Take that, Schwab: Wealthfront to expand free tax-loss harvesting

Mar 25, 2015 @ 1:29 pm

By Alessandra Malito

In yet another response to Charles Schwab & Co.'s retail robo-adviser, Wealthfront next month will begin offering free, daily tax-loss harvesting to accounts of all sizes.

Currently, tax-loss harvesting is free only for accounts with a minimum of $100,000 in assets. Similar robo-platforms, such as Schwab's Intelligent Portfolios and Betterment, offer the same service free to users with a minimum account balance of $50,000.

Wealthfront's tax-loss harvesting service was upgraded in October to include such features as predictive deposits and tax-sensitive withdrawals.

“From a mission standpoint, we always wanted to bring it to everyone,” said Adam Nash, Wealthfront's chief executive.

In announcing the change, Mr. Nash seized on the opportunity to take another swipe at one of his main competitors in the robo-adviser realm.

Schwab unveiled its retail robo-offering earlier this month. The company plans to take the wraps off an adviser version of the platform in the second quarter.

“I can't imagine they're going to be too happy about this,” Mr. Nash said. “Schwab has billions in revenues. Why in the world does it have a $50,000 limit?"

He added that he hoped his company's move would prompt people to ask, "Why don't all automated services offer this?”

Anita Fox, a spokeswoman for Schwab, said the company had no comment.

Schwab's retail robo-adviser is free for individual investors, and its adviser-facing robo-platform is 10 basis points for advisers who have less than $100,000 in assets under management. Betterment charges between 15 and 35 basis points annually, based on how much an investor has in an account.

Before Wealthfront's announcement, FutureAdvisor was the robo with the lowest AUM minimum for tax-loss harvesting, at $30,000. It charges clients 50 basis points annually to manage their accounts.

Chris Nicholson, head of communications for FutureAdvisor, said Wealthfront's announcement was a direct response to Schwab, but questioned how feasible the policy was.

"Our customers can reap better gains from tax-loss harvesting, because the more assets you have the more money you save," Mr. Nicholson said. "That's why it's always been a billionaire's game and is only now coming to middle class because the software takes care of the paperwork."

Wealthfront may be adding more strategies, but Mr. Nash said it was not looking at changing its fees.

"We are very confident that what milliennial investors are looking for is not just low cost but very simple and transparent, and we are skeptical of these gimmicky, gotcha-based pricing fee tables," he said. He mentioned a blog post he had written when Schwab announced its retail robo-adviser, claiming that the company had lost sight of its values and was deceiving clients. "It may be business as usual for the industry, but it's a business practice we're trying to change."


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