Robo advisers continue to creep into traditional financial product territory.

Wealthfront announced on its website this week that it is joining with the state of Nevada to launch its own tax-advantaged 529 account, the Wealthfront 529 College Savings Plan. College savings provider Ascensus will be the recordkeeper of the plan.

The news comes amid growth in the college savings market. According to researcher Morningstar, the 529 college savings market has nearly doubled over the past five years, reaching a record-high $227 billion in assets under management as of year-end 2015. That’s up from $133 billion in 2011.

Last year, Nevada approved a new tax credit for employers who make matching contributions to employees participating in a qualified 529 college savings plan.

Tuition, of course, has continued to soar, along with financial concerns for families. The new 529 account offered will help Wealthfront’s clients save the estimated $160,000 to $370,000 it will cost a child born today to afford college, the robo adviser said.

Wealthfront CEO Adam Nash has touted the plan’s low cost. Image: Bloomberg News
Wealthfront CEO Adam Nash has touted the plan’s low cost. Image: Bloomberg News

“Most of Wealthfront’s clients are 35 years old and under, and just beginning to start families of their own,” says Ali Rosenthal, Wealthfront’s vice president of partnerships.

“As such, many of them have been asking us for guidance regarding saving for future college costs. Our young clients are still burdened by their own college debt and do not want to see their children struggle with a similar problem, which is why we’re thrilled to be able offer a product that we believe is the best way to save for college.”

BRANCHING OUT BUSINESS
Additionally, Rosenthal says, “the Wealthfront 529 College Savings Plan augments our long term vision of becoming the only financial adviser our clients ever need.”

The firm said its 529 accounts will be invested in a portfolio comprised of up to nine “low-cost relatively uncorrelated index-based ETFs designed to optimize return for your unique tolerance for risk.”

Wealthfront is touting the plan’s low cost, saying it “even costs less than the majority of plans for investors who manage their 529 portfolios on their own.”

It will not charge advisory fees on the first $10,000 of assets, or the first $25,000 for Nevada residents. For higher amounts, the firm will charge 0.25% in advisory fees. Additionally, there are the costs of the underlying ETFs, as well as state and program administration costs, which together range from 0.18% to 0.21%.

“This will make the Wealthfront 529 by far the lowest-cost adviser-sold plan,” the Redwood City, Calif.-based company said.

The announcement makes Wealthfront the latest robo-advisers to branch out its business. Last fall, Betterment made headlines by entering the 401(k) business with a low-cost online plan.

To support the launch of its 529 college savings plan, Wealthfront also said it will be kicking off an ongoing effort to educate Americans on saving for college and will commit the entire month of June to education on college savings.