Robo Advisor Wealthfront Adds $1 Billion With New Product

Wealthfront (an “automated wealth advisor”) just launched a new high-yield cash account last February attracting $1 billion of new client money. Yielding more than Goldman Sachs’ and Ally bank’s similar products (2.24% vs 2.2%), it shows yield hungry customers still clamoring for safer, but higher, returns. Keep in mind a “normal” bank checking account yields only 0.8% according to Wealthfront intends to raise its rates to 2.29% on those accounts because of the cost savings brought about by the new deposits. This is exactly why traditional banks (and brokerages) are scrambling on how to compete with the new lower cost “robos” and online banking firms. Instead of holding deposits directly, Wealthfront partners with multiple third party banks in order to be FDIC insured. Another new way fintech is changing the whole financial services landscape. More in-depth below…

Bill Taylor/Fintek Capital

Customers in search of yield are piling into Wealthfront’s new cash accounts.

The company, which started as an automated wealth advisor, unveiled the account offering in February with a higher-than-average 2.24 percent interest rate. In the months that followed, Wealthfront ushered in $1 billion in customer deposits, the company announced Tuesday.

Because of what it said was a sooner-than-expected billion-dollar milestone, Wealthfront is raising interest rates on those accounts to 2.29 percent.

“Once we passed $1 billion dollars in deposits, we were able to get cost savings and pass that directly down to our clients,”

Wealthfront founder Dan Carroll told CNBC in a phone interview. “You really have to go above and beyond to actually earn clients’ trust in the banking system.”

That new rate puts Wealthfront’s rate above some notable options in the industry.

Goldman Sachs’ consumer banking arm Marcus offers a 2.25 percent yield on its savings account. Ally Bank and Barclays have a high-yield offering that kicks back 2.2 percent. Meanwhile, the national average on checking accounts stands at a .08 percent rate, according to the latest data from Money market accounts return an average .21 percent…”

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