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The US-based digital wealth manager, which debuted its online financial advisor in 2011, now holds $20 billion in assets under management (AUM), according to Business Insider.
This is nearly double the amount the company was holding at the beginning of the year. Wealthfront offers users access to a variety of investment options, including Traditional IRA, Roth IRA, SEP IRA, and 401(k) Rollover. It allows users to select what they want to save money for, such as retirement, travel, or homeownership, and also offers advice on savings targets and investment strategies.
Here’s what it means: Interest in robo-advisors will likely increase over time, and Wealthfront’s aim to add more financial services will help it further boost its AUM.
Nearly 60% of US consumers expect to use a robo-advisor by 2025, according to research from Charles Schwab. Additionally, 60% of current robo-advisor users are millennials, who are expected to have $20 trillion of assets globally by 2030, per CB Insights. As that wealth grows, more money will likely flow into digital wealth managers like Wealthfront, especially as they often offer such services at a cheaper price than incumbent wealth managers.
Diversifying its offering will help Wealthfront to accelerate the growth of its assets under management. In February 2019, Wealthfront rolled out its high-yield-savings-like account offering with a 2.24% APY on all balance tiers. The FDIC insures balances up to $1 million in the accounts. Since then, it has increased to the current amount of 2.32% (of note, it stood at 2.57% before the company responded to the Federal Reserve’s interest rate cut in August). In the first four month after the launch, clients earned $10 million in interest on their cash accounts. In the future, Wealthfront is aiming to expand its traditional banking offering with direct deposits, bill payments, and a debit card, according to Daniel Carroll, Wealthfront’s founder and chief strategy officer cited by Business Insider.
The bigger picture: Wealthfront is increasingly positioning itself as a viable threat to incumbents, and offering market-leading products will help the fintech remain successful over time.
Wealthfront’s business is thriving, at a time when a number of incumbent robo-advising offerings are failing. Earlier this year, Investec announced that it would shutter its robo-advisory platform Click and Invest and ABN Amro also closed down its digital wealth manager Prospery, which failed to attract sufficient clients, and UBS already discontinued its SmartWealth pilot program in 2018.
These examples show that Wealthfront is succeeding at a time where incumbents struggle to meet consumer demands with their digital wealth management products, and this lowered competition from incumbents will only boost the fintech’s future chance of success.
Moreover, Wealthfront’s savings-account-like product is offering an industry-leading interest rate, …read more
Source:: Business Insider – Finance