The company was founded by Andy Rachleff and Daniel Carroll in 2008. It is a fintech company in the "Robo-Advisors" domain. The company is currently funded by multiple venture capital companies and just completed its Series G funding in 2018, raising $75 million in capital.[1] As of January 2019,Wealthfront had more than $11.4 billion of assets under management.[2]
When the co-founder Andy Rachlesff, a former successful VC, was teaching at Stanford University, entrepreneurs and students alike came to him for investing advice. But he often couldn’t recommend the services he used because the minimums were too high — especially for students.
He saw a need to democratize access to sophisticated investment products. [3]
Around the same time, Dan Carroll, the other co-founder of Wealthfront, was helping his parents to assess the financial damage caused by the financial crisis of 2008. He was horrified to find out that his parents' financial advisor didn't do a good job.
It was clear to him that most people don't have access to good financial advice. [3]
So he started building a prototype that automatically gave people financial advice. This prototype got the attention of Andy Rachleff and that was how they started the company.
Problem
The financial problem the company is trying to solve is that financial advice is expensive to get and most of people don't have access to good financial products.
Customers
The company's targeted customers are millenials who are accustomed to managing their daily lives through their smartphones.
Assets under management (AUM) in the Robo-Advisors segment amounts to $750 billion in 2019 in the US. AUM is expected to show an annual growth rate (CAGR 2019-2023) of 18.7% resulting in the total amount of $1.5 trillion by 2023.[4]
One of the advantages Wealthfront has over its competitors is that it offers its users FREE financial advise even though they don't deposit money into Wealthfront's account.
Technology
The company utilizes Artificial Intelligenece (AI) to empower the automated investment advisor. They developed a proprietary algorithm called Path that handles giving personalized financial advice or asset management service given each user's unique financial situation as well as the user's financial goal (e.g., buying a house, saving for retirement and etc).[5]
Robo-Advisor Industry
For the past 5 years, the industry has seen extraodinary growth with more than 100 robo-advisor companies competing in the market.[6]As a 10-year-old industry, the robo-advisor industry has seen the following trends [7]:
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Big finance companies also followed to add robo-advisors to their traditional financial services
Big companies such as The Vanguard Group, Charles Schwab Corporation and Black Rock all have their robo-advisor businesses serving their current customers as well as attracting new ones.
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Low robo-advisory fee
As technology drives down fees and new competitors enter the robo-advisory field, robo-advisory fees will be further lowered to offer more lower-net-worth and younger investors the opportunity for professional investment management.
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Hybrid Human-Tech Models
Wierdly enough, even though the whole industry started with the intent to potentially replace human financial advisor, it looks like the hybrid model of human plus robo advisor is taking over. Human financial advisors are being added to formerly tech-only robo advisors at lightning speed as consumers demand more guidance. The list of robo advisors with human advisor access includes Personal Capital, Betterment, WealthSimple, Ellevest, Vanguard, SigFig and TD Ameritrade.
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Mobile Capacity
Online life is migrating from desktop computing to laptops to tablets and finally to mobile. Mobile capacity continues to trump other platforms as consumers perform more and more financial-management tasks on the go from their phones. The robo-advisor industry will keep up with the trend.
Other Robo-Advisor Companies
| Company Name | Asset Under Management |
|---|---|
| The Vanguard Group | $83 billion |
| Charles Schwab Corporation | $33 billion |
| Betterment | $20 billion |
| Personal Capital | $8 billion |
| FutureAdvisor by BlackRock | $1 billion |
With $11 billion asset under management (AUM), Wealthfront is a leading force in the robo-advisor domain, listed as one of the top 5 companies based on AUM. However, other top 5 companies all have human advisors in addition to their robo-advisor servives. Therefore, Wealthfront is the top 1 company using robo-advisor only for financial services.
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I would recommend the firm to explore more areas of investment other than ETFs and bonds, such as equities, options, futures, Real Estate Investment Trusts (REITs), and alternative investment
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Offering more investment products can achieve higher returns and attract more high-net-worth individuals who can tolerate more risk.
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The company might need to utilize more AI, machine learning and algorithmic trading to achieve this goal.
- https://app.cbinsights.com/profiles/c/okjO/fundings
- https://www.bestroboadvisors.org/review/wealthfront/
- https://www.wealthfront.com/origin
- https://www.statista.com/outlook/337/109/robo-advisors/united-states
- https://blog.wealthfront.com/introducing-path/
- https://en.wikipedia.org/wiki/Robo-advisor
- https://www.roboadvisorpros.com/wp-content/uploads/2016/09/Top-11-Robo-Advisor-Trends_Robo-Advisor-Pros.pdf