Wealthfront is expanding the functionality of an automated financial planning application it launched in February to help its millennial clients buy a home.
The digital platform's Path app will now combine a client's financial information with third-party projections on home prices and mortgage rates to estimate what type of mortgage an investor can expect to qualify for, when they can afford it, and what they need financially to get there. The estimation accounts for the client's entire balance sheet, accounting for expenses beyond a mortgage like closing costs, property taxes, maintenance and insurance.
The firm will automatically show investors how saving for a home will impact progress towards their other financial goals, and clients can use sliding scales to see how waiting to own a home affects savings.
The app will use a projection of the home's future value to show Wealthfront clients how home equity will affect retirement. Path also shows investors how saving for a home impacts their other goals, and clients can use sliding scales to see how different time horizons for buying a home impacts how much they need to save.
The goal is to let Wealthfront's users plan for all major life milestones with just a few taps on their phones, said Andy Rachleff, the firm's chief executive.
Wealthfront has "only scratched the surface of the kind of data we can apply to make financial planning easier," he said.
One example of how a digital advice company can take advantage of data is Wealthfront's integration with Redfin, a residential real estate company. The integration lets Wealthfront investors shop for homes in specific neighborhoods and shows them if they can afford it. Path also will track prices in that neighborhood over time and update clients on the affordability.
Data also is driving Wealthfront's own product roadmap.
The company looked at a study by Harvard University's Joint Center for Housing that found while 90% of millennials want to own a home, only a third of people under age 35 do, compared with 42% a decade ago. Another study found that most millennials have less than $1,000 saved for home buying.
Considering that 85% of Wealthfront's users are younger than 45, launching a financial planning feature for home ownership made sense, said Kate Wauck, Wealthfront head of communications.
Wealthfront recently secured $75 million in additional funding and has amassed about $10.5 billion in assets under management since 2011.