Wealthfront rolls out free planning tool
You really can’t beat free.
Wealthfront announced a new program to offer retirement planning software to all individuals in the U.S. at no cost. The freemium service lets users that do not have a Wealthfront account sync financial information into the company’s Path tool, which then calculates ideal spending rates and budgets and helps map out a plan for retirement.
The second largest independent robo is betting the firm can steer clients into fee-based accounts after they interact with its software. “We have the chance to scale our advice to 10 or 10 billion people without sacrificing quality,” says a Wealthfront spokeswoman in an email. “By keeping our focus on building technology-based solutions we can deliver our financial planning free, to everyone.”
The new strategy is in response to the growing challenge posed by hybrid advisors that are pairing traditional pure-play digital products with human advisors. Vanguard Personal Advisor Services, Schwab Intelligent Advisory and Betterment Premium have gained marketshare in recent years by adding a personal touch.
“This announcement comes at a pivotal time when the future of financial planning is up for grabs," says the spokeswoman. “Our competitors have all moved towards the hybrid model.”
The move also echoes Personal Capital, a hybrid-first solution with $8 billion in client assets, that offers free planning tools to almost two million users, according to its website. The tools include a retirement planner, investment checkups, fee analyzer and net worth calculators.
Wealthfront freemium is currently in development and is scheduled to launch by the end of the year.
The Redwood City, California-based robo has added a handful of new features in the past few months to keep pace with competitors. The most recent involves a partnership with Intuit's TurboTax that aims to further embed the firm with independent millennial investors and give it another lever to pull in attracting new clients. The average age of a Wealthfront client is 32 with an account average of $60,000, according to the firm.
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The firm also connects to third parties to pull in mortgage data to get estimates on how much house a client can afford or data on tuition costs around the country to plan for college savings. Services to save to buy a home and even take time off to travel the world have already been rolled out.
Gaining scale by offering free products could become a necessary strategy for startups, say experts. Take Acorns, which started as a free micro savings app that lets users save pocket change in retirement accounts, for example. The firm has steadily expanded offerings beyond its free offering including into checking and savings accounts. Acorns landed $50 million in funding from BlackRock in May that will build out the startup’s portfolio stack with new investment options.
The best way to scale efficiently may just be to start with as many client accounts as possible, according to industry experts. And that means offering services on the cheap.
“You start by grabbing a lot of users with free products that get a lot of attention,” United Capital CEO Joe Duran said about the Acorns' funding round in May, "and then upgrade the service stack and pick up more of the customer’s wallet.”