The wined and dined people also often really don't want to deal with a website and they want someone to call who can "get things done" if needed.
So for wealthfront and friends, let's say a family member is closing on a property purchase. You said you'd put in $500K. Closing comes and you try to wire the money over. But wait, it doesn't work.
1) First you have to sell investments
2) Trades have to SETTLE (T+2 or more)!
3) Then and only then can you initiate an ACH transfer.
4) It can only go to your own account in some cases (T+1/T+2)
5) Then you have to go to you bank and get a wire out (retail banks often have tight cutoffs or end up delayed if going online while they "approve" this).
6) This all can be stressful on closing day (agents calling, escrow calling, bank calling, your relative calling). Now you are not days but a week late.
vs
Talking with someone. They enable margin account if you don't have one, you wire same day, done or you can give your guys name to everyone to help coordinate if needed if it will be a bit late.
This is honestly a huge deal - when I make an angel investment, I send a text and/or wire info via the Merrill Lynch app, and I know it will be taken care of (by the same people every time) same day or next day, depending on when I send it.
That plus introductions and referrals to tax accountants, estate attorneys, etc., and access to investment vehicles I otherwise wouldn’t get (easily), definitely makes the 0.7% fee worth it for me.
[quick edit] Honestly, as someone who comes from an impoverished background, they also act largely as “financial therapists.” That is, I don’t make emotional decisions about money, but that doesn’t mean I don’t have tons of anxiety when I spend money on something large; they generate a wealth plan, allow me to see how my assets will change, allow me to (based on models) see if I’m overfunded, underfunded, etc., and I don’t have to do a thing other than send a text. That is insanely helpful to me, personally.
This is very interesting to me. I've been working on a retirement calculator in my free time as a hobby project for a while [1], but it never really occurred to me that there is real value in allowing people to do the 'what-if' analysis more easily. It seems obvious now...
Could you see yourself using something like this if there was an easy way to compare different scenarios?
You'd make a lot of money with this, I think. A lot of people don't have financial advisors and also don't have any method (or knowledge) of how to model various scenarios; if you built this out I bet you'd have a nice little passive income tool. Would it make billions of dollars? Probably not.
I'd use it and pay for it though, especially if it factored in historic market data, automatically figured out housing increase rates for my area, etc.
If you have planned to contribute $500K then presumably your plan involves making the money liquid with the necessary few days anticipation.
Also, my Wealthfront account is offering me approximately 25% "Available to borrow". I haven't tried it yet but I assume I could grab that immediately and then sell stock to pay back the loan.
I'm not challenging your claim that having a human financial advisor can be useful. I'm sure you're right; I just didn't think your points against the robo service were very strong.
I’m a mostly-happy Wealthfront user, but there’s a negative feature of the loan that I found out the hard way. I was having some medium-level renovations done on my house, and pushing the easy button to get some cash without liquidating investments sounded good to me. That worked great! But: WF would not let me add any more to my investment account until I paid the loan back in full! This wasn’t prominent, and I’d have happily made payments for longer by dividing between the loan and investment. I missed out on much of the big upside of the past 20 months.
Having been through this a few times betterment at least did not have a way AT ALL to wire out any amount of money regardless of balance in the account. This caused an issue during a real estate transaction - somewhat to extremely painful.
If wealthfront is offering an available to borrow that is perfect (for this issue).
You do get to a point though where you are like - hey, can I transfer $x of stock to a donor advised fund on this day and are just glad it can happen.
I'm not saying the fee is worth it, just that some folks may be willing to pay it because it appears to improve quality of life, even at cost of performance.
And actually, for something like a favor of $500K to help a close, you may NOT be doing a lot of planning in advance. Sure, call me when you need it if it ends up being needed. Call comes in (days / weeks / months later) - now its a pain.
I found betterment was also slow at even just transferring cash out of their accounts to other banks. Would not recommend them for anything that needs speed.
Their margin loan feature isn't much faster in my experience. ~2 days to open the initial request, 2 days to transfer via ACH, couple more to clear. I don't remember if there was a wire transfer option or not. Overall I still appreciate how easy it was to use
The Wealthfront happy paths seem to be ACATS transfers of brokerage holdings, or $250k (per day) ACH to/from a bank. They don’t have wire transfers. They can mail checks drawn on a Green Dot cash account but only up to $25k, which probably means they don’t have cashier’s checks.
So for wealthfront and friends, let's say a family member is closing on a property purchase. You said you'd put in $500K. Closing comes and you try to wire the money over. But wait, it doesn't work.
1) First you have to sell investments 2) Trades have to SETTLE (T+2 or more)! 3) Then and only then can you initiate an ACH transfer. 4) It can only go to your own account in some cases (T+1/T+2) 5) Then you have to go to you bank and get a wire out (retail banks often have tight cutoffs or end up delayed if going online while they "approve" this). 6) This all can be stressful on closing day (agents calling, escrow calling, bank calling, your relative calling). Now you are not days but a week late.
vs
Talking with someone. They enable margin account if you don't have one, you wire same day, done or you can give your guys name to everyone to help coordinate if needed if it will be a bit late.