Wealthfront, one of the largest independent robo-advisors, has announced an almost doubling of assets under management year to date to over $20 billion.
Helping to drive that growth: a high-interest FDIC-insured savings account offering, which was introduced in February and currently has an APY of 2.32%.
Wealthfront’s $20 billion AUM places it ahead of or in line with Betterment, another independent robo-advisor that also offers a high-interest savings account.
In June, Betterment CEO Jon Stein said the firm had $18 billion in assets, but that was before Betterment launched its Everday Savings account, which has an even higher APY than Wealthfront’s, currently 2.38%. Betterment has not responded to ThinkAdvisor’s request for its latest AUM figure.
(Related: Betterment Moves Into Banking)
Neither robo has updated the AUM on its Form ADV to reflect the latest publicly disclosed figures, and neither firm breaks down the assets held in savings versus investments.
Both robos, however, are “maintaining strong growth and are reaching the scale needed to offer rock-bottom pricing on investment management,” says David Goldstone, research analyst at Backend Benchmarking, which publishes The Robo Report. He added that Wealthfront’s AUM growth “is pretty significant as they have been trailing Betterment” for years.
“Wealthfront has also caught up by sticking to their digital-only roots and so far has not followed the trend of offering a hybrid service level,” says Goldstone. Betterment does have a hybrid service, offering the services of human advisors for an additional fee.
“Wealthfront’s plan of attracting new and existing clients’ cash assets is clearly working,” adds Goldstone. The question now is whether Wealthfront and other robos that offer high-interest savings accounts — in addition to Betterment they include Personal Capital and SoFi— can convert new clients with only savings accounts to investment account holders, notes Goldstone.
There’s also the challenge of retaining these new savings account clients because interest rates are falling, which is pushing the APYs lower. Wealthfront has cut its savings account APY from 2.57% in June and Betterment has done the same, from an intro rate of 2.69% in July.
A Wealthfront spokesman noted that the robo’s asset growth in the first eight months of 2019 was due “almost exclusively through word-of-mouth client referrals,” not through “expensive TV ads or tons of paid advertising.”
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