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Acorns and Wealthfront are two innovative companies that offer passive investing services to retail investors. With the help of robo-advisors, both firms invest and manage your money cost-efficiently and help you generate wealth on autopilot.
With Acorns, users can invest in pre-built portfolios and invest their spare change automatically. Wealthfront aims to create long-term wealth by applying specific investing strategies, including tax-loss harvesting and financial planning.
This review will take a closer look at the two companies and focus on individual features, investment options, account types, fee structure, and the pros and cons. At the end of the review, you will know which of the two suits your financial activities best.
Acorns vs. Wealthfront: Overview
These two companies are relatively new but are already some of the top robo-advisor service providers in the United States. Although both offer similar low-cost passive investing services, some of their services do differ.
In A Nutshell: Acorns can be categorized as a one-stop-shop for all things personal finance. They offer a wide variety of financial products related to banking, retirement planning, and investment management for as low as $1 per month.
In A Nutshell: Wealthfront is one of the biggest robo-advisor players in the United States with over $20B in assets under management (AUM). Wealthfront offers a wide range of products, including cash, investment, and retirement accounts.
Acorns is a fintech company that launched its services in 2012. The firms’ robo-advisor uses predefined algorithms and time-tested investment strategies to build an investment portfolio based on the investor’s risk tolerance, financial goals, income, and other characteristics.
Additional offerings on the platform include a variety of financial products and services related to banking, retirement planning, and investment management, starting as low as $1 per month.
As of right now, Acorns has $3 billion in funds under management and more than 8 million users on its platform. To learn more about Acorns, check out our full Acorns review.
Wealthfront launched its original service back in 2008. Although its services initially focused on mutual fund analysis, the firm successfully pivoted to wealth management in 2012, offering a well-rounded, low-cost robo-advisor and other financial services.
The company massively propelled the robo-advisor industry forward and currently has more than $20 billion in funds under management. If you want to know more, have a look at our Wealthfront review for more information.
Acorns vs. Wealthfront: Main Features
Both Acorns and Wealthfront target passive, long-term investors, and their features reflect that fact.
|$1 per month (Lite), $3 per month (Personal) and $5 per month (Family)
|0.25% per year
|Stocks and ETFs
|Stocks and ETFs
|Individual Taxable, Traditional IRA, Roth IRA, SEP IRA, and Custodial Account
|Individual Taxable, Joint Taxable, Traditional IRA, Roth IRA, SEP IRA, 401(k) Rollover, 529 and Trust
|Mobile (iOS and Android)
|Mobile (iOS and Android) and Web-based
|Get $5 when you sign up
|Socially Responsible Investing
|Access to Financial Advice
Acorns’ main feature is Acorns Invest, which is its robo-advisory service. This robo-advisor uses an algorithm to recommend asset allocations that will generate wealth based on the investor’s financial goals and risk profile.
Currently, Acorns offers five portfolios to its users. These portfolios range from conservative (100% bonds) to aggressive (100% stocks). The robo-advisor will recommend a portfolio based on an investor’s chosen level of risk, financial goals, and other factors.
With Acorns Invest. investors can also use the Round-Ups feature to invest “spare change” of made purchases into the portfolio. By linking any checking account, debit, or credit cards to Acorns, the provider rounds up all transactions to the next dollar and invests the spare change, helping investors can reach their long-term financial goals faster.
In contrast to Wealthfront, Acorns uses a monthly subscription fee model. These plans are called Lite, Personal, and Family and include banking, retirement, and cash management solutions.
Next to Invest, Acorns offers Acorns Later, which is the firm’s retirement planning feature. Investors must sign up to the Personal or Family plan to open a traditional IRA, Roth IRA, or SEP IRA, or to roll over a 401(k).
Another feature is Acorns Spend. This is a checking account and is available to Personal and Family subscribers. Lincoln Savings Bank provides the account, issues a tungsten metal Visa™ debit card, and is FDIC-insured up to $250,000.
Parents who want to save for their children’s future use Acorns Early (family plan only). They can include multiple kids at no added costs.
Acorns also offers the Acorns Earn rewards program. This program entitles users to make money when shopping at one of Acorns’ 350+ affiliated partner brands. The cashback rewards is deposited to the investment account directly when an Acorns credit or debit card is used.
Main Features Overview:
- Automated passive-investing service: Investors using the firm’s robo-advisor will have their portfolios managed professionally at a low cost.
- Round-Ups: Users link their cards to the Acorns investing account to benefit from the spare change of their purchases being invested.
- Pre-built portfolios for each type of investor: The five pre-built portfolios enable every type of investor to find the most suitable option based on their financial goals and risk profile.
- Banking and retirement products: Acorns Spend (checking account), Acorns Later (retirement account), and Acorns Early (investment account for kids) add significant value to Acorns’ robo-advisor.
- Competitive subscription fees: Acorns offers competitive rates for their subscription plans compared to other providers. Besides, once the amounts in your account grow, the flat-fee model will become cheaper than the percentage-based model.
Wealthfront’s main features and services can be split up into four categories: banking, investing, borrowing, and planning.
Users can benefit from an annual percentage yield of 0.35% with the provider’s cash account and can open a banking account with a $1 minimum deposit. Typical bank fees are entirely waived.
Wealthfront’s applied PassivePlus® investment strategy focuses on low-risk and long-term passive investments to generate steady returns for investors. Wealthfront periodically rebalances the portfolio to continue allocating funds according to the account’s goals, and only requires an annual advisory fee of 0.25% for assets under management.
Part of this investment strategy is daily tax-loss harvesting. TLH sells negative result-producing assets to claim tax credits resulting from capital loss. These tax credits help offset the capital gains tax from ETFs sold at a plus. This strategy also exists on a stock level for investors that have an account balance of more than $100,000.
Above the $100,000 threshold, investors get access to risk parity. This feature is similar to Modern Portfolio Theory (MPT) and aims for the same risk-adjusted weight for each asset class in the portfolio and may lead to even higher returns.
Investors with $500,000 or more on their accounts can use the Smart Beta service. With it, investors can expect a higher level of caretaking and portfolio analysis. For that reason, particular indicators are used to estimate better stock allocations. Smart Beta might again bring better returns than direct indexing.
Investors who need to borrow money and have more than $25,000 on their account can open a credit line of up to 30% of their portfolio value. The interest rate ranges between 2.45% and 3.70%.
Wealthfront’s Path planning tool makes it easy to plan for future goals such as homeownership, early retirement, vacations, and college funding. The platform’s algorithm evaluates the impact each investment has on your main goals as well as other possible goals.
Main Features Overview:
- High annual percentage yield: Wealthfront offers a cash account that provides an eight times higher APY than the current national average.
- Tax-loss harvesting: This feature makes it possible for investors to increase their portfolio return by 0.58% or even 1.07%, according to the website.
- Risk Parity: Risk Parity might increase larger account holders’ returns higher than expected with Modern Portfolio Theory (MPT), which is applied to account balances that are lower than $100,000.
- Smart Beta: Investors with $500,000 on their account will enjoy further in-depth analysis of their portfolio and a more adequate stock allocation.
- Borrowing money: Investors can borrow money for short-term expenses while facing only moderate interest fees.
- Financial planning: Wealthfront developed this feature so users can specifically plan for one or more investment goals and see how their decisions impact future results.
See Also: 7 Best Micro-Investing Apps
Acorns vs. Wealthfront: Investment Options
Both robo-advisor services utilize ETFs on the same asset classes to build investor portfolios, while Wealthfront’s ETF selection is broader. Choosing only low-cost ETFs from Vanguard, Charles Schwab, and Blackrock, Acorns and Wealthfront can keep costs low for investors.
Acorn’s robo-advisors use a handful of low-cost Exchange Traded Funds (ETFs) to build the platform’s five portfolios. Depending on the investor’s risk tolerance, the portfolio basket will hold only bonds (conservative), only stocks (aggressive), or a mix of the two asset classes (moderately conservative, moderate, moderately aggressive).
Having said this, investors can’t build their portfolio from scratch and don’t have any control over its structure. They can’t trade or change any of the assets in their basket.
Like Acorns, Wealthfront’s robo-advisor creates a customized portfolio from a basket of low-cost ETFs in ten global asset classes. These include stocks (US, foreign, emerging markets, dividend), REITs, and bonds (municipal, corporate, US government, emerging markets, TIPS).
Acorns vs. Wealthfront: Account Types
Acorns and Wealthfront offer the most common account types including taxable accounts for individuals and groups as well as the main retirement accounts. That way, they can cater effectively to every user’s needs.
Currently, Acorns provides various investing accounts to its users. Have a look at the list below:
- Individual taxable account
- Traditional IRA
- Roth IRA
- SEP IRA
- Custodial account
Wealthfront offers numerous accounts as well:
- Individual taxable account
- Joint taxable account
- Traditional IRA
- Roth IRA
- SEP IRA
- 401(k) rollovers
- Trust account
- 529 college savings plan
Acorns vs. Wealthfront: Sign Up Bonuses and Promotions
Usually, fintech companies offer rewards or bonuses to new users or for referrals. We were surprised to learn that while Acorns does follow this convention, Wealthfront does not.
Acorns currently offers two different rewards to new users. The first incentive is a sign-up bonus of $10 for opening an account with the provider.
In addition, investors receive rewards when getting friends to join the platform. If your friend joins Acorns through your referral link and deposits $5, you will both receive $5.
Moreover, you can receive additional rewards through Acorns’ general referral program. The weekly referral bonus is a limited-time promotional offer and goes as high as $500 for four referrals.
See Also: 12 Best Online Brokers for Stock Trading
In contrast, Wealthfront doesn’t offer any rewards for new sign-ups or referrals.
Acorns vs. Wealthfront: Fees & Pricing
Although Acorns and Weahlthfront offer similar services, their approach to pricing differs. While investors can start with only a few dollars at Acorns, Wealthfront requires a steep minimum deposit.
The second aspect setting them apart is how they charge their users. While Acorns uses a monthly subscription model, Wealthfront opted for a classic management fee structure.
Opening an account with Acorns is entirely free, but investors must deposit $5 to start investing on the platform. Users also have to choose one of three available subscription models:
- Acorns Lite: The cost of Acorns Lite is $1 per month, which gives users access to the company’s robo-advisor, the Round-Ups feature, and the rewards program.
- Acorns Personal: The mid-range Acorns Personal program costs $3 per month and allows users to open retirement (Acorns Later) and checking accounts (Acorns Spend).
- Acorns Family: The Acorns Family subscription model is available for $5 per month and gives users access to all Acorns features. This includes access to all of the programs mentioned above and the Early program for custodial accounts.
Acorns charges $50 per ETF to transfer it to another broker when a user closes their account. Selling your ETFs and closing the account doesn’t lead to any fees, however.
Wealthfront charges a flat annual 0.25% management fee on portfolios held with the firm. This number is way below the industry average of around 1%. Besides, the expense ratios of the chosen financial assets are low as well and range between 0.06% and 0.13%.
When investors tap into their credit line, they can borrow up to 30% of their overall portfolio value. Interest rates range between 2.45% and 3.70%, depending on the account size.
To open a banking account, the minimum deposit is $1. When opening an investment account, users must deposit $500 on the platform, which is a lot compared to other brokers.
Cash accounts only face fees that occur when using the debit card.
Acorns vs. Wealthfront: What We Like (Pros)
Both companies effectively helped make robo-advisors available to many long-term passive investors. Find out below what we like best about Acorns and Wealthfront:
- A US-based regulated investing firm
- No account minimum and no inactivity fee
- Acorns offers a variety of investment accounts, including IRAs
- User-friendly web-based platform and mobile app to track the progress of accounts
- Hassle-free portfolio selection through Acorns’ robo-advisor service
- The pricing structure is competitive for investors with a portfolio value of $15,000+
- A time-tested investing methodology that aims to produce steady returns over a long-term investment horizon
- A vast network of affiliated brands that offer rewards and cashback for each purchase
- The robo-advisor automatically rebalances quarterly when the portfolio is off-target
- Acorns Early is an innovative investment feature for parents who want to build wealth for their kids early on
- The Round-Ups feature allows investors to save and invest seemingly unimportant spare change that can turn into larger sums over time
- A US-based, regulated brokerage firm
- Low management fees of 0.25% for assets under management
- Great variety of account types, including retirement accounts
- Very low expense ratios for their ETF selection
- Automatic periodical rebalancing of the portfolio
- No deposit or withdrawal fees and no maintenance fees for cash accounts
- Daily tax-loss harvesting increases long-term returns
- The APY of 0.35% is eight times higher than the national average
- The free digital planning feature is intuitive and user-friendly
- Short-term expenses can be funded through a credit line at a moderate rate
Acorns vs. Wealthfront: What We Don’t Like (Cons)
Unfortunately, both Acorns and Wealthfront have a few downsides as well. Below are a few things we don’t like:
- Acorns does not allow users to trade assets or have any control over portfolios, which might be a downside for investors looking to be more active
- Acorns doesn’t support tax-loss harvesting
- No human advisory service is available
- The firm’s subscription-based Lite model can be pricey compared to competitors like Wealthfront if investors have only small account balances
- No human advisory service is available
- $500 minimum deposit might be too much for many investors
- Services are not suited for DIY investors who want to trade assets outside the recommendations of the robo-advisor
Acorns vs. Wealthfront: Security
Acorns, as well as Wealthfront, and their products are well insured and offer protection for investments (excluding portfolio drops). This coverage ensures that the investor’s funds are safe in case their broker fails in any way.
Acorns is highly regulated by the Securities and Exchange Commission (SEC) of the United States and is part of the Financial Industry Regulatory Authority (FINRA).
In addition, Acorns is a member of the Securities Investor Protection Corporation (SIPC). Therefore, investors’ accounts have coverage on up to $500,000 in assets. Acorn’s bank accounts provided by Lincoln Savings Bank are FDIC-protected up to $250,000.
Wealthfront’s cash account, provided by Green Dot Bank, is FDIC-protected on up to $1 million, which is four times the industry standard. Like Acorns, Wealthfront’s accounts enjoy SIPC coverage of up to $500,000 and $250,000 in cash claims.
Wealthfront is also regulated by the Securities and Exchange Commission (SEC) and the self-regulatory Financial Industry Regulatory Authority (FINRA).
Acorns vs. Wealthfront: Platform and App
Acorns and Wealthfront offer user-friendly website platforms and mobile apps that have been designed with long-term passive investors in mind.
Acorns provides a well-designed web-based version on their official website and an aesthetic mobile app for Android and iOS devices. Acorns’ app is very simplistic and lets you do a few things before the provider does the heavy lifting. Changing your strategy within the app is also very easy.
As of right now, Acorn’s iOS version has a 4.7-star rating in Apple’s App Store, with close to 700,000 reviews. In contrast, the Android version has a slightly lower 4.4-star rating in Google’s Play Store with more than 138,000 user reviews.
Wealthfront offers an intuitive web-based platform and a mobile app to its users. The fully-digital planning tool on the platform is called Path and lets you synchronize all your financial accounts in one place. The dashboard is easy to navigate and its comprehensive tool comes close to a human financial planner.
Investors can set parameters to discover possible long-term results and quickly get an idea of how their goal setting and financial decisions impact their desired long-term wealth.
Who Is Acorns For?
Acorns is an excellent option for investors who are looking for hands-off investing vehicles. The robo-advisor quickly matches the investor’s risk tolerance and financial goals with the best-suited portfolio, so users have to spend as little time as necessary on the platform.
Investors that have trouble saving money can easily save what they would usually spend elsewhere through the Round-Ups program. That way, they are charmed into saving with minimal effort and actively contribute to their portfolio growth.
Investors with account balances of up to $15,000 have to compare Acorns’ investment models to percentage-based models such as Wealthfront and determine what is best for their financial activities.
Ultimately, Acorns does not support self-directed investing. Investors who want a say in the asset allocation or trade of some of their securities must look elsewhere.
Who Is Wealthfront For?
Like Acorns, Wealthfront is great for investors who want to invest on autopilot. The profile manager’s easy-going approach, coupled with the fact that it allows users to borrow money against their accounts, plan for future goals, and profit from tax optimization strategies, makes this an excellent choice.
Advanced investors with large account balances may further benefit from the smart beta and risk parity features, which are challenging and expensive to implement for retail investors themselves. Users may also like the option to invest in a college savings plan for their children.
However, Wealthfront’s services aren’t a good fit for active investors and traders that want to trade financial assets or build a portfolio.
In A Nutshell
- Account Minimum: $500
- Fees: 0.25% management fee
- Promotion: None at this moment
Acorns and Wealthfront are two automated passive investment firms that help individuals in the US build wealth and retirement cushions through their innovative robo-advisor services.
Wealthfront’s percentage-based model is perfect for investors with small budgets compared to Acorns’ flat fee-model that is better suited for investors with larger account balances. Still, big accounts can expect a higher level of caretaking from Wealthfront.
Moreover, Wealthfront offers a user-friendly and feature-rich planning tool that incorporates multiple accounts. This helps investors make better decisions and provides the potential to generate more wealth. Combined with a fantastic tax-loss harvesting service and low management fees, Wealthfront’s place at the top is well deserved.
On the other hand, Acorns shines through features such as investing your spare change every time you swipe your card and a vast cashback program. Acorns also has a lower investment barrier for users than Wealthfront.
While offering similar services, their approach to executing strategies and generating wealth is different. That is especially apparent in their features and pricing structures. Investors should be aware of these differences and think about which services they will need now and in the future before opting for one of the two featured companies.
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Carsten is a Freelance Copywriter with a personal interest in money management and investing. Besides taking care of his investments, he loves traveling, reading books, and working out (calisthenics & yoga).