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> average level of assets per client account was about $57,000 It’s strange to me how people with such low assets would pay for a roboadvisor instead of just a

> average level of assets per client account was about $57,000 It’s strange to me how people with such low assets would pay for a roboadvisor instead of just a fidelity or vanguard mutual fund. Even at a low price of 25 basis points per year that’s not very wise for the simple needs of low value portfolios. I can understand if you have a lot and actually need some complicated management. But if you just have a few thousand then there’s no need. It’s interesting and sad how it seems regular people get fleeced when they should just pay $500-1000 once to a fee only advisor and do their thing.

benced 4y ago
I’ve done the math on it and the losses I can declare on and deduct from my taxes from their tax loss harvesting cover their fee. Am I missing something?
- hedora 4y ago
  According to their marketing, tax loss harvesting more than covers their advisory fee for 96% of customers: https://www.wealthfront.com/pricing https://www.wealthfront.com/pricing If you want to save a few more bucks, you could check your portfolio every morning, invest in 100s of stocks manually, track wash sales and comparable stocks, then enter each trade into your tax software instead of just using the 1099 computations their computer does for you. Or, maybe spend that time relaxing or being paid to do something more valuable. They charge $212 a month to manage a million dollar portfolio. Assuming I could earn minimum wage doing something else, the lost wages from the time it would take me to do all that every weekday would be more than $212.
  - geraldwhen 4y ago
    In general I don’t think anyone trades daily. You rebalance quarterly and tax loss harvest annually or maybe semi annually. If you traded daily you would run into tracking error quickly as you ran out of similar funds to jump between for your tax loss harvest.
  - prepend 4y ago
    Or you could look at your vanguard dashboard every year on December 20th, look at the annual losses and sell those reinvesting in something else similar. I think people get $1MM by avoiding $2500/year expenses. I plan on investing for 20-50 more years so saving $50-125k seems like a good exchange for an hour or so work every year. You kind of have to review your holdings manually anyway as even if I had a personal advisor I would still check my own stuff.
- lyrrad 4y ago
  The tax harvesting feature can be worth it for many people. - There can be diminishing returns with higher balances and over time, since one can ordinarily deduct a net of $3000 from income a year and carry forward further losses, so one may at some point be carrying forward losses every year and only deduct $3000 from income. However the fee would continue to grow proportional to the balance. It may make sense to reevaluate whether the service is still worth the fee once one has several years of losses to carry forward. - Depending on how much effort one wants to put in, one may be able to get much of the benefits of tax loss harvesting by doing it oneself. - One may have significant balances in tax advantaged accounts. If those are managed by Wealthfront, one may not be able to get the benefits of tax loss harvesting on those balances.
- prepend 4y ago
  Tax loss harvesting are just realizing those losses earlier. You would have eventually gotten them anyway so if you’re investing in the long term then it doesn’t matter much.
  - itsdrewmiller 4y ago
    Aside from getting money earlier mattering for compounding, this also breaks down if you donate stocks to charity.
willio58 4y ago
I am one of those people that have less than $57,000 in Wealthfront. I just checked and I paid $.11 in August for advisory fees. I wonder when it becomes worth it to pay someone $500 like you mentioned, if I’m only paying a couple dollars per year in advisory fees.
- sb8244 4y ago
  It becomes worth it if you want someone to tell you things you don't know. For example, auditing your retirement contributions, cash flow, planning for future cash flow, etc. It can be really comforting to have someone that knows the landscape give you advice or confirmation. For actual investments, I am basically bought into the "bogleheads" methodology. So, I don't think it's worth it to pay for an advisor. BTW, Wealthfront minimum fee is 0.25% annually. I only say this because if you have more than 500$ in WF then your fee should be higher than $.11
  - deleted 4y ago
    [deleted]
  - prepend 4y ago
    It seems like GP has about $528. I wouldnt want to pay a fee only advisor but this is actually cheaper than vanguard or fidelity until you get $2k or something.
orev 4y ago
Or read the Bogleheads wiki for free.
acover 4y ago
They start with less and transferring out is complicated. There are much worse decisions like not being invested at all.
argonaut 4y ago
I think you have things flipped. Since the fee is a percentage, roboadvisors are perfect for someone with relatively low assets. If you have millions you benefit more from spending the time to manage/rebalance everything yourself and also gain access to different investment opportunities/vehicles/services.
- Izkata 4y ago
  > If you have millions you benefit more from spending the time to manage/rebalance everything yourself Robo-advisors probably also save a ton of time come tax season. I've never used the traditional ones but if you're doing the management yourself I imagine they don't automate it like the robo-advisors do...
  - deleted 4y ago
    [deleted]
  - kibibyte 4y ago
    My experience is that they usually complicate your taxes. In particular, past a certain asset threshold, Wealthfront will do something called "direct indexing", which basically invests your money in individual stocks the way an ETF would. It has TLH benefits, but at the cost of a massive 1099-B that you have to deal with every year.
    - hedora 4y ago
      Wealthfront has a turbotax import option. You tax accountant can press it too.
      - bombcar 4y ago
        And if you do all your dirty work in an IRA or other privileged account, nobody cares.
      - JumpCrisscross 4y ago
        > Wealthfront has a turbotax import option. You tax accountant can press it too Two issues: complexity of return and efficiency of turning pre-tax into post-tax income. Wealthfront is good at the former. It's half decent at the latter for moderate income levels. Above some threshold between $500k and $2mm, it's not the best.
enra 4y ago
I think it's opposite, if you have more of money, you likely will have more options and don't want to have your money on some random roboadvisor startup. Part of Wealthfront mission was to encourage younger people to save. They had a nice "savings tool" that you could play around with. Similarly how Robinhood got lot of people in to stock investing because the app was engaging and easy to use (for good or bad). Fidely and Vanguard apps and websites are quite horrible to navigate and there are many more hoops to go through just to open an account and then you need to figure which funds to pick and how balance etc. With Wealthfront you just download the app on your phone, add some info, your bank account and set like that you want to invest like $250 twice a month and then forget about it.
- flashfaffe2 4y ago
  Kind of contrarian view I like to read on HN. If I may add, maybe the reason people used robo advisory here is potentially ( mainly) because they are not aware of the other tool. I must admit myself that the focus over fees charged is not something, as new comers, you would look at priority. Especially as sales person in the sector would not put that out.
  - JumpCrisscross 4y ago
    > maybe the reason people used robo advisory here is potentially ( mainly) because they are not aware of the other tool Is there a term for self-aware aversion to the Dunning-Krueger effect? Where one recognizes a task is outside their circle of competence, and so avoids making off-piste judgements in its respect?
    - flashfaffe2 4y ago
      Not sure I got your point. Can you elaborate?
- cowsandmilk 4y ago
  > set like that you want to invest like $250 twice a month and then forget about it. I don’t believe Wealthfront actually supports this. If they did, I would use it. They have you set targets for your cash account. Then any amount of money over that target gets invested into Wealthfront[0]. Vanguard does actually support this [1]. [0] https://support.wealthfront.com/hc/en-us/articles/360045189471-Setting-up-your-automated-savings-plan https://support.wealthfront.com/hc/en-us/articles/3600451894... [1] https://support.vanguard.com/tutorials/automatic-investments https://support.vanguard.com/tutorials/automatic-investments
sb8244 4y ago
I looked into fee only advisors in my area for investing and 100% of them charge a minimum of 1% AUM in order to "do their thing" with it. It was pretty crazy experience to go through. Most of these advisors are creating a portfolio using ETF index funds, so it is a pretty outrageous price to pay. I did find one that sold hourly consultations and she was really helpful at confirming my plan and that another situation I may have gotten myself into was not a good deal for me. I say all of this because $500-1000 for a fee-only advisor is something I literally could not find. Additionally, advisors I researched have minimums in the hundreds of thousands range. I ended up following bogleheads methodology and I think I'll be happy. It's still pretty new so no real data yet.
- bombcar 4y ago
  Vanguard seems to offer advisors at a certain point -https://investor.vanguard.com/advice/financial-advisor https://investor.vanguard.com/advice/financial-advisor but honestly I'm not sure what they can really provide beyond the standard bogleheads. A separate advice session from a tax guy can be worthwhile but always remember that the tax guys work to minimize taxes, which isn't necessarily always the goal. The bogleheads forum is great for general advice, even if you only read it: https://www.bogleheads.org https://www.bogleheads.org
  - synu 4y ago
    Even simpler than that, is there any reason not to go with something like a Vanguard Lifestrategy which implements something quite close to a Bogleheads mix? Asking sincerely as that’s what I’m using now, and it’s just so easy it feels like there must be some unanticipated downside.
    - benjaminwootton 4y ago
      I agree. Buy some low cost diversified funds through Vanguard. I cannot understand why the average investor needs anyone else in the loop.
    - readams 4y ago
georgeecollins 4y ago
>> It’s strange to me how people with such low assets .. The average size of a Robin Hood account is $4k. The average IRA is like $150k, but lets assume that most of the larger balances are held by people close to retirement age. Wealthfront is new(ish) and technical. They probably have customers averaging less than 40 years old. People like that who have saved up $57k are likely to ultimately be much wealthier than the average American. If they won't need an advisor, who would?
- JumpCrisscross 4y ago
  > People like that who have saved up $57k are likely to ultimately be much wealthier than the average American. If they won't need an advisor, who would? There are fixed costs to wealth management. Traditionally, someone with less than ~$250k wouldn't be worth bespoke advice; practically, that limit is closer to $1 to 3mm. Wealthfront uses technology to reduce service costs, thereby bringing some of the perks of that upper tier of advice to folks with less money. It would be reductive, however, to expand that service offering to the PWM/MFMs of the world.
raverbashing 4y ago
You're exactly right. Index funds beat most other investment strategies in the longer term

benced 4y ago

I’ve done the math on it and the losses I can declare on and deduct from my taxes from their tax loss harvesting cover their fee. Am I missing something?

hedora 4y ago
According to their marketing, tax loss harvesting more than covers their advisory fee for 96% of customers: https://www.wealthfront.com/pricing https://www.wealthfront.com/pricing If you want to save a few more bucks, you could check your portfolio every morning, invest in 100s of stocks manually, track wash sales and comparable stocks, then enter each trade into your tax software instead of just using the 1099 computations their computer does for you. Or, maybe spend that time relaxing or being paid to do something more valuable. They charge $212 a month to manage a million dollar portfolio. Assuming I could earn minimum wage doing something else, the lost wages from the time it would take me to do all that every weekday would be more than $212.
- geraldwhen 4y ago
  In general I don’t think anyone trades daily. You rebalance quarterly and tax loss harvest annually or maybe semi annually. If you traded daily you would run into tracking error quickly as you ran out of similar funds to jump between for your tax loss harvest.
- prepend 4y ago
  Or you could look at your vanguard dashboard every year on December 20th, look at the annual losses and sell those reinvesting in something else similar. I think people get $1MM by avoiding $2500/year expenses. I plan on investing for 20-50 more years so saving $50-125k seems like a good exchange for an hour or so work every year. You kind of have to review your holdings manually anyway as even if I had a personal advisor I would still check my own stuff.
lyrrad 4y ago
The tax harvesting feature can be worth it for many people. - There can be diminishing returns with higher balances and over time, since one can ordinarily deduct a net of $3000 from income a year and carry forward further losses, so one may at some point be carrying forward losses every year and only deduct $3000 from income. However the fee would continue to grow proportional to the balance. It may make sense to reevaluate whether the service is still worth the fee once one has several years of losses to carry forward. - Depending on how much effort one wants to put in, one may be able to get much of the benefits of tax loss harvesting by doing it oneself. - One may have significant balances in tax advantaged accounts. If those are managed by Wealthfront, one may not be able to get the benefits of tax loss harvesting on those balances.
prepend 4y ago
Tax loss harvesting are just realizing those losses earlier. You would have eventually gotten them anyway so if you’re investing in the long term then it doesn’t matter much.
- itsdrewmiller 4y ago
  Aside from getting money earlier mattering for compounding, this also breaks down if you donate stocks to charity.

willio58 4y ago

I am one of those people that have less than $57,000 in Wealthfront. I just checked and I paid $.11 in August for advisory fees. I wonder when it becomes worth it to pay someone $500 like you mentioned, if I’m only paying a couple dollars per year in advisory fees.

sb8244 4y ago
It becomes worth it if you want someone to tell you things you don't know. For example, auditing your retirement contributions, cash flow, planning for future cash flow, etc. It can be really comforting to have someone that knows the landscape give you advice or confirmation. For actual investments, I am basically bought into the "bogleheads" methodology. So, I don't think it's worth it to pay for an advisor. BTW, Wealthfront minimum fee is 0.25% annually. I only say this because if you have more than 500$ in WF then your fee should be higher than $.11
- deleted 4y ago
  [deleted]
- prepend 4y ago
  It seems like GP has about $528. I wouldnt want to pay a fee only advisor but this is actually cheaper than vanguard or fidelity until you get $2k or something.

orev 4y ago

Or read the Bogleheads wiki for free.

acover 4y ago

They start with less and transferring out is complicated. There are much worse decisions like not being invested at all.

argonaut 4y ago

I think you have things flipped. Since the fee is a percentage, roboadvisors are perfect for someone with relatively low assets. If you have millions you benefit more from spending the time to manage/rebalance everything yourself and also gain access to different investment opportunities/vehicles/services.

Izkata 4y ago
> If you have millions you benefit more from spending the time to manage/rebalance everything yourself Robo-advisors probably also save a ton of time come tax season. I've never used the traditional ones but if you're doing the management yourself I imagine they don't automate it like the robo-advisors do...
- deleted 4y ago
  [deleted]
- kibibyte 4y ago
  My experience is that they usually complicate your taxes. In particular, past a certain asset threshold, Wealthfront will do something called "direct indexing", which basically invests your money in individual stocks the way an ETF would. It has TLH benefits, but at the cost of a massive 1099-B that you have to deal with every year.
  - hedora 4y ago
    Wealthfront has a turbotax import option. You tax accountant can press it too.
    - bombcar 4y ago
      And if you do all your dirty work in an IRA or other privileged account, nobody cares.
    - JumpCrisscross 4y ago
      > Wealthfront has a turbotax import option. You tax accountant can press it too Two issues: complexity of return and efficiency of turning pre-tax into post-tax income. Wealthfront is good at the former. It's half decent at the latter for moderate income levels. Above some threshold between $500k and $2mm, it's not the best.

enra 4y ago

I think it's opposite, if you have more of money, you likely will have more options and don't want to have your money on some random roboadvisor startup. Part of Wealthfront mission was to encourage younger people to save. They had a nice "savings tool" that you could play around with. Similarly how Robinhood got lot of people in to stock investing because the app was engaging and easy to use (for good or bad). Fidely and Vanguard apps and websites are quite horrible to navigate and there are many more hoops to go through just to open an account and then you need to figure which funds to pick and how balance etc. With Wealthfront you just download the app on your phone, add some info, your bank account and set like that you want to invest like $250 twice a month and then forget about it.

flashfaffe2 4y ago
Kind of contrarian view I like to read on HN. If I may add, maybe the reason people used robo advisory here is potentially ( mainly) because they are not aware of the other tool. I must admit myself that the focus over fees charged is not something, as new comers, you would look at priority. Especially as sales person in the sector would not put that out.
- JumpCrisscross 4y ago
  > maybe the reason people used robo advisory here is potentially ( mainly) because they are not aware of the other tool Is there a term for self-aware aversion to the Dunning-Krueger effect? Where one recognizes a task is outside their circle of competence, and so avoids making off-piste judgements in its respect?
  - flashfaffe2 4y ago
    Not sure I got your point. Can you elaborate?
cowsandmilk 4y ago
> set like that you want to invest like $250 twice a month and then forget about it. I don’t believe Wealthfront actually supports this. If they did, I would use it. They have you set targets for your cash account. Then any amount of money over that target gets invested into Wealthfront[0]. Vanguard does actually support this [1]. [0] https://support.wealthfront.com/hc/en-us/articles/360045189471-Setting-up-your-automated-savings-plan https://support.wealthfront.com/hc/en-us/articles/3600451894... [1] https://support.vanguard.com/tutorials/automatic-investments https://support.vanguard.com/tutorials/automatic-investments

sb8244 4y ago

I looked into fee only advisors in my area for investing and 100% of them charge a minimum of 1% AUM in order to "do their thing" with it. It was pretty crazy experience to go through. Most of these advisors are creating a portfolio using ETF index funds, so it is a pretty outrageous price to pay. I did find one that sold hourly consultations and she was really helpful at confirming my plan and that another situation I may have gotten myself into was not a good deal for me. I say all of this because $500-1000 for a fee-only advisor is something I literally could not find. Additionally, advisors I researched have minimums in the hundreds of thousands range. I ended up following bogleheads methodology and I think I'll be happy. It's still pretty new so no real data yet.

bombcar 4y ago
Vanguard seems to offer advisors at a certain point -https://investor.vanguard.com/advice/financial-advisor https://investor.vanguard.com/advice/financial-advisor but honestly I'm not sure what they can really provide beyond the standard bogleheads. A separate advice session from a tax guy can be worthwhile but always remember that the tax guys work to minimize taxes, which isn't necessarily always the goal. The bogleheads forum is great for general advice, even if you only read it: https://www.bogleheads.org https://www.bogleheads.org
- synu 4y ago
  Even simpler than that, is there any reason not to go with something like a Vanguard Lifestrategy which implements something quite close to a Bogleheads mix? Asking sincerely as that’s what I’m using now, and it’s just so easy it feels like there must be some unanticipated downside.
  - benjaminwootton 4y ago
    I agree. Buy some low cost diversified funds through Vanguard. I cannot understand why the average investor needs anyone else in the loop.
  - readams 4y ago

georgeecollins 4y ago

>> It’s strange to me how people with such low assets .. The average size of a Robin Hood account is $4k. The average IRA is like $150k, but lets assume that most of the larger balances are held by people close to retirement age. Wealthfront is new(ish) and technical. They probably have customers averaging less than 40 years old. People like that who have saved up $57k are likely to ultimately be much wealthier than the average American. If they won't need an advisor, who would?

JumpCrisscross 4y ago
> People like that who have saved up $57k are likely to ultimately be much wealthier than the average American. If they won't need an advisor, who would? There are fixed costs to wealth management. Traditionally, someone with less than ~$250k wouldn't be worth bespoke advice; practically, that limit is closer to $1 to 3mm. Wealthfront uses technology to reduce service costs, thereby bringing some of the perks of that upper tier of advice to folks with less money. It would be reductive, however, to expand that service offering to the PWM/MFMs of the world.

raverbashing 4y ago

You're exactly right. Index funds beat most other investment strategies in the longer term