SoFi Invest and Wealthfront are two automated investing platforms taking on old-school brokerages and financial advisors.
They are both sleek platforms where people have flexibility in managing their investments, while often paying significantly less in fees. Rather than leveraging high fees and commissions to earn money, Wealthfront and SoFi have minimized or in some cases eliminated fees.
These platforms are leading the "robo-advisor" movement and pushing for lower fees across the board and a wider set of features for the everyday investor.
That being said, there are some key differences between Wealthfront vs SoFi Invest. We will cover those here.
|Purchase Individual Shares||Yes||No|
|Access to CFPs||Yes||Limited|
|Best For||Investors looking for greater flexibility||Investors looking for standardized portfolios|
SoFi, a well-known conglomerate of personal finance tools such as student loan refinancing, mortgages, and personal loans, has a robust investment arm known as SoFi Invest.
As a whole, the SoFi platform aims to be a one-stop shop that can meet all of your personal finance needs in one centralized location. By continuing to roll out more offerings to their members, they continue to become a more attractive option for people looking to simplify their finances.
This platform focuses on three key areas where they offer great tools to young investors that are looking for a simple and sleek way to enter the world of investing. Although relatively new, SoFi has amassed a user base of over 2.5 million customers.
SoFi Invest focuses on three main categories; Active Investing, Automated Investing, and Crypto.
Each of these plays a unique role in SoFi's offering and havs helped it earn the large following it has today.
In addition to the three-pronged approach, SoFi Invest wants its customers to feel at home when they log on to the site. This is evidenced by the large investing community and educational resources available.
You can take advantage of the benefits like career coaching, financial planning advice, and discounts on other SoFi products.
With Active Investing, there are absolutely no account minimums or those lousy account fees that have discouraged so many investors. This alone is something to be excited about!
SoFi Invest also offers its version of fractional shares in what it calls Stock Bits. With Stock Bits, you can invest in dollar amounts instead of numbers of shares. This means that instead of putting forward the full price of a share, you can specify a dollar amount.
As a result, you can invest as low as $1 into companies that otherwise would be very expensive to buy.
If you're not a genius at picking individual stocks, and let's face it, who is, you may consider investing in one of SoFi Invest's specialized ETFs. Here are some options below:
These ETFs have reasonable expense ratios and allow investors the ability to target certain sectors without needing to research and monitor individual companies.
Saving for retirement or other worthy long-term goals shouldn't be hard. That's why SoFi Invest set up an Automated Investing option. With this, members can sign up and fill out a questionnaire and SoFi will build a personalized portfolio and manage it with no management fees!
This is relatively unheard of in the brokerage space. To this day, if you want your portfolio to be managed, you're typically going to need to pay a decent amount for this service. However, SoFi is able to offer this to their investors absolutely for free.
SoFi also rebalances automated investing accounts so that your long-term and short-term goals stay on track. You can rest assured that your account will never get off track with frequent portfolio rebalancing.
Since your portfolio was built with your risk tolerance in mind, each one is diversified to give you the best path forward to reach your goals.
As mentioned above, there are no management fees associated with the offered portfolios. However, as with all investments, there are other expenses.
These range from 0.03% to 0.08%. Before you get too upset at these rates, note that they are fairly low compared to other expense ratios.
When you sign up with SoFi Invest, you can also set up common long-term retirement accounts and choose from a Roth, Traditional, or SEP IRA. These can allow you to save on taxes over the long term and incentivize you to start thinking for the long term.
With the renewed interest in cryptocurrencies like Bitcoin, SoFi is taking the lead ahead of many other brokerages and offering investors the ability to purchase crypto on their platform. After you complete your first trade of at least $10 using crypto, SoFi will give you $25 in bitcoin. Cool, right?
Unlike the stock market, crypto trading is open 24/7. But, all those trades do come with a cost, unlike active investing.
A 1.25% fee is added to every crypto transaction and all crypto trades need to be above $10 in value and have a maximum of $50,000. In addition, no crypto can be transferred outside of SoFi Invest to an external wallet. This is a regulation put into place to protect user data.
While there are some restrictions here, this can be a good way to get some initial exposure to Bitcoin without having to set up an entirely new account. However, if you're thinking about purchasing a significant amount of crypto, you'll likely be better served by a platform like Coinbase that specializes in crypto.
Wealthfront is a technology-first, passive-focused investment platform. If long-term investing is your goal, Wealthfront could be a great vehicle to get you there.
In addition to investing, Wealthfront also offers services like banking which are becoming commonplace among robo-advisor platforms. For the purposes of this article however, we will focus on the investing arm.
Since Wealthfront’s focus is mainly on passive investing, it prides itself on custom portfolios, investing options, low fees, and tax benefits.
After signing up for Wealthfront, you will respond to a series of questions for the algorithm to get to know you and then create the perfect portfolio to match your situation.
Wealthfront’s investing algorithms will help you know how much you should be saving, which accounts you should be using, and what your strategy should be.
For example, let’s say you’re focusing on investing for retirement but you also want to save up for a big vacation in the coming years. Wealthfront will tell you exactly how much you should invest and in which low-cost ETFs, but it will also tell you how much you need to be saving in your bank account to reach your vacation goals.
This is great for those searching for a total financial view. For many, it is helpful to be able to visualize and plan for all of their goals individually and keep track of their progress over time.
If you just want to try this out with no risk, you can get Wealthfront’s experience and expertise without investing. This is a great benefit because Wealthfront has a higher account minimum of $500.
Wealthfront offers multiple accounts for retirement including: Traditional IRA, Roth IRA, SEP IRA, 401(k) Rollover.
All of these can be used to amplify your hard-earned money and get you to your golden years of retirement. At the same time, you'll have the potential to save on taxes and magnify your after-tax returns over time.
Investing for your children’s education is a top priority for a lot of parents. Luckily Wealthfront is there with necessary guidance and a 529 College Savings account. This allows parents to save for their kid’s education without paying taxes on the growth or on the distribution. With the rising cost of education, 529 Plans have only become more attractive to parents and grandparents.
Individual accounts allows investors to experience the thrill of investing without paying any trading commissions that eat away at gains.
Wealthfront boasts that its 0.25% annual advisory fee is less than ¼ of the industry average. This means that using Wealthfront’s service will cost you $1.04 per year if you have $5,000 invested.
Other than the fees stated above, there are no other fees to speak of. No trading commissions, no withdrawal fees, non minimum fees, and no transfer fees. The only thing you pay is the annual advisory fee and the fund fees.
One thing to note is that Welathfront will automatically set aside a cash balance equal to the projected fees you will owe over the coming year. This has the potential to present a level of cash drag on your portfolio, especially because Wealthfront also does not invest in fractional shares.
Taxes are something that no investor likes to talk about and certainly not something anyone enjoys paying. That’s why Wealthfront's technology-driven approach aims at reducing your tax burden so you can enjoy a richer experience.
With Tax-Loss Harvesting, you can reduce your tax bill by taking advantage of certain movements in the market to capture investment losses. For example, when an ETF in the portfolio declines in value, the ETF will be sold at a loss. Then, a near-identical investment is purchased to replace it.
That loss will then help you offset ordinary income or investment gains. This will reduce the amount of taxes you will need to pay at the end of the year. This feature is available for all taxable investment accounts and happens at the ETF level.
Stock-level Tax-Loss Harvesting is the same concept but takes place at the individual stock level and is only available for investors with more than $100,000 in invested assets.
In the past, only investors with a dedicated financial advisor could afford this service, but Wealthfront has made this an option for everyday investors. For many, the tax savings they see through tax-loss harvesting will more than pay for the fee Welthfront charges.
SoFi Invest and Wealthfront have impressive reputations and are laser-focused on the customer. Both are responding to the voices calling for low fees and freedom to establish financial freedom in the stock market despite potentially having a low net worth. This is where the industry as a whole is moving, so it's good to see both of these platforms staying ahead of the curve.
SoFi has some great offerings, but we hope to see the expand the Investment arm with additional features, potentially even tax-loss harvesting in the near future. If you are looking to simply pick and choose some stocks to invest in, SoFi may be a good fit for this. The Stock Bits allow you to buy fractional shares of many popular stocks.
However, if you are investing a sizable amount of money for the long haul, Wealthfront has a lot of great features that enable you to do this in a cost-effective manner. The trade-off is that you're not able to pick and chose what stocks and ETFs you invest in, and you may end up paying slightly higher fees.
In the end, both brokers provide the ability to put your cash to work with minimal fees and your decision will primarily come down to which fees you value more.