Wealthfront account closed

Last week I indicated that a couple of decisions needed to be made. I’ve made the first. I decided to close the Wealthfront test account. There were several reasons why this one was chosen.

First, Wealthfront and Betterment were the two most similar accounts, as demonstrated by the 0.97 correlation between the two in weekly moves.

Next, Betterment is aimed at smaller accounts. Because they use fractional shares, they can more easily reinvest dividends in an effort to re-balance in smaller accounts. Wealthfront would work better with larger accounts. The test accounts will always be on the smaller side.

Finally, I personally am not comfortable with Wealthfront. This began when I first started this blog and published my evaluation analysis. I was contacted by one of the founders of Wealthfront saying that my math was wildly wrong and offering to help fix it. This led to several interchanges. I spent a couple of days cleaning up my spreadsheets before sending them to him. He responded that he didn’t have time to look at them and sent me parts of his spreadsheets. These didn’t make sense to me and after a few more exchanges, the matter was dropped without resolution. The bottom line was that neither of us ended up with much respect for the work of the other.

Later when I opened the test accounts and indicated that I planned to track them, I received the following tweet from someone else at Wealthfront. “Pls keep in mind short term evaluation of long term investment account is not a good idea. Better to evaluate us on what we claim.” I agree with the first sentence, but not the second.

I think Wealthfront is likely a good company and I’d have no problem recommending them to someone. They’re just not at the top on my list.

About an hour before close on last Friday, I went to their web site and liquidated my holdings. I received an Email asking me to confirm my intentions. The trades are scheduled to settle today, and it will take a few more days to transfer the funds back to my bank. I’ll update you with my weekend update. Follow me on Twitter @billlanke to know when this update is posted.

Test Accounts Week 15

The S&P 500 Index was up 1.8% for the week In the 15 weeks there have been 8 up weeks and 7 down. But overall the index is up 3.6% for the period. Only the Folio Test account did better than the S&P for the week, finishing up 1.9%. Betterment and Schwab were up 1.0% and Wealthfront was up 0.8%. Meanwhile Lending Club gained 0.3% for the 5^th week in a row.

For the 15 weeks, all the robo-advisers have outperformed the S&P 500 Index. Betterment and Schwab are up 4.2% while Wealthfront is up 3.7%. Folio is still suffering from the annual trading fee of $290. It is only up 3.0%. Without that charge, Folio would be up 5.9%. Over time, the impact of that charge will diminish.

Lending Club is up 2.9% for the period. If the market tanks Lending Club will move to the top.

In my mid-week post, I indicated that it was time to decide on the future of these test accounts. I’ve taken the first step and will update you with the next post. Follow me on Twitter @billlanke and I’ll let you know when that occurs.

 

W/E	S&P 500	BTRMNT	WLTFRNT	FOLIO	LND CLB	SCHWAB
16-Jan	-1.2%	0.0%	0.4%	-0.2%	0.0%	-0.2%
23-Jan	1.6%	1.1%	0.7%	2.0%	0.0%	1.0%
30-Jan	-2.8%	-1.5%	-0.9%	-2.0%	0.0%	-1.3%
6-Feb	3.0%	1.0%	1.0%	0.9%	0.0%	1.3%
14-Feb	2.0%	1.0%	0.8%	1.8%	0.0%	1.2%
21-Feb	0.6%	0.6%	0.4%	0.5%	0.0%	0.4%
28-Feb	-0.3%	0.2%	0.2%	0.3%	0.7%	0.0%
6-Mar	-1.6%	-1.6%	-1.8%	-0.9%	0.3%	-2.1%
13-Mar	-0.9%	-0.1%	-0.3%	-0.6%	0.2%	-0.7%
20-Mar	2.7%	2.1%	2.0%	0.6%	0.2%	1.0%
27-Mar	-2.2%	-1.0%	-1.1%	-2.3%	0.3%	0.5%
3-Apr	0.3%	0.6%	0.6%	0.0%	0.3%	0.8%
10-Apr	1.7%	1.2%	1.0%	2.5%	0.3%	1.3%
17-Apr	-1.0%	-0.3%	-0.2%	-1.5%	0.3%	-0.3%
24-Apr	1.8%	1.0%	0.8%	1.9%	0.3%	1.0%

Decision Time Is Approaching

It’s time to make some decisions. The 4 test accounts (Lending Club is a permanent IRA) are cash accounts. They were created to hold some extra cash and to learn something. The extra cash was withdrawn from an IRA at the end of 2014 for a project in 2015.

The project involved the sale of one house and the building of another. The sale closes in less than a month and will result in generating some cash to be held until needed for the new construction project. This requires deciding where to hold the cash. While I’m at it, I’d like to start reducing the number of test accounts.

So I decided to start the decision process by looking at the percentage weekly gains for the accounts and the S&P 500 Index. I did a correlation between these accounts and their weekly changes. Following are the results.

 

	S&P 500	BTRMNT	WLTFRNT	FOLIO	SCHWAB
S&P 500	1.00
BTRMNT	0.92	1.00
WLTFRNT	0.87	0.97	1.00
FOLIO	0.85	0.80	0.74	1.00
SCHWAB	0.79	0.85	0.82	0.68	1.00

While these numbers will play a role in making the two decisions, they won’t be major factors. I think more significance will be placed on what I think their future roll will be in my investment plans, and their operational issues.

I need to make these decisions in the next few weeks. Follow me on Twitter @billlanke and I’ll let you know when I make more posts.