A short while after disclosing that they have topped $2.5 billion in funds under management for their robo-advisory services, Wealthfront announced that they are dropping account minimums. Lowered from $5,000, Wealthront is now offering its services with a minimum account size of $500.
Announcing the news on its blog, Wealthfront cited that a year ago the percentage of their clients under 35 years old was 60%, with that figure continuing to grow. As a result, Wealthfront has received a demand from these younger investors for lower account minimums.
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For Wealthfront, beyond the altruistic statement that they are ‘Helping the Young Investor’, there are key financial reasons that makes sense for the firm to target this demographic. With the entrance of established financial advisory firms such as Charles Schwab and Vanguard into the robo-advisory sector, Wealthfront is no longer only battling against fellow startups in the sector. As a result, while Wealthfront may have a hard time convincing the 35 years old and older groups of existing investors at the Charles Schwab’s of the world to move their assets to them, by dropping their minimums, Wealthfront is in a position to grab the younger market. Therefore, Wealthfront’s current initiative can be viewed as more of a play on the future than one expected to provide immediate economic benefits.
According to Wealthfront, in offering smaller account sizes, the firm will continue using their proprietary indexing technology when creating customized portfolios for their clients. But, portfolios will be adapted to fit within the smaller account size.