Cute robots “Wealthfront’s financial planning is delivered solely through software instead of people, allowing the company to easily scale the advice without charging for it,” the company says. (Image: Thinkstock)

Wealthfront, the second largest independent robo-advisor, has launched a free financial planning service available to anyone who downloads the Wealthfront app.

The app uses the same underlying financial advice engine available to current Wealthfront clients, called Path, which can aggregate data from all financial accounts belonging to an individual, then analyze the data to advise on goals such as saving for a home, college or retirement.

“We realized we needed to get our financial planning service into more hands after we found engagement with Path is directly correlated to clients saving more of their income,” said Dan Carroll, co-founder of Wealthfront, in a statement. “Wealthfront clients who use Path are saving four times more than the average American every year.”

The app, like Wealthfront’s fee-based service, targets millennials, though anyone can use it. “Our clients are millennials,” spokeswoman Kate Wauck told ThinkAdvisor. “They grew up digitally native and want to consume all services through their phone … It’s why we solely build services that are automated.”

Path uses artificial intelligence techniques like machine learning to develop its advice. If an individual is interested in buying a home, for example, it will use a person’s location and Zillow housing data plus their net worth, credit score and debt-to-income ratio to estimate the size of the mortgage they can qualify for.

David Goldstone, research analyst at Backend Benchmarking, which produces The Robo Report, said Wealthfront’s free financial planning app is “another step in the democratization of financial services,” which continues a “trend of robo-advisors challenging the value proposition of traditional financial advisors.”

Indeed, Wealthfront’s Carroll notes in his statement, “Americans desperately need access to financial planning and advice and it shouldn’t be reserved for the wealthy behind a paywall.”

The new Wealthfront app, like the existing Wealthfront automated financial management service that has an annual fee of 25 basis points, never involves access to a human advisor. “Wealthfront’s financial planning is delivered solely through software instead of people, allowing the company to easily scale the advice without charging for it,” according to the company’s announcement.

Wealthfront is touting the new app as the “first free financial planning services on the market,” according to its spokesperson, but Personal Capital offers free planning services for multiple client goals including retirement, education, home purchases, vacations and healthcare.

Bill Winterberg, founder and president of FPPad.com, a technology consulting company for financial advisors, says the new Wealthfront provides the digital advisor a “way to mimic Personal Capital’s lead generation and lead qualification strategy.”

Wealthfront’s spokeswoman said the firm will “absolutely not” mimic Personal Capital’s lead generation practices because its “clients are squarely allergic to 1. phone calls and 2. being sold.”

The personal financial data entered on the free Wealthfront app can be used to identify target individuals for the firm’s paid advisory services and for potential investments into its proprietary Risk Parity mutual fund or fee-based portfolio line of credit, much like Personal Capital uses its account aggregation data and personal wealth dashboard reporting to identify potential users of its paid advisory services, explains Winterberg. Personal Capital, however, requires a minimum $100,000 for its paid services while Wealthfront requires just $500.

Winterberg notes that Wealthfront is announcing the free offering at a time when the growth of new account signups, on a year-over-year percentage basis, has slowed.

According to its latest Form ADV, Wealthfront has 281,405 client accounts with a total $11.45 billion in assets. Betterment, in contrast, has 463,480 accounts with $14.14 billion in assets, and offers individuals services from a human advisor for an additional fee.

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