It took 14 years, but Wealthfront has finally become profitable—thanks to Fed Chairman Jerome Powell. Here’s how it intends to stay in the black.. UBS’ chairman opined a few months later that the fintech’s “mass affluent” clients simply weren't upscale enough to be a good fit, but the deal had also faced substantial resistance from U.S. regulators. Its collapse, whatever the cause, was a blow for the then 14-year-old fintech and its venture capital investors.
Their initial idea was a marketplace where investors paid for access to professional money managers of their choosing. KaChing pocketed some of the fees and gave the rest to the portfolio managers. It was launched with personal investments from Silicon Valley bigwigs, including.
Betterment has also gone into the hybrid-advisor business, offering help from a certified financial planner and a computerized asset allocation for 0.65% of assets, with a $100,000 minimum. But Rachleff and Fortunato, who was named CTO in 2011, president in 2019 and CEO in 2021, have never veered from the low-cost, automation-only model. Today, half of Wealthfront’s 280 employees are engineers, and it has just 19 customer service reps covering more than 800,000 users.
Wealthfront got a lot of mileage from its tax-loss harvesting and direct-indexing services, but it also took some heat for how they were initially promoted and implemented. In 2018, itand paid a $250,000 fine for, among other things, claiming it would avoid any wash-sale transactions in client accounts, while failing to consistently do so from 2012 to 2016.
In contrast to Betterment, Wealthfront has steered clear of human advisors and tried to differentiate itself by releasing automated new products, with mixed results. For example, in 2016, it launched a 529 college savings plan. It was a heavy lift, but so far has attracted just $600 million. Vanguardin 529 assets at the end of 2023.