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Wealthfront’s Mission: Build A Financial System That Favors People

Andy Rachleff: mission is to build a financial system that favors people

My co-founder Dan Carroll and I chose to partner over a common desire to democratize access to sophisticated financial advice. We came upon this mission from very different experiences. As a venture capitalist, many of my former portfolio company recruits came to me for investment advice after their companies had been acquired or gone public. Unfortunately, I couldn’t recommend anything I would use because the minimums associated with a high quality financial advisor were too high. Dan’s interest in solving this problem arose from the poor financial advice his hard-working parents received from a family friend who was a financial advisor. We both knew sophisticated financial advice was too exclusive, and we were determined to change that. This mission sustained us from our founding in 2011.

Nearly a decade later, we are extremely proud of the progress we have made towards achieving our mission. We weren’t just the first company to offer a globally diversified and rebalanced portfolio of low-cost index funds that, thanks to software, could be managed automatically for less than a quarter of what an advisor charged. We were also the first to offer many other investment features that were previously only available through an advisor that required a $1 million account minimum (and sometimes as much as $10 million). These features include ETF-based tax-loss harvesting, tax-loss harvesting within an index, multi-factor smart beta, risk parity and even tax-minimized transition to a more optimized portfolio. The investment management industry took notice. Because of our success, every brokerage firm now either offers or plans to offer an automated investment service, although none have the breadth of features we do. According to Statista, automated investment services will manage over $1 trillion by the end of this year.

Our progress toward our original mission combined with our recent push into banking services and our much grander vision to optimize and automate all our clients’ finances made us realize it was time to update our mission to reflect a broader purpose. In crafting this new mission, we were heavily influenced by Jim Collin’s first book, “Beyond Entrepreneurship: Turning Your Business into an Enduring Great Company.” Specifically, we wanted a new mission statement that reflected a big, hairy, audacious goal that could be realized, ideally within 10 years. It also needed to be measurable and reflective of our work today and our vision for the future. We ultimately coalesced around this:

Our mission is to build a financial system that favors people, not institutions.
Favoring people, not institutions, means putting clients’ interests ahead of shareholders’. Every financial company says they do this, but none actually do because their business model doesn’t allow it.

The first step towards realizing this mission is to reinvent banking — an industry that is notoriously unfavorable to its customers. We’re all familiar with account fees, overdraft fees, and getting zero interest on our deposits. But why does the banking industry do this?

The answer is simple: banks weren’t built to benefit customers – they were built to benefit banks. As a result, the current banking system doesn’t put customers and their needs first. Instead, banks force you to pay for outdated bank branches you don’t use through confusing, hidden and seemingly endless fees. And they pay you nothing or almost nothing on your deposits, even when interest rates are high.

A classic example of the bank industry mentality was the way Jamie Dimon, the CEO of JP Morgan Chase, recently responded to a Bloomberg reporter when he was asked how he would deal with negative pressure on revenues caused by a decreasing interest rate environment. Without missing a beat, Dimon replied that they’d just find other fees to charge consumers to make up for the difference. Can you imagine Jeff Bezos saying that?

We don’t think the answer to a short-term loss of revenues is to raise fees. Instead we believe delivering delightful new features that create new revenue sources is the superior way to build financial stability. I doubt you have ever heard that explanation from another financial services company. That’s because no financial services company is as product driven as we are.

Our vision stretches beyond just building great products ourselves. Accordingly, one of the things we like about our new mission statement is its double entendre. We both want to build our own financial system that favors people, not institutions, and influence other companies to do the same. We’re proud of how we changed the investment management industry and are excited to have the same impact on banking.

The future of financial services
In order to favor people, financial service companies will need to build delightful, software-based products. Only through software can you lower the cost of delivering a service enough to make money with your clients and not from them.

Software is also what will allow us to deliver on our bold vision of Self-Driving Money™. Self-Driving Money™ will optimize every dollar you earn and automatically take the most appropriate action based on what’s best for you, not us. Our software will make managing your finances effortless, allowing you to reach financial nirvana. We can’t wait to deliver on this vision and we are grateful to all of you for joining us on our journey.

Andy Rachleff


The information contained in this communication is provided for general informational purposes only, and should not be construed as investment or tax advice. Nothing in this communication should be construed as a solicitation or offer, or recommendation, to buy or sell any security. Any links provided to other server sites are offered as a matter of convenience and are not intended to imply that Wealthfront Advisers or its affiliates endorses, sponsors, promotes and/or is affiliated with the owners of or participants in those sites, or endorses any information contained on those sites, unless expressly stated otherwise.

Investment advisory services are provided by Wealthfront Advisors , an SEC-registered investment adviser, and brokerage products and services are provided by Wealthfront Brokerage LLC, member FINRA / SIPC. Wealthfront Software LLC (“Wealthfront”) offers a free software-based financial advice engine that delivers automated financial planning tools to help users achieve better outcomes.

All investing involves risk, including the possible loss of money you invest, and past performance does not guarantee future performance. Please see our Full Disclosure for important details.

Wealthfront Advisers, Wealthfront Brokerage and Wealthfront are wholly owned subsidiaries of Wealthfront Corporation.

© 2020 Wealthfront Corporation. All rights reserved.

Banks Are Having Their “Blockbuster Moment”


For many of us who came of age between the late 1980s and early aughts, Blockbuster Video is a pleasant memory. For roughly two decades, Blockbuster was a dominant force in the video rental industry. But despite this dominance, Blockbuster declared bankruptcy in 2010 and instead of operating 9,000 stores like it did in 2004, now it has only one. There are parallels between Blockbuster’s demise and what’s likely to happen to traditional banks. The effects of COVID-19 have only strengthened the comparison. Banks are having their “Blockbuster moment,” and it could cost them big.

Blockbuster’s heyday
Most of us probably remember going to Blockbuster Video years ago. On a Friday night, it was the place to go pick out the video you were going to watch. I have fond memories of browsing the aisles (and rushing to check out the new releases shelf) at my local Blockbuster as a teen, and you probably do, too. You could take any movie home with you for just a few dollars.

Blockbuster had 9,000 retail locations at its peak, and these stores were a key part of their business model. Blockbuster stores were seemingly everywhere, making it easy to find a convenient one to visit. Of course, these stores cost money to maintain – but Blockbuster had ways of paying for that. Late fees were a big source of revenue. While consumers hated paying them, late fees helped the company afford the large costs associated with maintaining 9,000 stores.
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What You Should Know About Bank Fees

ANDY RACHLEFF: What you should know about bank fees

You’ve probably spent a significant amount of time and effort trying to avoid paying banking fees. Unfortunately, these fees are extremely difficult to avoid and they really add up. Last year, the Los Angeles Times reported that fees alone made up more than a third of banks’ total revenue. Worse yet, these fees often far exceed any interest your bank is paying you, meaning your banking relationship is eroding your wealth – not building it. Paying $100 in banking fees annually (which is not at all outside the realm of possibility) would cost you $1,000 every decade, and that’s before you factor in the interest you could otherwise earn on that sum.

At Wealthfront, it’s no secret we don’t like fees. Fees are essentially negative earnings, and they can destroy your return. It’s important to be aware of any banking fees you’re paying, especially in combination with the interest your bank pays you on your deposits. To get the most out of your banking relationship, you’ll want a competitive interest rate and no fees. Unfortunately, most banks won’t give you that option.

Below we describe some common kinds of fees banks charge to shed some light on how banks typically operate. Some of these fees are for checking accounts, some are for savings accounts – and all of them have the potential to eat into your hard-earned cash.
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Tips for Managing Your Finances After Job Loss Or Wage Loss

Savings Strategies From Wealthfront

Over the last seven weeks, more than 33 million Americans have filed for unemployment. Many more have had their hours or their pay cut at work. Dealing with the loss of wages or your job can be incredibly stressful – I was laid off in 2008 during the financial crisis, and remember how challenging it was.

You’re probably feeling overwhelmed if you were recently laid off and don’t currently have a job. Job loss is painful, and it can be difficult to cope with the stress of a layoff while figuring out your next move. The first thing you should do if you’ve been let go is file for unemployment. You can do this by filing a claim with the unemployment insurance program in the state where you worked. Depending on the state, claims may be filed in person, online, or by phone. But if you’ve already done that, maybe you’re not sure what to do next. Navigating job and wage loss can be difficult, but having been through it myself, I have some tips to share to make this transition a bit easier.

Evaluate your cash on hand
Cash is your first lifeline as you consider your next steps after being laid off or having your pay reduced. If you have an emergency fund (which might be in the form of cash, investments, or a mix of the two depending on the factors described in this blog post), now is the time to use it. Assess how much cash you have and how long it will last if you have to use it to cover your expenses.
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Why The Elimination Of Stretch IRAs Means It’s Time To Update Your Retirement Plan


On December 20, 2019, President Donald Trump signed the Setting Every Community Up for Retirement Enhancement (SECURE) Act with overwhelmingly bipartisan support. In so doing, the most comprehensive retirement bill since the Pension Protection Act of 2006 became law. Among the SECURE Act’s many provisions comes some potentially bad news for many Wealthfront clients, and it’s important that you’re aware of it.

The law expands opportunities for individuals to participate in efficient employee retirement plans, but it also eliminates stretch individual retirement accounts (IRAs). This part of the legislation is an unwelcome change for some individual retirement savers.

Why it matters
Prior to the passage of the SECURE Act, individuals who inherited a Roth or traditional IRA were subject to required minimum distributions (RMDs) based on life expectancy. This allowed beneficiaries to continue growing the IRA in a tax-deferred manner over the course of their lives. For example, a young beneficiary would have a lower RMD and could potentially stretch the tax-free growth of the inherited IRA over decades — hence the term stretch IRA.
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How Do Interest Rates Work? Everything You Need To Know

Wealthfront On Interest Ratres

Whether you *think* you completely understand what interest rates are and how they work, or you know that you definitely don’t know everything about them, this will lay out all the essential details.

While “interest” can feel like a dirty word for anyone with debt, there’s a lot more going on with these rates than the way they puff up the balance on your credit card. Since interest rates will invariably appear in nearly every aspect of your financial life, it’s incredibly important to understand the different types of interest and their implications on your financial plans. An interest rate has bearing on the size of your credit card bill, how long it takes you to pay off your mortgage or student loans — and it’s also what fuels your savings..

You probably already know a few things about interest rates, like that the principal balance of a loan is the amount you borrowed, and the interest is the money you pay on top of that every month as a fee for borrowing said money. What’s harder to determine is where interest rates come from (no, they don’t just appear out of thin air), how they work, and how they impact your money. Let’s dig into everything you need to know to speak interest rates fluently.

The Different Types Of Interest Rates

An interest rate on a savings, checking, or high-yield account will usually either have the term APR or APY attached. APR (annual percentage rate) tells you how much interest is paid in a given year, while APY (annual percentage yield) takes into account the year’s compounding interest. What’s compounding interest, you ask? Essentially, you earn interest on your interest, unlike simple interest, which is only based on the principal balance of a loan or investment.

For example, if you put $100 into an account with 5% simple interest, you’ll have $105 in a year and $150.00 in 10 years. Meanwhile, $100 in an account with 5% interest compounded monthly will be $105.12 in a year and $164.70 in 10 years. It works the same way for loans. If you take out a $10,000 loan with 5% interest that compounds monthly, you’ll owe $16,470 in 10 years (If you don’t make any payments, that is). Most mortgage loans, credit cards, and high-yield savings accounts will have compound interest.

Why Compound Interest Matters

Albert Einstein reportedly called compound interest “the eighth wonder of the world,” adding: “He who understands it, earns it; he who doesn’t, pays it.”
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