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Wealthfront vs. Vanguard: Pros and Cons of the Investment Companies

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Personal finance is something that too few people understand well.

It’s too bad, because smart financial planning can relieve a ton of stress for many Americans.

Luckily, there are more and more companies out there offering financial planning services and portfolio advice for everyday people.

There are very low-cost options out there, like Acorns or Digit, for people who are looking to start investing in the stock market.

If you are getting serious about your investment portfolio, however, and want better investment options, you may want to look at two companies: Wealthfront and Vanguard.

In this article we’ll first give an introduction to investment management, and then break down Wealthfront vs. Vanguard.

We’ll look at what each company offers, and go through the pros and cons of each service.

By the end of the article, you should have a good understanding of investment management, and what these two companies can offer you.

Investment Management Terms to Know

Investment management platforms give you one place to hold all your investments and monitor them online, but they also offer three main points of value to investors.

In order to on Wealthfront vs. Vanguard, read over these three terms and figure out what you value.

Some provide these points of value with digital robo-advisors, which is the case with Wealthfront or its competitor, Betterment.

Others do it with human advisors as well, which is what Vanguard and other sites like Fidelity do.

Portfolio Building

Portfolio building is the act of taking the money in your investment account(s) and then using them to purchase assets that will, in theory, grow bigger.

Investment accounts could be an account you set up specifically for investing, or tax-protected retirement funds like a traditional IRA, SEP IRA, or a Roth IRA account.

If you have kids, you can also set up a tax protected college savings fund which can be a part of your portfolio.

Building a portfolio is about asset allocation, or purchasing assets with the funds in your account.

These asset classes can include individual stocks, bonds, mutual funds, index funds, real estate funds, exchange-traded funds (ETFs), or even Bitcoin.

When building a portfolio, advisors take a lot into account when coming up with an investment strategy.

They’ll think about your age, net worth, and family situation, but they’ll also ask you about risk tolerance, and how aggressive you want to be in pursuing your financial goals.

Advising and Rebalancing

Once you’ve built your portfolio, a big service that these online companies provide is sound financial advice with how to maintain and grow your investment accounts.

A part of this will include rebalancing:

To rebalance a portfolio is to sell off and then acquire new assets so they more accurately represent the kinds of assets and risk level you feel comfortable with.

Some companies will offer a robo-advisor, an AI-powered machine that evaluates trends in the marketplace and makes suggestions for where to move your money based on your personal preferences for your investment portfolio.

They will perform automatic rebalancing if your portfolio drifts away from the performance or breakdown you wanted.

Others will offer a real live person as a financial advisor, someone you can discuss in more detail exactly how you want to manage your retirement account and other investments.

Perks and Benefits

One of the nice parts of using a service like Wealthfront or Vanguard is that they offer you perks that have traditionally been taken advantage of only by the very wealthy.

One popular perk is known as tax-loss harvesting.

If you have taxable accounts with a portfolio management company, and you lose money on an asset in a given year, they will sell off that asset come tax time.

They will then report that loss to the IRS and get you a break on your taxes.

Quickly thereafter, however, they will repurchase that same asset, giving you the chance to still stay committed to something you believe in long term, but saving money with the IRS for that year.

Another popular perk is direct indexing.

This is the practice of looking at an ETF, or exchange-traded fund, and seeing all the assets in that fund.


Some ETFs charge fees.

So, management companies will avoid that fee by directly purchasing all the individual assets within that fund, without actually purchasing into the fund.

This lets investors avoid the ETF fees while still giving access to its diverse growth potential.

Getting to Know Wealthfront and Vanguard

wealthfront vs vanguard: data graphs
Wealthfront and Vanguard are two big players in the investment management space.

Both offer portfolio building, asset management, portfolio advice, and perks.

How they go about providing those things, and who they provide them for, are slightly different.

Let’s get into the details.

What Wealthfront Offers

Wealthfront is a digital platform that offers a whip smart robo-advisor to help you build and manage your investment portfolio.

They offer:

  • Tax-loss harvesting on all taxable accounts
  • Automatic rebalancing and direct indexing
  • Many different account types, including rollover IRAs, trusts, and 529 college savings plan
  • Low fees
  • Affordable minimum investment of $500
  • Mobile app

Wealthfront stands out among the field for offering some serious investing perks for people who can make a (relatively) low minimum investment.

Automatic rebalancing, direct indexing, and tax-loss harvesting have traditionally been only available to people with massive accounts.

They offer that to people who open an account with just $500.

What Vanguard Offers

Vanguard is a more traditional management company.

While they do have smart, automatic rebalancing, they also offer traditional person-to-person financial advice.

Their big offers:

  • Human advisors
  • Automatic rebalancing with human review
  • Access to special Vanguard ETFs and Vanguard funds
  • Tax-loss harvesting on a case-by-case basis
  • Many different account types, including rollover IRAs, and trusts
  • Mobile app

Vanguard is a really nice hybrid option in that it offers you some smart, automatic digital processes, as well as a mobile app to get real-time updates on your investments.

But they also offer you a human touch that other robo-advisors don’t.

As you can see, though, there is also quite a bit of overlap with what the two companies offer.

Let’s get to the pros and cons of each, and how they compare to each other.

Wealthfront vs. Vanguard Pros and Cons

investing board: personal finance
We’ve covered the main offerings of Wealthfront and Vanguard.

Let’s get to the pros and cons of each.

Wealthfront Pros

Wealthfront gives you a lot of the tools that you’d get from a more expensive human advisor, but with a lower barrier of entry (just $500 minimum balance required) and low-cost management fees, with a flat 0.25% annual fee.

A quarter of a percent for the services they offer is a real deal.

They take on most accounts, and offer serious perks — tax-loss harvesting, direct indexing, and more — for a low fee rate and low minimum balance.

Wealthfront Cons

For people looking to seriously invest their money, they may want a human touch, and Wealthfront doesn’t offer human advisors.

Some Wealthfront reviews mention that their management fees are flat, with no breaks for large accounts, but this is a small issue for most investors.

Vanguard Pros

Vanguard offers the best of both worlds in that it has a strong robo-advisor which conducts automatic rebalancing, but also offers you access to financial advisors.

They also have financial planning specialists you can work with, something Wealthfront doesn’t.

They have an adjusting fee structure, with 0.3% annual management fee for accounts less than $5 million, 0.2% for accounts $5 million to $10 million, and 0.1% on accounts $5 million (and it shrinks even more from there).

Less than half a percent for a management fee is a solid starting deal, especially if you get a dedicated personal advisor with no additional advisory fees.

Vanguard Cons

A Vanguard account comes with a hefty minimum balance if you want to get access to their Vanguard personal advisor services: $50,000.

This makes it attractive from a wealth management perspective, but for someone just getting started in investing without huge account balances, that’s a major ask.

Wealthfront vs. Vanguard: The Bottom Line

Both Vanguard and Wealthfront offer great perks.

The deciding factor for you may be how much money is in your bank account.

For Vanguard, a $50,000 minimum deposit is a serious ask, but if you have the funds, and you are looking for an investment company with a great human touch, Vanguard could be for you.

If you are just getting started out but still want access to the tools that have typically been reserved for the wealthiest of people, Wealthfront is a really nice way to get started.

While it doesn’t have a person to advise you, it does have great technology and serious perks.

Either way, both apps are really good ways to manage your money and grow it through the market.

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