Two of the leading web-based investment platforms are Wealthfront and Empower. The former targets a wide pool of investors with its low fees; the latter caters to those who still want a human touch in their investment guidance. Here are a few essential matters you need to know if you’re considering either of these online advisors.
If you prefer a more hands-on approach, a financial advisor can help you create a financial plan for your investment needs and goals.
Overview of Wealthfront vs. Empower
Both platforms work to address similar needs but have approaches that attract different users. Wealthfront’s target audience is millennial investors, which means that costs are relatively low and portfolio options are easy to manage. Academic research-based software forms the backbone of their personalized portfolios and financial advisory programs.
Whereas Wealthfront focuses its attention on young investors, Empower supports high-net-worth individuals. So, its fees are higher than those of Wealthfront, but that also allows access to human advisors and hands-on portfolio options. Both services support investing in U.S. stock options, retirement accounts like IRAs and trusts.
Wealthfront vs. Empower: Fees
When it comes to pricing, you’ll find that technology brings low rates into play. The more humans involved in the app you use, the higher the prices will be. That is why Wealthfront can offer lower fees than Empower. Since its advisory system is automated, there’s less of a need to cover certain costs.
The difference starts at the minimum necessary investment for the two services. Wealthfront requires a minimum account size is $500. Their flat annual advisory fee is then 0.25% of the account’s balance. That means if your account holds $70,000, you’re paying $178.32 for the service.
As for Empower, the platform uses a sliding scale. The base amount to start investing is $100,000, which results in a 0.89% annual advisory fee. That fee percentage extends until your first $1 million. The more you invest, the lower that advisory fee drops. The first $3 million incurs a 0.79% annual advisory fee, the next $2 million incur 0.69% and the following $5 million result in 0.59%. Once you invest over $10 million, you are billed at 0.49%.
Empower says that it doesn’t charge hidden fees, trailing fees or trade commission – only the annual management fee. Likewise, Wealthfront will not charge you account transfer fees, trading or commission fees or fees to open, withdraw or close your account.
Wealthfront vs. Empower: Services and Features
Wealthfront and Empower both have a similar scope of account types available to you. They offer IRA accounts, including traditional and Roth IRAs, 401(k)s, 529 college savings plans, trusts and taxable brokerage accounts. Beyond these similarities there are notable differences between the two platforms.
Empower is set up with progressive investment in mind, so it offers more services depending on the investment tier you fall under. They have four tiers: the Investment Service tier for investments below $200,000; the Wealth Management tier for those who invest between $200,000 and $1 million; the Private Client tier if you’ve invested over $1 million; and finally, those who participate in the Private Equity Offering. The last group has to invest a minimum of $5 million and be with Empower for at least six months. You gain access the more you invest.
The Investment Service tier provides access to the website’s free dashboard and an advisory team. Wealth Management clients receive a comprehensive financial plan that includes concerns like retirement. They also can receive a matched financial advisor and a customized portfolio. Beyond that, clients receive increased personalized services, specialists, reduced fees and opportunities to invest in higher profile funds. Empower ensures that its features are directed towards a customized, skilled professional experience.
Wealthfront offers tax-loss harvesting, rebalancing and asset allocation. Its automated advisory system customizes portfolio options that minimize your risk while seeking the best possible returns. The platform promotes this through PassivePlus and Path features. PassivePlus focuses on investment strategies, tax-loss harvesting, risk parity and smart beta. The availability of each of these features will depend on your account value, though tax-loss harvesting is available to all investors. With the exception of risk parity, which carries an additional fee of 0.03%, all of these features are available at no additional cost. However, they only apply to taxable accounts. Meanwhile, Path helps you create a financial plan.
Wealthfront also offers short-term cash management. The robo-advisor has the Wealthfront Cash Account, which offers an APY of 4.05% and is FDIC-insured up to $2 million. And if you have a joint account, Cash Account deposits are insured up to $4 million. There’s also the Portfolio Line of Credit, in which clients with at least $100,000 in a taxable account are automatically enrolled. This establishes a line of credit that’s accessible without paperwork or a credit check for as much as 30% of your account value.
Lastly, there’s the a referral program that eliminates the management fee on $5,000 of assets every time you invite someone who creates a Wealthfront account. Anyone you refer also gets the $5,000 bonus.
Wealthfront vs. Empower: Online and Mobile Experience
Wealthfront and Empower have desktop sites you can use, but both promote investing through their apps. You’ll find that Wealthfront boasts a slightly better score on the Apple store and the Google Play store, with a 4.8 and 4.5, respectively. Although, Empower is just shy of those scores at 4.7 and 4.3 comparatively.
The advisory sites share a goal in their mobile experience. They want to streamline how you manage your accounts by putting them in one accessible place. Essentially, they want to act as your one-stop shop for all your financial account needs. They both offer a thorough range of tools that cater to financial planning. Empower’s app includes a free financial dashboard, budgeting features, investing and planning tools. Wealthfront offers its free Path feature with planning tools that promote the platform’s hands-off experience.
Who Should Use Wealthfront?
Thanks to its low costs, Wealthfront is an opportunity for novice investors to build up their investment sense. The app provides thorough digital guidance that keeps even the most cautious investor safe. The portfolio customization can also help users feel like they’re being treated like an individual. However, the lack of human advisors can impact how well that comes across. Overall, those who are new to investing, are in the lower investment tier or even people who just want to be smarter with their finances will find Wealthfront a useful tool. However, if you want to be a little more hands-on with your investing, for example, using fractional shares, you might need to look somewhere else.
Who Should Use Empower?
Empower directs most of its attention on an individualized experience for those who tend towards mid-level investments. The higher management costs may be too expensive for someone just breaking into investments. However, a number of their investment management tools come free, which may appeal to DIY investors. Since some are free, though, it may be wise to look elsewhere if you just want access to human financial advisors. Overall, Empower offers a comprehensive investment management service that can help even savvy investors reevaluate their risk level and maximize returns.
In the end, the right investment platform depends on your needs. New investors will find Wealthfront an affordable and personalized experience. However, those same risk protections might be too hands-off for an individual with experience. On top of that, the team of human advisors available at Empower may make the higher-priced platform the winner for those who invest in a higher bracket. Either way, both are valuable options for different investment styles.
Tips for Investing
- A financial advisor can help you create a financial plan and investment strategy to reach your goals. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Whether you’re considering getting started with investing or you’re already a seasoned investor, an investment calculator can help you figure out how to meet your goals. It can show you how your initial investment, frequency of contributions and risk tolerance can all affect how your money grows.
- While these platforms are great options, they might not tick all the boxes you need. Read up on our in-depth brokerage reviews, where we analyze both Betterment and Fidelity Go in detail.
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