Ellevest vs Wealthfront: Which Robo Advisor Is For You?
Over the last decade, the introduction of robo advisors has radically changed the brokerage industry.
There are many robo advisors out there in the investing world right now. Many are very similar in what they do but go about it in different ways.
Two very distinctive robo advisors are Wealthfront and Ellevest.
Each is unique in its own way and has its own set of ups and downs involved with them.
This article is going to give you all the necessary information it takes to make the decision about which of these platforms could be right for you.
- Both Wealthfront and Ellevest offer free financial planning services
- Only Wealthfront offers tax-loss harvesting
- Wealthfront is cheaper to unlock all the features it offers
- More account types are offered with Wealthfront
- Ellevest is more beginner-friendly
- Both allow you to invest in Real Estate using exchange-traded funds (ETFs)
- Ellevest is designed to meet the specific needs of women
- Wealthfront does not have a target demographic
What Is Ellevest?
Ellevest takes a very different investment approach when compared to Wealthfront. It is designed to fit a very specific set of needs for female investors.
It was created to put women’s needs in investing in the forefront. This is something the company says is severely lacking in today’s financial world.
They aim to bring the unique challenges women face to the forefront and factor them into your investing plan, like the fact that women live longer and are paid less on average.
While it was originally made for women, men are able to use the platform to fit their needs as well.
Ellevest says they support anyone's financial ambitions regardless of gender.
How Does Ellevest Work?
The company says they use a gender-specific algorithm in their retirement portfolios and will build your portfolio based on things like your age, time horizon, goals, and salary.
You’ll set up your account and enter some additional information into their system.
When you tell them what they need to know, they will instantly present a free financial plan for you. Whatever goals you have given them is how it will begin to structure your portfolio.
Ellevest sets you up with a few different paths you can go down and what different milestones you are looking at throughout your life. You don’t have to have everything planned out all the way as it allows you to make modifications at any time.
Depending on the type of plan you have with Ellevest, you may have access to a financial advisor.
Ellevest offers a few different tiers. They do offer one on one instruction for your finances with their premium offering, giving you access to a CFP ®.
In addition to this you will be able to talk to an “Executive Coach” should you choose to do so.
They will advise you on the correct path you should take in your career in terms of salary negotiations and other events.
This platform does not support tax-loss harvesting. Instead, you will receive what they call Tax Minimization Methodology or TMM.
What this means is that they will try to include securities in your taxable accounts that will be costing you less in taxes such as municipal bonds. They will also try to put the securities that will cause more taxes in your non-taxable accounts.
Goal Oriented Investing
Ellevest has an excellent platform that paints a clear picture of your finances.
This means that you can plan life events on the fly and use the money you are already putting into Ellevest to help plan for these changes.
Ellevest has a few different levels of their service and as such different fees associated with them.
The Digital plan costs you 0.25% of your total managed assets and has no minimum balance.
Premium is going to run you double that at 0.50% and has a minimum of $50,000.
The highest tier is Private Wealth. This does not have a listed price as the managed assets will be determining the cost. This is for investors with a minimum balance of $1 million dollars.
- Offers a variety of great goal setting tools
- Beginner-friendly design
- Specific structuring for women’s needs
- Access to financial professionals at Premium level and higher
- No tax-loss harvesting
- Premium tier is more expensive than competitors
What Is Wealthfront?
Wealthfront is a well-rounded robo advisor that caters to many different types of investors.
Wealthfront offers everything from financial planning to savings accounts and lines of credit.
Helping them along is a committed team of prolific investors like Chief Investment Officer Burton Malkiel, author of “A Random Walk Down Wall Street."
It has become a big player in the industry with over $11 billion in total assets under management.
How Does Wealthfront Work?
When you create an account with Wealthfront, the algorithm will ask you some general questions about your financial life. They use this data to calculate suggestions for your financial plan.
Upon completion of the introductory process, a free financial plan will be presented to you with the use of their Path tool.
Then you will set up some milestones that you would like to hit such as retirement, purchasing a home and college costs. The system will give you advice on how to approach these scenarios.
With their automatic deposit system, the investing process is something that would be intriguing to someone who wants a hands-off system to plan for the future.
Wealthfront offers tax-loss harvesting for your portfolio.
Their system will look every day for ways to keep the tax bill low without changing your investment strategies.
The big deal with Wealthfront is Stock-Level Tax-Loss Harvesting.
According to their website, this “looks for movements in individual stocks within the US stock index to harvest more losses and lower your tax bill even more."
Line Of Credit
You will have the opportunity to borrow money from yourself in a way when you invest with Wealthfront.
Upon reaching $25,000 in your account you will be able to take a loan of up to 30%. The interest rate varies.
Wealthfront Cash Account
With a minimum of $1 to open and no additional requirements to deposit, Wealthfront’s bank account is very easy to set up.
It also features no fees whatsoever including free transfers.
Wealthfront makes the statement that they are not a bank. However, through their bank partners, your money with them will be FDIC insured up to $1,000,000.
The interest your money accrues is none too shabby either offering interest rates higher than most traditional banks.
A lot of services out there require that you sell your previous investments and proceed with them with cash. Depending on the account type this could cause tax consequences.
This robo-advisor offers Tailored Transfers which allows you to transfer your assets over time to a specialized portfolio, instead of all in one shot.
Wealthfront has a blanket fee of 0.25% of your managed assets to use their service. They also say that they select low-cost investment funds when building your portfolio with fees varying between 0.06-0.13%.
These are the only two fees associated with your Wealthfront account. There are no trading commissions whatsoever. In addition, there will be no fee for withdrawals, minimums or transfers.
- Excellent tax-loss harvesting
- Automatic rebalancing
- High-interest bank account
- One size fits all fee structure of 0.25%
- Not tailored to a specific demographic of investors
- No access to financial advisors
Verdict: Which Robo Advisor Is Best For You?
The answer to this question, like most investment questions, is largely going to be based on you and your needs.
If you are a beginner to investing or want a specific approach, then you should probably go with Ellevest. It has a better system to guide you along with hand-holding in place to avoid perilous decisions.
You will also have access to financial advisors and one on one coaching if you go to the Premium level.
However, if you want more flexibility and better tools at your disposal then you are going to want to go with Wealthfront.
With Wealthfront, you have access to a great online banking platform, and the ability to borrow money after you reach a threshold.
Wealthfront also offers a better tax-loss harvesting platform that aims to make your tax bill less worrying when that season rolls around. However, there is no access to financial advisors on Wealthfront. You have to rely on the algorithm.
When all is said and done, these are two excellent investing platforms and each of them will be able to excel in their own ways.
You will have to make your decision based upon the needs that you bring to the table as an investor and the tools that you believe will be best suited for those needs.