If you’re looking for an easy way to save money for long-term goals like retirement, a robo-investing platform can help. These services are designed to invest your money for you and keep your portfolio on track without you doing any of the hard work. Robo-advisors can be a cost-effective way to grow wealth for anyone who doesn’t want to spend their time thinking about investing.
When it comes to choosing a robo-advisor, two of the most popular platforms are Wealthfront and Acorns. These two services take somewhat different approaches to investing and have notably different pricing structures. To help you decide which is better for you, we’ll compare Wealthfront and Acorns head to head.
About Wealthfront And Acorns
Wealthfront was one of the first robo-investing services on the market when it launched in 2008 by founders Andy Rachleff and Dan Carroll. The platform now manages more than $20 billion in total assets.
Acorns is a younger service, founded in 2014 by brothers Walter and Jeff Crutenden. The company is much smaller than Wealthfront, manages just over $1 billion in assets, but has received backing from corporations such as PayPal, Blackrock, and Bain Capital.
Wealthfront vs. Acorns: Account Types
One of the first differences between Wealthfront and Acorns to note is that they offer slightly different types of accounts. Both Wealthfront and Acorns offer standard investing accounts and IRAs, including traditional, Roth, and SEP IRAs. However, Wealthfront also offers 401(k) accounts and 529 education savings accounts, which you cannot open with Acorns.
Wealthfront and Acorns also offer banking services, although in contrasting ways. Acorns offers a checking account with an included debit card. The platform has partnerships with more than 350 US retailers and restaurant chains so that you may be eligible for cash back on some purchases. Any cash back you receive is automatically credited to your investment account rather than your checking account. Note that the Acorns checking account isn’t free – we’ll cover the pricing below.
Wealthfront doesn’t offer a checking account, but rather a savings account. This comes with 0.35% annual interest and up to $1 million in FDIC insurance.
Wealthfront vs. Acorns: What Can You Invest In?
Neither Wealthfront nor Acorns give you a ton of control over how your money is invested, even by the standards of robo-advisors. With Wealthfront, you are asked to answer some questions about your goals and risk tolerance. From there, the platform will suggest a balance for your portfolio, which you won’t be able to further customize. With Acorns, you simply choose between five pre-made portfolio choices, which range from “Conservative” to “Aggressive.” You can change your choice in Acorns or your risk tolerance in Wealthfront at any time.
Both Wealthfront and Acorns invest in low-cost ETFs, and the contents of those ETFs are relatively similar between the two services. Each platform’s ETFs includes mid-cap and large-cap stocks, emerging market stocks, real estate investment trusts, and corporate and government bonds. Wealthfront also gives you exposure to municipal bonds, natural resource stocks, and treasury inflation-protected securities with some portfolio setups.
Wealthfront vs. Acorns: Investing Platform
Wealthfront and Acorns each offer straightforward platforms for mobile and web. You can transfer money from your bank account, manage your portfolio balance, and track your investment performance over time. Both services also automatically rebalance your portfolio and use tax-loss harvesting to maximize your returns.
One thing that makes Acorns unique is that you can link the service to your debit card, even if you don’t use an Acorns checking account. When you make purchases, Acorns will automatically round up the transaction to the nearest dollar and rollover the difference into your investment account. If you want to increase the amount you’re automatically investing, you can add multipliers to the rollover amount. This feature can be helpful for investors who rarely think about transferring money, but it’s not the best way to save large sums for retirement or other big goals.
Wealthfront vs. Acorns: Pricing And Fees
Neither Wealthfront nor Acorns require a minimum deposit to open an account. With Wealthfront, you are charged 0.25% of your account balance each year, regardless of which type of investment account you open, as a management fee. Note that a Wealthfront savings account is completely free and is not included in the management fee.
Acorns charges a flat fee of $1 per month for a standard investing account or $3 per month for a standard investing account, an IRA, and a checking account. To put this in perspective, the fee is cheaper than Wealthfront’s percentage-based fee if you have more than $5,000 in a standard investing account or $15,000 across a standard investing account and IRA (you can get a free checking account with most banks).
Both services lean heavily on low-cost Vanguard ETFs, so there isn’t much difference in the exchange fees you’ll pay for your investments.
Which Service Is Better?
Wealthfront and Acorns are relatively similar in terms of the assets they enable you to invest in and the control (or lack thereof) you have over your portfolio balance. Ultimately, price may be the biggest factor in determining which service is better for your needs. Acorns is cheaper if you only need a standard investing account and have more than $5,000 to invest. If you only plan on setting aside a small amount of money to invest, however, Wealthfront may be the less expensive option.
Wealthfront And Acorns Alternatives
An alternative robo-investing platform worth considering is Betterment. Betterment charges the same 0.25% management fee as Wealthfront and offers both checking and savings accounts. You also get more flexibility over how your portfolio is balanced between stocks and bonds. That said, we recommend Wealthfront over Betterment for most investors because Betterment only offers exposure to a limited range of assets, and the ETFs your money is invested in are much more expensive in the long run.
Conclusion: Wealthfront vs. Acorns
Wealthfront and Acorns are both excellent robo-investing services for long-term investors. Acorns is best if you plan on investing several thousand dollars or more, while Wealthfront is the better option if you only plan to invest a small amount. With either platform, you can essentially set and forget your investment and let the platform grow your wealth over time.