Wealthfront is an online investing service that helps users automate their investments, take advantage of tax-loss harvesting, and set detailed financial goals. Wealthfront utilizes advanced investing technology, paired with a simple-to-use mobile app to help users build a comprehensive financial plan.
Vanguard is one of the largest investment firms in the U.S., and offers a super-simple investing platform with its Vanguard Digital Advisor service. Vanguard uses its own low-cost investment funds to build an investment portfolio aimed toward retirement or other financial goals. Vanguard also offers its Personal Advisor Services, which give users access to human financial advisors to help them build a customized investing plan.
We’ve compared both Wealthfront and Vanguard’s robo-advisory services, breaking down the pricing, investment options, security, and user experience of each.
Wealthfront vs Vanguard Overview
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Wealthfront is a robo-advisory service that offers automatic management of user investments, advanced tax strategies, and access to a wide range of investments through exchange-traded funds (ETFs).
Wealthfront uses a passive investing strategy based on Modern Portfolio Theory (MPT), helping users avoid costly investment funds by only offering low-fee investment options that cover almost a dozen asset classes. This is achieved by creating recommended investment portfolios of ETFs that are diversified, focusing on long-term growth of those investments, as well as automatically rebalancing when necessary to maintain the asset allocation. This all happens in the background and users only need to continue investing. Wealthfront does the heavy lifting.
The company also offers a free financial planning tool called Path, which helps users build an optimized financial plan by plugging in all their financial information and goals. Path pulls each piece of data together into a financial overview that shows you how to hit your investment and retirement goals.
Wealthfront charges a 0.25% management fee and requires a $500 minimum to start investing.
Vanguard’s Digital Advisor service helps users automatically invest for retirement and other financial goals. For a 0.15% annual management fee, Vanguard automatically builds a portfolio with a blend of Vanguard ETFs based on a user's goals.
It offers automatic rebalancing, which includes daily monitoring of accounts, and selling of investments that make up too large a portion of the portfolio. Vanguard also offers tax-efficient investing and withdrawals, with both taxable and tax-advantaged investing accounts available, as well as selling securities in a specific order to minimize taxable events within the portfolio.
Vanguard gives users access to a dashboard where users can track their progress. The minimum investment required for Vanguard Digital Advisor is $3,000.
The company also offers a hybrid service called Vanguard Personal Advisor Service, which includes automatic investment management and access to a licensed financial professional. This service charges a 0.30% annual management fee for the first $5 million invested. The minimum investment required for Vanguard Personal Advisor Service is $50,000.
Main Features of Wealthfront vs Vanguard
While both Wealthfront and Vanguard offer automated investment management and access to low-cost ETFs, each company has unique features that can help users make the most of their money. Here are a few of our favorite features from each robo advisor:
Wealthfront Tax-Loss Harvesting
Wealthfront helps users reduce their potential tax losses on standard investment accounts through a strategy called tax-loss harvesting. For example, when an investment declines, Wealthfront can automatically sell the investment in order to create a loss. The robo advisor will then immediately purchase a similar investment, which keeps the asset allocation of your portfolio intact.
Wealthfront’s tax-loss harvesting is done on a daily basis, in order to find the best tax-saving opportunities possible.
Wealthfront Portfolio Line of Credit
Wealthfront offers a Portfolio Line of Credit on standard investment accounts. This product gives customers quick access to cash by allowing them to borrow up to 30% of their total account balance.
While this may be a good option for someone who needs cash, it requires investors to eat into their returns.The annual percentage rates (APRs) on Wealthfront’s Line of Credit is variable, though it's typically below 4% APR, which is lower than most personal loans (about 9.4%) and credit cards (about 14.5%).
If the portfolio drops below a certain threshold, Wealthfront may require users to deposit extra funds into their Wealthfront account, or sell investments from their taxable account to repay some of the loan.
Wealthfront Financial Planning Tool (Path)
Path is Wealthfront’s free financial planning tool. This tool takes inventory of your financial accounts, assets, savings rate, and goals. After you connect your accounts, users can set financial goals (such as buying a home) and Path will evaluate your currency account balances, savings rate, and goals, and show you how much you need to be saving to reach your goals. It will tell you exactly how much more (or less) you need to put aside monthly to ensure you’re on track.
Whether you want to purchase a home, pay for college, or even take a year off to travel, Path will crunch the numbers, offer insights and suggestions, and let you know if you are able to hit your financial goals.
When setting goals with Path, the tool takes into account the impact on your retirement and future plans. Each goal you add has a section called “How Will This Impact My Plan?” which allows you to see the long-term implications.
For example, if you want to travel for a year (with no income), the tool will show the estimated impact to your savings and recommend the appropriate adjustment to your investments.
Vanguard ETF Fees
Vanguard offers four simple ETFs with an average expense ratio of 0.05% annually. Adding this to the portfolio management fee of 0.15%, the net total fees for Vanguard Digital Advisor average around 0.20%.
By comparison, Wealthfront charges 0.25% for portfolio management, as well as fees associated with the ETFs in each portfolio, which can be as high as 0.13%. This makes Vanguard a much lower-cost option compared to Wealthfront.
Vanguard Debt Payoff Tool
Vanguard has a simple debt-payoff calculator built into the Digital Advisor platform. To use this tool, customers can input a list of their debt accounts, interest rates, minimum payments, and account balances. The calculator will compare multiple debt payoff methods, and show the potential debt free date of each method. It also shows the total interest charges for each payoff method, allowing users to find which one will save them more.
Vanguard Access to Financial Advisors
In addition to the online-only Digital Advisor service, Vanguard offers its Personal Advisor Services to clients with a $50,000 or higher investment balance. This service offers direct access to a team of licensed financial advisors, allowing users to ask any financial questions they may have. The Personal Advisor Service also allows users to build a more customized investment and financial plan than they’re able to build with the Digital Advisor service.
Vanguard Personal Advisor Services does charge a higher fee than the standard robo-advisor service, but at 0.30%, the rate is far lower than most financial planning firm fees.
Who Wealthfront Is Best For
Wealthfront is ideal for clients who want access to a wide range of investment options, and the advantage of advanced tax strategies built into their investment service.
Wealthfront can also be a better choice for clients who want to map out their financial goals while still planning for a comfortable retirement. Plus, the line of credit product gives customers the option to borrow against their taxable investments at relatively low interest rates.
Wealthfront offers far more advanced investing and planning tools than Vanguard Digital Advisor, which may overwhelm new investors. But Wealthfront also makes it easy, with a simple-to-use mobile app, automatic rebalancing, and free financial advice built right into the platform.
Who Vanguard Is Best For
Vanguard Digital Advisor is perfect for the new investor who wants to build a simple investment plan for retirement or other financial goals. With a quick onboarding process, a portfolio constructed of four broad-based ETFs, and very low fees, Vanguard Digital Advisor is a great “set-it-and-forget” investment tool.
Vanguard also offers the Personal Advisor Service for those who want access to a human advisor for a slightly higher fee. Users can set up phone or video calls, and connect with financial advisors over email to get all their financial questions answered. Vanguard advisors will also help put together a customized portfolio based on those conversations, helping educate users on how to save for financial goals, such as retirement.
Overall, Vanguard is a great option for beginners and those who don’t need a ton of bells and whistles, but want a simple investing platform with very low fees.
Ready to start? Check out Vanguard today!
Both Wealthfront and Vanguard offer excellent investing services, aimed at helping clients save for retirement and other financial goals in the most efficient way possible.
Vanguard focuses on simplicity, offering a handful of funds to build a globally-diversified portfolio with low fees. Wealthfront, on the other hand, offers some of the most sophisticated investment tools available today, helping users fully automate their financial lives and avoid costly taxes.
For more information about Wealthfront, you can read our full Wealthfront review to learn about all of its features.
Want even more? Check out the 13 best robo advisors today.