Two and a half years after its launch, Wealthfront, the algorithm-based financial advisory service marketed toward the “millennial” investor, has hit $1 billion in assets. The milestone comes less than four months after the Silicon Valley startup that had the traditional wealth management industry questioning its sustainability hit the $700 million mark, topping competitors like Betterment and Personal Capital in the automated investment management space. The company, which has been called the “Uber of wealth management,” has undergone two rounds of venture capital funding, the first of which which was led by investing powerhouse Andreessen Horowitz, and targets young people, hoping to capture a large chunk of what Wealthfront estimates is 90 million people in the U.S. with a net worth of $2 trillion. The goal is to hook early investors in their twenties and keep them for life. Roughly 60% of Wealthfront’s client base fits this description so far, with an average portfolio size of $93,000. And as the firm is seeking investors who favor technology over a human to manage their money, it’s no surprise that Wealthfront counts a number of tech sector professionals as its clients, helping Twitter employees manage their newly public stock holdings, with an eye toward attracting the next set of new millionaires to come out of the startup world as investors. In a post on its blog announcing the $1 billion in assets, Wealthfront, which often compares itself to financial advisory giant Charles Schwab, said that it hopes to grow at least 100 times as large in record time. “Wealthfront reached its first $1 billion in assets in less than half the time it took Schwab,” the company wrote. “We hope that by focusing on Millennials the way Schwab focused on Baby Boomers, we can continue our rapid growth to $10 billion, $100 billion, and beyond.”
Surf, as founder of the Palm Beach Hedge Fund Association, this is going to put a lot of your members out of business. This concept is not totally new. Remember that company back from the dot com days called Folio Investing? That was 15 years ago. Not as streamlined as this, but same concept.
Can't stop progress, Renaissance Technologies have been around since 1982 and high net-worth investors, pension funds still invest with hedge funds run via traditional methods.
You guys are not understanding this. There is NO algo. The word "algo" as it's being used in this context simply means the funds are not being actively managed by an individual. Their money is being put in various index funds based on some risk score. What is different about what they are doing is they are doing this for practically NOTHING! That is the point. Not that some algo is doing some magic trading. When you consider the fact that 90% of hedge funds and 95% of mutual funds can't be an index fund and most RIA's are shit who simply siphon fees are investor's accounts, then these guys do pose a threat from a cost perspective. I mean 25 bips is stupidly cheap and there is ZERO charge for small accounts. Hell, just to not have that annoying RIA call me non stop about the magic of variable annuities is worth the cost alone. And by cost, I mean the stupidly cheap 25 bips.
It's going to change things that's for sure. We have many RIA's and family office folks in the association---Folio was before its time, but now I think this will gain enough traction to be a player--but there's tons of old school money that won't totally commit to the machines for several decades IMHO. I see it as just another add on in the biz, it won't replace but rather enhance. Nice to talk to you Mav-- i think its been 10 years since we hung out at Niederhoffer's CT manse--- those were the days!! Since that time, I was divorced, married Annaland-- a central banker quant and have another baby Eva then semi retired and moved to Palm Beach-- Hope all is well!
How is this ground breaking? Click through the 10 page questionnaire and then click the 'See More Details' link. Under the historical performance tab you can see how their strategy would have performed hypothetically. I tried a few different risk inputs and all the outcomes look like a big yawn (almost all beta and little or no alpha). Anybody with a few minutes to spare each week and an excel spreadsheet could do better ETF investing on their own for free.
I don't think you understand. They are NOT trying to beat the market. Why is this so hard for you to understand. In fact, they are actually stating that. Their whole premise is that "no one" can beat the market. What they ARE doing is simply providing standard vanilla index allocation strategies. And they are doing it for about a 75% discount! They are competing on costs, not alpha. This concept is so simple, I have no idea why you guys struggle to understand this stuff. Basically they are the Vanguard from the 90's when John Bogle made a fortune telling retail investors to get out of mutual funds and into passive index funds. He was right.