Wealthfront 529 Plan Launches

Financial Professional Content Wealthfront officially launched its new 529 plan November 1, 2016. The Wealthfront 529 College Savings Plan (Wealthfront Plan) is sponsored by the State of Nevada with Ascensus Broker Dealer Services, Inc. serving as program manager. Wealthfront serves as an automated investment advisor, designing individual portfolios for each account owner based on the owner's risk assessment and the beneficiary's expected college enrollment date. How does it compare? The Wealthfront Plan is unique in that, while it is technically an advisor-sold plan for which Wealthfront collects a 25 basis point advisory fee, it is not sold by third-party broker-dealer or RIA firms. Its distribution channel is strictly limited to Wealthfront clients, meaning you will need to be registered with Wealthfront in order to open and maintain an account with the Plan. Further, the Plan offers a favorable cost structure, where the advisory fee is waived on the first $10,000 for non-Nevada residents, and the first $25,000 for residents. In fact, if you compare the lowest and highest 10-year expense totals for all direct-sold plans against the Wealthfront Plan, excluding the 25bp advisor fee, the plan is the second lowest-cost plan on average (mean) after New York's direct-sold plan. And when you include the advisor fee it ranks 14th among direct-sold plans. Indeed, for an advisor-sold plan, this is impressive. Initially the Plan operates much like a direct-sold plan, since the investor needs to take the initiative to approach Wealthfront and establish an account. The appeal thereafter is that Wealthfront will manage both the 529 Plan and the investor's non-529 assets in a quantitative manner across accounts and over time. Wealthfront conducts a thorough analysis of its participants' time horizon, risk tolerance, and other factors when building and establishing their portfolios. All-in costs are kept low because the plan utilizes Vanguard and iShares ETFs in its asset allocation models. RELATED: The Wealthfront 529 College Savings Plan: Is college investing with a robo-advisor right for you? What does the Wealthfront Plan mean for human advisors? It's too soon to tell for sure, but the entry of Wealthfront to the 529 space probably represents less of a threat to traditional advisors and more of an expansion in terms of consumer access to professional college savings advice. Indeed, the financial technology behind the first roboadvisors evolved from the pursuit of a more cost-effective method of servicing the mass affluent market, whose smaller account sizes can be more difficult for advisors to manage and grow while collecting a reasonable fee. For decades, the wirehouses have been trying to figure out how to service and support smaller accounts using call centers and discount online brokerages. Today, technology advances are making financial management not only possible, but in some cases preferable for mass affluent investors who want the convenience and control that a provider like Wealthfront can offer. However, for the foreseeable future, traditional advisors whose clients include high net worth and ultra-high net worth individuals will still be the bread-and-butter of the financial services industry. A recent survey of affluent investors by Wells Fargo found that seven in 10 viewed their financial advisor's services as important as that of their doctor. Given the complexities of investing, taxes, and the personal issues that impact both, there will always be a need for personalized financial advice with a human element. RELATED: Wealthfront 529 College Savings Plan Details Page Additional Reading The Wealthfront 529 College Savings Plan "The B2C Robo-Advisor Movement Is Dying, But Its #FinTech Legacy Will Live On!" - by Michael Kitces, kitces.com. May 2, 2016 "Can Robo Advisers Replace Human Financial Advisers?" - by Lisa Kramer, The Wall Street Journal. Feb. 28, 2016 2015 Wells Fargo Affluent Investor Survey - Wells Fargo Bank, N.A. 2015 This information does not constitute tax advice and is provided for informational purposes only. Please consult your tax advisor, financial advisor, local taxing authority, and/or plan provider or sponsor for more information. Financial Professional Content Wealthfront officially launched its new 529 plan November 1, 2016. The Wealthfront 529 College Savings Plan (Wealthfront Plan) is sponsored by the State of Nevada with Ascensus Broker Dealer Services, Inc. serving as program manager. Wealthfront serves as an automated investment advisor, designing individual portfolios for each account owner based on the owner's risk assessment and the beneficiary's expected college enrollment date. How does it compare? The Wealthfront Plan is unique in that, while it is technically an advisor-sold plan for which Wealthfront collects a 25 basis point advisory fee, it is not sold by third-party broker-dealer or RIA firms. Its distribution channel is strictly limited to Wealthfront clients, meaning you will need to be registered with Wealthfront in order to open and maintain an account with the Plan. Further, the Plan offers a favorable cost structure, where the advisory fee is waived on the first $10,000 for non-Nevada residents, and the first $25,000 for residents. In fact, if you compare the lowest and highest 10-year expense totals for all direct-sold plans against the Wealthfront Plan, excluding the 25bp advisor fee, the plan is the second lowest-cost plan on average (mean) after New York's direct-sold plan. And when you include the advisor fee it ranks 14th among direct-sold plans. Indeed, for an advisor-sold plan, this is impressive. Initially the Plan operates much like a direct-sold plan, since the investor needs to take the initiative to approach Wealthfront and establish an account. The appeal thereafter is that Wealthfront will manage both the 529 Plan and the investor's non-529 assets in a quantitative manner across accounts and over time. Wealthfront conducts a thorough analysis of its participants' time horizon, risk tolerance, and other factors when building and establishing their portfolios. All-in costs are kept low because the plan utilizes Vanguard and iShares ETFs in its asset allocation models. RELATED: The Wealthfront 529 College Savings Plan: Is college investing with a robo-advisor right for you? What does the Wealthfront Plan mean for human advisors? It's too soon to tell for sure, but the entry of Wealthfront to the 529 space probably represents less of a threat to traditional advisors and more of an expansion in terms of consumer access to professional college savings advice. Indeed, the financial technology behind the first roboadvisors evolved from the pursuit of a more cost-effective method of servicing the mass affluent market, whose smaller account sizes can be more difficult for advisors to manage and grow while collecting a reasonable fee. For decades, the wirehouses have been trying to figure out how to service and support smaller accounts using call centers and discount online brokerages. Today, technology advances are making financial management not only possible, but in some cases preferable for mass affluent investors who want the convenience and control that a provider like Wealthfront can offer. However, for the foreseeable future, traditional advisors whose clients include high net worth and ultra-high net worth individuals will still be the bread-and-butter of the financial services industry. A recent survey of affluent investors by Wells Fargo found that seven in 10 viewed their financial advisor's services as important as that of their doctor. Given the complexities of investing, taxes, and the personal issues that impact both, there will always be a need for personalized financial advice with a human element. RELATED: Wealthfront 529 College Savings Plan Details Page Additional Reading The Wealthfront 529 College Savings Plan "The B2C Robo-Advisor Movement Is Dying, But Its #FinTech Legacy Will Live On!" - by Michael Kitces, kitces.com. May 2, 2016 "Can Robo Advisers Replace Human Financial Advisers?" - by Lisa Kramer, The Wall Street Journal. Feb. 28, 2016 2015 Wells Fargo Affluent Investor Survey - Wells Fargo Bank, N.A. 2015 This information does not constitute tax advice and is provided for informational purposes only. Please consult your tax advisor, financial advisor, local taxing authority, and/or plan provider or sponsor for more information.