller is not a Wealthfront Advisers client, and this is a paid endorsement. More information is available via our links to Wealthfront Advisers.