Wealthfront, A Startup That Wants To Replace Financial Advisors, Raises $20 Million In A New Funding Round

Wednesday, March 20, 2013 15:18
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Wealthfront, A Startup That Wants To Replace Financial Advisors, Raises $20 Million In A New Funding Round

Tags: competitors

Wealthfront, a startup intent on replacing financial advisors with its wealth management software, just raised $20 million from some more Silicon Valley biggies, including Reid Hoffman, the co-founder and executive chairman of LinkedIn. That’s on top of the $10.5 million raised to start the company from venture capital investors including Netscape founder Marc Andreessen and Jeff Jordan, former president of PayPal.

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I wrote about Wealthfront in December 2011, and said it could be a serious contender because of the smart people involved, and this new round of funding tells us that the company is not going away. In fact, since I wrote about the company, it’s added a tax loss harvesting app and broadened its available asset classes for creating diversified portfolios.
 

TechCrunch, which reported on the new round of funding earlier today, says Wealthfront is growing its user based 20% a month. Its chief investment officer is Prof. Burton Malkiel of Princeton University and its CEO is Andy Rachleff, who teaches entrepreneurship at Standard University’s Graduate School of Business.

 

Wealthfront’s software based financial advisor service charges an annualized fee of 0.25% on a client’s assets under management, and there is no fee charged for the first $25,000 of AUM, according to its Form ADV Part 2
 

Comments (5)

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FamaFiduciary
Andy,
This bears watching going forward, and we all appreciate your bringing this and other potential game-changers to the attention of the investment advisory community. That being said, it seems that it will be a difficult task indeed for a web-based application to serve the complex needs of high-net worth clients who may need a variety of integrated services, including such things as estate and trust planning, tax planning, real estate investment integration, business succession planning, charitable giving, etc. It may eventually be a force to be reckoned with, however, particularly among Generation Y and the Millennials.
FamaFiduciary , March 20, 2013
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Patricia
No Website, no matter how sophisticated, can prevent bad behavior on the part of investors. I have earned my clients' trust and respect more from the things I kept them from doing, than what I specifically did for them. The client connection cannot be commoditized. I think that, in many instances, someone who would be attracted to this service would never have been a target client for an advisor. I shall stay tuned to see what happens.
Patricia , March 21, 2013
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FamaFiduciary
There was another article published today in RIA Biz which goes into more details about the $20 million funding. This article has some additional quotes, including an incredible statement from Andy Rachleff, who is described as chief executive and co-founder of Wealthfront, which reads: "Advisors are of no value" (and that quote is not taken out of context, by the way).
FamaFiduciary , March 22, 2013
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rickf248
Don't thing of Wealthfront as an investment company. It is not. This is a technology company that is being valued for it's software applications. The RIA is the showcases for this technology. The exist strategy for the firm is likely to sell to Schwab or another large custodian so that do-it-yourself (DIY) investors can have their ETF portfolios rebalanced and tax-managed hands free. They'll get $1 billion in assets over the next couple of years because $20 million in new VC money can buy a lot of media space.
rickf248 , March 27, 2013
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darrella775
I operate a low-cost asset management firm and I welcome new and more efficient ways of managing money.

Technology changes everything including asset management. Advisors should integrate low-cost asset management services into their practices and focus on what they do best...managing their clients emotions.

The emergence of low-cost asset management services is good for both the client and the financial planner.


Darrell Armuth
Founder of Sensible Express
darrella775 , March 28, 2013

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