Wealthfront cash account

[hopeisnotaplan]

I searched the site and found a few mentions, but not really seeing anyone using them for the 2.57% cash. (May have missed it).

Any reviews? Concerns?

Thanks!

 

[brewer12345]

No thank you. This is basically a hot money bucket shop that will likely eventually blow up. When it does, some of their customers will get burned. Deal with one of the many online banks that pay almost as much.

 

[Hopeful]

No thank you. This is basically a hot money bucket shop that will likely eventually blow up.

Curious what you mean? FDIC will not cover? Interest rate will drop? I don’t use them, but I am curious as to what you mean by “blow up”.

 

[brewer12345]

They are a thinly capitalized broker dealer that takes in money, holds it for an indeterminate amount of time, then transfers it to partner banks. If they go insolvent, I imagine a surprisingly large amount of customer funds will be at wealthfront rather than at the partner banks and will be exposed to loss.

 

[jazz4cash]

It seems like it could be too good to be true. I’m not inclined to use any of these robo-advisory firms for their primary services so using them as a middleman for a cash Account is not appealing. Should be interesting to watch, though.

 

[njhowie]

Curious what you mean? FDIC will not cover? Interest rate will drop? I don’t use them, but I am curious as to what you mean by “blow up”.

Ignore the other replies - you are correct - the Wealthfront cash account is FDIC insured. It will pay the stated interest rate and you will not lose any money - whether or not Wealthfront eventually blows up.

If you believe that the 2.57% (up to $1 million max FDIC insured) is better than alternatives available to you, then go for it.

 

[njhowie]

They are a thinly capitalized broker dealer that takes in money, holds it for an indeterminate amount of time, then transfers it to partner banks. If they go insolvent, I imagine a surprisingly large amount of customer funds will be at wealthfront rather than at the partner banks and will be exposed to loss.

Wealthfront is a member of SIPC. Therefore, in the short period (probably a couple days max) between when the funds are with Wealthfront and not yet at the program bank (covered by FDIC), the funds (up to $250k) are covered by SIPC insurance.

 

[njhowie]

Now, here is a new one with a twist - (up to) 3.0% savings account.

https://fitnessbank.fit

if you're age 65 or over:
https://fitnessbank.fit/content/senior-fitness-savings (only 10,000 average daily steps vs. 12,500 for younger folks).

younger folks:
https://fitnessbank.fit/content/fitness-savings-0

 

[LRDave]

Now, here is a new one with a twist - (up to) 3.0% savings account.

https://fitnessbank.fit

if you're age 65 or over:
https://fitnessbank.fit/content/senior-fitness-savings (only 10,000 average daily steps vs. 12,500 for younger folks).

younger folks:
https://fitnessbank.fit/content/fitness-savings-0

Interesting....I've never seen this before. Thanks for pointing it out.

They must be monetizing the data they collect (?).

 

[neihn]

Now, here is a new one with a twist - (up to) 3.0% savings account.

https://fitnessbank.fit

if you're age 65 or over:
https://fitnessbank.fit/content/senior-fitness-savings (only 10,000 average daily steps vs. 12,500 for younger folks).

younger folks:
https://fitnessbank.fit/content/fitness-savings-0

Hmm, quite interesting. 10,000 steps a day for folks over 65 YO is not an easy task but it is doable. I wish that they track cycling miles, ie 10 or 15 miles a day (which I do everyday

 

[audreyh1]

Wealthfront is a member of SIPC. Therefore, in the short period (probably a couple days max) between when the funds are with Wealthfront and not yet at the program bank (covered by FDIC), the funds (up to $250k) are covered by SIPC insurance.

I believe that the SIPC has stated they do not cover cash this way.

 

[njhowie]

I believe that the SIPC has stated they do not cover cash this way.

That was in the case of Robinhood - where they were (planning on) offering the high savings rate, not as an FDIC insured account but instead relying on SIPC for total coverage.

In this case, any money at Wealthfront is only as the money is in transit to the ultimate place at the program banks. This is no different than if you make a deposit to your Fidelity account which is set up for their FDIC sweep accounts:

https://accountopening.fidelity.com/ftgw/aong/aongapp/fdicBankList

 

[brewer12345]

Wealthfront is a member of SIPC. Therefore, in the short period (probably a couple days max) between when the funds are with Wealthfront and not yet at the program bank (covered by FDIC), the funds (up to $250k) are covered by SIPC insurance.

You might want to read the fine print on the wealth front and sipc language.

 

[njhowie]

You might want to read the fine print on the wealth front and sipc language.

Why don't you provide the fine print language you are referencing?

 

[DINKFIRE]

Here's a link to FAQ section related to the FDIC coverage. Basically they deposit your cash in one or more of their four partner banks.

https://support.wealthfront.com/hc/...2--How-does-Wealthfront-offer-FDIC-insurance-

I used Wealthfront in the past for free robo investments, it did fine and was free up to $15K of assets. Currently I've parked some cash with them that I plan to use in the next 12 months. Their explanation on their ability to offer a higher rate is found here:

https://blog.wealthfront.com/how-th...t-cash-accounts-does-what-banks-refuse-to-do/

What I believe they are saying that they have greater bargain power to demand higher rate than individuals.

 

[njhowie]

Here's a link to FAQ section related to the FDIC coverage. Basically they deposit your cash in one or more of their four partner banks.

https://support.wealthfront.com/hc/...2--How-does-Wealthfront-offer-FDIC-insurance-

Yes, all true. What brewer is referring to is the period between when Wealthfront receives your cash and when it is with the partner bank. Typically, this would only be a day or two while the funds clear. However, as I'm sure you've experienced, some institutions will place a hold on funds received, which could be up to a week. Maybe you have more insight to the process and how quickly the funds move from Wealthfront to the partner bank?

This is the point which brewer is concerned about (the fine print from your linked page):

FDIC insurance is not provided until the funds arrive at the program banks.

So, there is the small window where your funds are with Wealthfront but on its way to the program bank. My contention is that during this period, it is considered funds waiting for investment with the broker and is covered by SIPC.

 

[DINKFIRE]

So, there is the small window where your funds are with Wealthfront but on its way to the program bank. My contention is that during this period, it is considered funds waiting for investment with the broker and is covered by SIPC.

Initial deposit could take a bit longer, especially if the linked account could not be verified by trial deposits. I don't recall how it went since it was over 2 years ago. Subsequent cash transfer showed up on Wealthfront account overnight. It doesn't mean the cash has also been deposited with one of the banks by then, but I doubt Wealthfront would hold the cash for long if they are accruing the interest on daily basis.

 

[Rianne]

I searched the site and found a few mentions, but not really seeing anyone using them for the 2.57% cash. (May have missed it).

Any reviews? Concerns?

Thanks!

Interesting, but scary. Reminds me of home mortgages without verifying employment. It just sounds too good to be true. This beats CD rates and that's concerning.

 

[DINKFIRE]

This may help

https://www.financialsamurai.com/wealthfront-cash-account-review/

 

[njhowie]

Interesting, but scary. Reminds me of home mortgages without verifying employment. It just sounds too good to be true. This beats CD rates and that's concerning.

Plenty of online banks beating CD rates - all FDIC insured.

https://www.depositaccounts.com/savings/

 

[mistermike40]

Wealthfront is FDIC insured. I use it to keep $25K-$50K (from periodic 401k withdrawals) as a cash repository that pretty much keeps up with inflation.

I used to use Marcus by Goldman Sachs (also FDIC insured) but Wealthfront has a substantial 2.57% to 2.15% APY advantage.

 

[Rianne]

Plenty of online banks beating CD rates - all FDIC insured.

https://www.depositaccounts.com/savings/

OK, then why is Wealthfront special? And do the rates change over time or are they guaranteed?


Didn't see mistermike40 before I posted.

 

[njhowie]

OK, then why is Wealthfront special? And do the rates change over time or are they guaranteed?


Didn't see mistermike40 before I posted.

Who said that Wealthfront was special, aside from the 2.57% rate?

It's a savings account - just like all savings accounts the rates can change at any time. That is the difference between a CD and a savings account.

And if 2.57% concerns you, then definitely don't look at https://fitnessbank.fit which I mentioned in the earlier reply.

Or DCU https://www.dcu.org/personal-banking/savings-reg-shar.html - put $1000 there for 6.17% instead of a one year CD.

 

[Rianne]

Or DCU https://www.dcu.org/personal-banking/savings-reg-shar.html - put $1000 there for 6.17% instead of a one year CD.

"2 - A dividend rate of 6.00% will be paid on your daily balance up to $1,000.00. The Annual Percentage Yield (APY) for this tier will be 6.17%. A dividend rate of .25% will be paid on any daily balance over $1,000.00. The APY will then range from 6.17% to .25% depending on the total account balance. Requires a $5.00 minimum balance to open the account and earn the APY."


This is in fine print and I'm not sure if it means, if you go over $1000, it changes to .25% And why are you yelling at me?

 

[njhowie]

"2 - A dividend rate of 6.00% will be paid on your daily balance up to $1,000.00. The Annual Percentage Yield (APY) for this tier will be 6.17%. A dividend rate of .25% will be paid on any daily balance over $1,000.00. The APY will then range from 6.17% to .25% depending on the total account balance. Requires a $5.00 minimum balance to open the account and earn the APY."

This is in fine print and I'm not sure if it means, if you go over $1000, it changes to .25%

Yes, it's the first $1000 - as my post said to put $1000 there.

And why are you yelling at me?

Maybe you have the volume on your speakers or your headphones turned up too loudly?