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Wealthfront Company Analysis
- 1. Wealthfro nt Presented by Daniyal Mistry
- 2. 2 Problem Wealthfront aims to automate the investing process to more efficiently manage portfolios, cut management costs and customer facing fees, and hand value back to the customers. Products High-InterestCash Account General Long-Term Investing Retirement Investing (IRA) College Investing (529) Portfolio Line of Credit
- 3. 3 • 25 • Wants to invest but doesn’t know where to start • Doesn’t want to pay a financial advisor to do it for them Rob Park Young Professional
- 4. 4
- 5. 5 0 10 20 30 40 50 60 70 80 Series A (2007) Angel Indiviual (2008) Series C (2009) Series D (2013) Series E (2014) Series F (2014) Series G (2018) $ in Millions Rounds of Funding
- 6. Business Model 6 Market Appreciation AUM should grow by approx. 6% annually – built in 6% increase in revenue Automation Saving money by automating the work of financial advisors 0.25% Advisory Fee On all assets under management Organic Growth Rely onWord Of Mouth Advertising - cut marketing costs
- 7. History 2008 – Andy Rachleff and Dan Carroll start kaChing 2011 – Pivot to Wealth Management, became Wealthfront 2012 – Started offering Tax Loss Harvesting 2014 – Adam Nash becomes CEO 2016 – Launched 529 Accounts & Andy Rachleff reclaims CEO role 2019 – Launched Cash Accounts 7
- 8. Secret Sauce Automation = lower fees 8
- 9. “The proof of this leverage is last year we were able to grow our assets under management by 100% and our revenue by 110% while only growing our headcount by 15%” - Andy Rachleff 9
- 10. What’s Hot 10 High Interest Cash Account National Average – 0.27% Wealthfront – 1.78% Tax Loss Harvesting Capture losses in investment to reduce your tax bill Portfolio Line of Credit Low interest (3.90% - 5.15%) loans to protect your savings without a credit check
- 11. 11 Wealthfront Betterment Acorns Advisory Fee 0.25% 0.25 - 0.40% $1-$3 a month Assets Under Management $20 Billion $21 Billion $1.2 billion Minimum Deposit $500 $1 $1 Cash Account Yes, 1.78% Yes, 1.83% Yes, no interest Cash Account Debit Card Coming Soon Coming Soon Yes Financial Advice Yes, free Yes, +0.15%; $149-$399 / call No Inexpensive Borrowing Yes No No Tax Loss Harvesting Yes Yes No
- 12. Prediction
- 13. Works Cited • https://finance.yahoo.com/news/what-investors-are-doing-wrong--malkiel-214250023.html • https://my-pitchbook-com.libproxy.bus.umich.edu/profile/52816-87/company/profile#general-info • https://www.wealthfront.com/ • https://www.businessinsider.com/wealthfront-review • https://support.wealthfront.com/hc/en-us/articles/360022591031-How-does-Wealthfront-make- money-on-the-cash-account- • https://www.investopedia.com/wealthfront-review-4587933 • https://www.linkedin.com/pulse/business-model-analysis-us-leading-robo-advisor-xavier-gomez/ • https://en.wikipedia.org/wiki/Wealthfront • https://www.depositaccounts.com/ratetable/savings/?mboxSession=6338d6005f144ff1b1e76077be9 13a4c&adobe_mc_sdid=SDID%3D10EA0188B51F662C- 4F45F443C320DBCD%7CMCORGID%3D2E96401053DB518E0A490D4C%40AdobeOrg%7CTS%3D1580334944 &adobe_mc_ref=https%3A%2F%2Fwww.google.com%2F • https://www.betterment.com/cash-management/
Editor's Notes
- https://www.freepik.com/free-vector/digital-marketing-landing-page_5467432.htm#page=1&query=marketing&position=8
- High-interest cash FDIC insurance up to $1 million through our partner banks. Unlimited transfers and no fees. Current APY: 1.78% General long-term investing All-purpose investment accounts for goals at least five years away. Retirement investing Tax-advantaged accounts for money you won’t need before your 60th birthday. Roth, SEP, Traditional College investing Tax-advantaged accounts to cover educational expenses. 529 account
- https://www.freepik.com/free-photos-vectors/business A significant portion of our revenue is derived from the 0.25% advisory fee we charge on assets under management. Another source of growth is market appreciation. Our assets under management should grow by approximately 6% annually on average due to market appreciation. I don’t know of many businesses that have a built in 6% increase in revenues that doesn’t require any marketing effort or expense. However, the downside of this cost-free growth is its high variance. In some years market appreciation can be much greater than 6% (for example 19% in 2017), and in other years it might be negative. When markets turn down, our growth rate temporarily declines, but the good news is it picks right back up when the markets recover. According to our research, the average market correction (peak to trough decrease of more than 10%) takes only 121 days from which to fully recover, so we typically expect to experience a dampening of growth for a short period of time. We also experience much lower withdrawals than the traditional investment industry during market declines because our clients tend to stay true to a passive investing strategy and keep investing despite the volatility. Unlike most consumer Internet startups, we rely almost exclusively on organic growth. Great companies are built through word of mouth, not by relying on advertising. Customer delight is the greatest form of virality, which is why we put all our efforts into building exceptional products. The secondary benefit of organic growth is it leads to much higher margins.
- https://www.freepik.com/free-vector/teamwork-characters-operator-crew-front-screen-presentations_4997765.htm#page=1&position=44
- https://www.freepik.com/free-vector/social-media-marketing-efficiency-promotion-report-mobile-phone-with-loudspeaker-data-graph_4102840.htm#page=5&position=4 The power of automation