Wealthfront's growth being surpassed by its competition may have led the robo-adviser to cut chief executive Adam Nash from daily management of the company, outside fintech experts said.
The digital advice platform announced Monday that venture capitalist and founder Andy Rachleff was reclaiming the top title at the company, while Mr. Nash would remain a member of Wealthfront's board of directors.
Mr. Rachleff, who wasn't available for comment Tuesday,
said in a company blog Monday that he “wants to spend more time” leading Wealthfront and will continue to strive toward making the company “the only financial adviser our clients will ever need.” Wealthfront made Mr. Nash the CEO in 2014.
The digital advice platform is facing strong competition from a mix of companies with big financial brands, including Vanguard Group, Charles Schwab,
Fidelity Investments and Blackrock. On Tuesday, TD Ameritrade announced its
new low-cost, direct-to-consumer robo-adviser, Essential Portfolios.
Wealthfront also is
slipping further behind its original robo-rival Betterment, which has branched out to serve non-retail clients, such as financial advisers. Wealthfront has said it only plans to provide digital financial advice to investors.
Wealthfront spokeswoman Kate Wauck confirmed the company's commitment to that plan Tuesday.
"Our strategy to build a standalone direct-to-consumer business has not and will not change," she said.
Betterment surpassed Wealthfront in AUM about a year ago. Today Wealthfront manages about $4 billion for 90,000 investors, while Betterment has nearly $6 billion in AUM and 188,000 clients. Both, though, pale in comparison to Vanguard Group's robo with $40 billion in AUM and Schwab's at $10 billion.
“This change means that the Wealthfront board has lost faith in Nash's ability to execute his plans to become the market leader,” said Craig Iskowitz, founder of Ezra Group, a technology consulting firm in the financial advice industry.
Wealthfront has fallen behind Betterment in terms of introducing new features to improve their platform, he said.
“The combination of Vanguard and
Charles Schwab has already sucked the lion's share of AUM in the self-directed/automated-investing space,” Mr. Iskowitz said. “Now it's a race to see who gets to pick through the scraps.”
Ms. Wauck said Mr. Rachleff's blog described the only reason he's resuming the CEO role.
“He wants to be at the forefront of the opportunity and lead us through our next chapter,” she wrote in an email. “He's too excited about the business to pull himself out of the day to day.”
The spokeswoman said the robo-adviser is on track to double its clients for the year and the firm's monthly net deposits are growing "at an accelerated pace."
Mr. Nash's only public reaction has been on Twitter.
"It's been an incredible journey and I am excited for where the company will go,"
he tweeted Monday.
Financial technology expert Bill Winterberg said the change at the top could be a result of any of these factors: the firm's slowing growth, increased competition or its delays in platform updates.
“The company was pressured by its investors to do something and make whatever changes were necessary,” he said.
Tim Welsh, president and founder of Nexus Strategy, said Wealthfront's failure to expand its technology for new clients, like Betterment has done with advisers and the 401(k) market, is adding to its troubles.
“Wealthfront is clearly heading south,” Mr. Welsh said. “Wealthfront's corporate mission to stay on course solely at their one target market will ultimately be its downfall.”
Some conjectured that Wealthfront may be headed for a sale.
“If you're reliant on venture capital money that isn't going to continue pouring in when you can't find a profitable way to seize the market, the next best option is to sell the company for its strategic value to another player,” said Aaron Klein, chief executive at
Riskalyze, a fintech firm that includes a digital advice platform for advisers to use with clients.
(Updates to correct earlier version of story to note Schwab's AUM at $10 billion, not $8 billion.)
