The leading mobile financial advisory service is going after a younger, more tech-savvy demographic with low fees and a fiercely independent corporate mission. But is the model sustainable? View this image ' Viawealthfront.com Silicon Valley startupWealthfront grew by a stunning 450 in fees and focuses on a narrow customer base. It does strike me as difficult to sustain, especially when youre not charging anything, said Elliot Weissbluth founder and CEO of $25 billion wealth management firm HighTower Advisors, referencing the fact that Wealthfront accounts under $10,000 are free to manage, and anything over that comes with a 25 basis-point fee. And 25 basis points does not leave a lot of room for having anything but a piece of software. Launched in 2008, Wealthfront, part of a peer group of companies known as roboadvisories that includes Betterment, Personal Capital, SigFig and LearnVest, just raised $20 million in its second round of venture capital fundraising and is about to going out for another round later this year, according to a venture capital source familiar with Wealthfronts financing. (Its first was led by powerhouse investor Marc Andreessen.) It has roughly 7,500 users with accounts ranging from a minimum of $5,000 up to $8 million, with an average account balance of $91,000, Nash said. And its assets under management put it at the front of the pack of mobile personal finance services. This success has come, in part, from the fact that Wealthfront differentiates itself from its competitors by offering tax services in addition to investment guidance. The whole idea behind Wealthfront is to take a lot of the best academic research and put it into software so that its cheap enough for everybody to have it, said Nash, whorecently moved into the CEO position at Wealthfront from his role as chief operating officer, replacing Andy Rachleff, who moved into an executive chairmanship. This is really about millennials. This is about young people. They have a different perspective on investing than the baby boomer generation, theyve been through two market crashes, they dont believe in beating the market, they think thats kind of a scam. Theyre really really averse to fees. Nash says Wealthfront is able to charge such low fees because its savings advice is disseminated by machine instead of man. The cost benefit of running software and coming up with algorithms instead of hiring people works to Wealthfronts advantage. Im very comfortable with our economics, the cost of adding a new client is incredibly low, the value is incredibly high, Nash said. We think were building once-in-a-generation company here in Wealthfront, but were doing it for millennials, and this generation is bigger than people think. Its 90 million with a liquid net worth already of $1 trillion in the U.S. and that will grow to $7 trillion in 2025, so this is not a short-term company. For us, a $100,000 account is about $20 per month. But for a software company $20 per month is a great subscription.
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