The world of investing has a culture of exclusivity around it, or, at least, that’s how many people feel. It’s common to believe that only the rich profit off stock market trading. However, online platforms Wealthfront and Robinhood claim to combat this perceived gatekeeping. Although both promise to create opportunities for a new range of investors, their functions set them apart. Wealthfront, a robo-advisor, offers various planning tools to help you reach your financial goals. Meanwhile, Robinhood, an online investment broker, opens up basic stock trading with little to no fees. But to understand which platform is right for you, we need to unpack what makes each service unique. Online services are convenient, but sometimes the best help comes from another person, especially a professional financial advisor.
Overview of Wealthfront vs. Robinhood
The two financial tools overlap in how they function. That crossover is limited, though, because the two products focus on different financial needs. Robinhood is designed for low-fuss, no-fee trading. For many, its highlights are its few costs, easy-to-navigate design and cryptocurrency trading option.
Looking at Wealthfront, we see a more comprehensive range of options for investment, including retirement accounts like IRAs and 401(k)s. However, Wealthfront’s service does not come at the “no-cost” level that Robinhood boasts. Despite that, Wealthfront’s fees are minimal compared to other robo-advisors, and it provides access to extra features such as automated financial advisement. That includes personalized portfolios optimized with research-based software and fully mobile financial planning.
Wealthfront vs. Robinhood: Fees
Robinhood stands with other trading platforms like Interactive Brokers and TD Ameritrade in its low-cost business model. However, it takes it a step further by being 100% fee-free (excluding its Robinhood Gold account). So, with Robinhood, you can expect a $0 account minimum, no maintenance fees, no inactivity fees, no trading fees, no transfer fees and no overdraft fees. On top of that, there are no annual fees since all trades are commission-free. However, Robinhood receives payment for order flow from market makers.
As mentioned, there is the Robinhood Gold account which is the site’s premium membership. You can have a 30-day trial of such an account. After that, it costs $5 per month. If you have margin enabled on your Gold account, which requires a $2,000 minimum, it will charge you interest when you spend over your available cash amount. If you invest on margin, you’ll pay 7% yearly interest on the amount you use over $1,000 since your first $1,000 of margin used is included in Gold.
In contrast, Wealthfront basic membership does come with some user fees; however, it’s competitively priced compared to other robo-advisors. The account minimums are $500 for investment accounts and $1 for cash accounts. Wealthfront charges an annual advisory fee of 0.25% on said investment accounts, one of the few costs. The two main other fees you’ll experience with Wealthfront are the embedded ETF and mutual fund expense ratios, as well as the 529 accounts. The 529 plan’s fee ranges from 0.42% to 0.46% annually, and the expense ratio Wealthfront charges to the Wealthfront Risk Parity Mutual Fund is 0.25%.
Like Robinhood, though, Wealthfront does not have any trading commission or fees for transfers or withdrawals. The website also does not charge for financial planning services.
How Robinhood and Wealthfront Compare
|REGULAR ACCOUNT MINIMUM||$0||$500|
|TRANSFER FEE||No ($75 ACAT transfers)||No|
|PREMIUM ACCOUNT FEE||$5/month (3% margin interest)||N/A|
Wealthfront vs. Robinhood: Services and Features
Wealthfront and Robinhood both allow users to build a portfolio; however, the former encourages investors to take a hands-off approach. That’s because Wealthfront follows MPT (Modern Portfolio Theory) to help you maximize returns while minimizing risks. So, complex algorithms design and manage your portfolio for you. Despite that, Robinhood is the more straightforward platform between the two. Its primary purpose is to facilitate easy investments. That can make the DIY investment website feel overly simple or straightforward, depending on your viewpoint. You can trade commission-free stock, options and ETF through it. However, it only supports brokerage accounts, in contrast to Wealthfront. The advising app supports high-interest cash accounts, general long-term investing, retirement investing like IRAs and College Savings accounts like the 529.
Robinhood approaches Wealthfront’s investment tools with its Gold membership. It offers access to Level II market data, investment recommendations and instant transfer. However, Wealthfront contrasts that with free automated financial planning through its program, Path, as well as the PassivePlus feature. The Path presents data based on your financial situation and projects how to reach retirement goals, whereas PassivePlus delivers investment strategies like tax-loss harvesting and risk parity.
Many users seek out Robinhood for its easy cryptocurrency trading rather than its stock investment experience.
Wealthfront vs. Robinhood: Online and Mobile Experience
Wealthfront and Robinhood offer online experiences, but both emphasize trading through their mobile apps.
Robinhood was the first in the industry to put out a mobile trading app. This, along with its low cost, drew new traders to it. But, like the platform’s overall design, the actual app is sometimes considered too simplified. It makes trading easy but risky, which has led to criticism that Robinhood “gamified” trading. This can fool novice traders into believing that there’s not much research involved in stocks, not to mention the problem of the indirect costs of order flow payment. Such concerns have sparked numerous Congressional hearings.
The lack of bells and whistles might appeal to an experienced trader, but the few trading tools and features can also drive them away. It lacks industry-standard custom stock price alerts and has minimal trading tools for either fundamental or technical analysis.
In comparison, Wealthfront carries over many features on to its mobile experience, including its Path tool. However, both the app and the desktop experience are clean to navigate through. You can find Wealthfront’s under “Wealthfront: Earn More” on the Apple store and “Wealthfront: A New Way to Bank” on the Google Play store.
Who Should Use Wealthfront?
Wealthfront and Robinhood have similar missions: to open up trading to a broader range of people. However, that doesn’t mean each platform offers the same experience. Wealthfront offers a more well-rounded experience but a hands-off approach that may limit advanced investors. Its financial planning and portfolio optimization tools make it a nice introductory platform for novices, that is, if the $500 account minimum is affordable for them.
Who Should Use Robinhood?
Robinhood is best for those who want a streamlined experience. It might be better suited to those trading in cryptocurrency than stocks, however. That is because the platform may promote unsafe stock investment practices, thanks to its “gamified” approach.
The Bottom Line
Investing is a complex process that involves both the investor and the brokerage they use. More active investors may find that a clean and simple layout like Robinhood offers suits them. Alternatively, those who want to sit back and watch their money grow may prefer an application like Wealthfront. Both platforms offer services at minimal costs compared to their competitors, making them appealing to new investors.
Tips for Investing
- Consider working with a financial advisor. If you don’t have a financial advisor yet, finding one doesn’t have to be hard. SmartAsset’s free tool matches 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.
- One of the most important ways to ensure that you don’t take on an excessive amount of overly volatile or highly risky investments is with a proper asset allocation. A free easy-to-use asset allocation calculator can help you keep your portfolio properly balanced.
- Wealthfront might be more your speed, but not the right robo-advisor for you. If that’s the case, read up our in-depth brokerage reviews on Betterment and Fidelity Go. You might find the platform that suits your needs.
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