Which Is Better For You?
Investments are a crucial part of anyone’s financial health, but they’re also one of the most complicated parts of the personal finance puzzle. Put aside the fact that many people don’t understand how things like the stock market even work; there’s an overwhelming amount of options when it comes to where you can start investing.
Analyzing all the brokerages, robo advisors and brokers out there can drive you a little nuts. And deciding which one is the right choice for you will come down to your investment plans. Make sure to spend some time thinking about your future and goals before you invest anywhere.
We’ve broken down the major (and minor) differences between Wealthfront, Vanguard and E*TRADE for you. If you’ve been considering investing with one of these players, you’ll find all the details you need below.
California-based robo advisor Wealthfront came onto the scene in 2008. Founders Andy Rachleff and Dan Carroll originally intended to create a mutual fund analysis company, but they soon wanted to move into wealth management. With a mission to “help democratize access to sophisticated financial advice,” the duo decided to make Wealthfront a wealth management and education platform for people who weren’t served by traditional investment firms.
When you sign up for Wealthfront, you complete a questionnaire and your answers are used to create your asset allocation needs.
Vanguard was founded in 1975 by John C. Bogle as a client-owned mutual fund company. Vanguard consistently has some of the lowest fees offered to investors, and Bogle is credited with being the first to make low-fee index funds available to individual investors.
Vanguard is based in Pennsylvania.
William A. Porter and Bernard A. Newcomb founded a company called TradePlus in California in 1982. E*TRADE was born out of TradePlus in 1991, with the goal of becoming an online trading platform for retail investors. E*TRADE claims the first online transaction ever sent to an exchange. Today E*TRADE provides online brokerage services as well as financial education.
How Are They the Same?
All three services offer many features. First, let’s take a look at how they’re similar.
Investment Account Types
All three offer taxable, joint, Roth IRA, Traditional IRA, Rollover IRA, SEP IRA, trust and nonprofit accounts.
All three services allow you to invest in exchange traded funds (ETFs).
All three services emphasize investing with an Android or Apple mobile device.
How Are They Different?
Here are some of the big differences among the three sites.
Wealthfront is a robo advisor, while E*TRADE and Vanguard are full-service discount investment brokers.
E*TRADE and Vanguard are primarily for self-directed investors, while Wealthfront is for passive investors.
Wealthfront offers predesigned portfolios. E*TRADE and Vanguard also offer managed investment options but allow you to invest in individual stocks, bonds, funds, options and other investments too.
Wealthfront charges an annual advisory fee. E*TRADE and Vanguard charge trading commissions, although each also charges an annual advisory fee on its robo advisor.
E*TRADE offers 24/7 customer service by live chat. Wealthfront and Vanguard offer limited daily phone center hours.
E*TRADE has 30 local branch offices, Vanguard has 18, and Wealthfront has none.
What’s in This Comparison?
Wealthfront offers cash accounts to its users. With an APY of 2.29%, these are accounts where you can stash some savings at a higher interest rate than most banks, and the money isn’t actively invested. Your money is protected up to $1 million, quadruple the FDIC insurance guarantee of $250,000.
While not a totally unique feature, it must be said that Vanguard’s commitment to low cost is written into the framework of the company. It’s what inspired John Bogle to found the company in the first place.
The company has no outside owners, which not only keeps costs low but is unique in the investment field. The company is owned only by its shareholders.
E*Trade Pro users (those with $250,000 in assets and who make at least 30 trades a month) have access to features such as E*TRADE’s Strategy Scanner, which provides real-time screening, sales data and backtesting of trading strategies.
Wealthfront requires a $500 minimum deposit for its low-fee index fund investment accounts.
E*TRADE requires a $500 minimum deposit like Wealthfront, except for when it comes to IRAs, which don’t have a minimum.
Of the three, Vanguard has the highest minimum investment required to get started. You need $1,000 to start investing in Vanguard Target Retirement Funds or Vanguard STAR® Fund. Most other Vanguard funds require a minimum of $3,000, depending on the share class.
Wealthfront charges an annual advisory fee of 0.25% on its investment accounts on all assets under management. Wealthfront doesn’t charge any fees for account opening, account closing, withdrawals or account transfers, nor any trading commissions.
Wealthfront also offers cash savings accounts, and there are no fees for those.
E*TRADE charges $6.95 per trade for its investment services. If you make more than 30 trades per quarter, that charge becomes $4.95.
Vanguard charges $20 annually per mutual fund you have with the broker and/or $20 per brokerage account. If your account is under $10,000, Vanguard says that it will review how much your annual fee is. You can eliminate mutual fund fees by signing up for electronic message services, aka “going paperless.” ETFs are always commission free, while trading individual stocks at Vanguard comes with a sliding scale. Vanguard also charges a flat $5 per month fee for participants in a 403b plan.
Winner — Vanguard wins for long-term investors. Its fees vary, but overall Vanguard chooses again and again a flat fee for most accounts, which means that as your assets grow, your fees do not.
Vanguard is beloved in the personal finance world for its low fees. That love is deserved. Over the lifetime of your investments, fees can eat away at your returns in huge amounts. Low fees may seem like a relatively benign thing to applaud, but it really matters when it comes to your money and should be considered a standout feature.
As for making personal finances and particularly investing accessible, both E*TRADE and Wealthfront have invested huge amounts of money and time into their education platforms. They both offer a wide array of blogs, videos and outlets that give users loads of information about investing. This is a very big deal since many people cite investing as an intimidating part of their financial experience.
Wealthfront has an abundance of information on how to use the website and services segmented into “Getting Started,” “My Wealthfront” and “Learning Center” in its online help center. On top of that, it offers videos from leaders in the industry that explain investing concepts. You can contact Wealthfront’s support team 24/7 by submitting a help ticket on the website. Users can call a help number Monday through Friday, 7 a.m. to 5 p.m. Pacific Time.
Vanguard has segmented its help center into the types of accounts you might need help with, as well as a list of answers to common questions. You can call Vanguard Monday through Friday from 8 a.m. to 10 p.m. Eastern Time or email at any hour. While Vanguard has limited hours when you can reach the customer service reps, once you do they are incredibly well informed and polite.
E*TRADE provides 24/7 customer service through email and a phone number. There’s also a chat box you can open to ask a question. The chat box comes with a reminder not to reveal personal information. E*TRADE also provides information on where to find one of its 30-plus locations around the country if you want to speak to someone in person about your issue.
Winner — E*TRADE wins for its 24/7 access to an actual person.
All of these investment services provide high-quality security. That’s mandatory when you start a financial firm.
Wealthfront has a lot of language around security on its site, none of it very specific. The platform says it uses third-party firms to test security, but it doesn’t tell you which ones. Wealthfront has an internal security system team that “monitor[s] numerous security sources,” but again there are no details provided on these activities. Wealthfront does stress in several places on the site that it will never sell any information you provide, and the platform undergoes an annual safety procedure audit by Ernst & Young. Assets are held by a third-party custodian, Apex Clearing, and Wealthfront has access to your money only to withdraw its fees.
E*TRADE works with a third-party app called VIP Access to generate a unique password each time you log in to the site. E*TRADE uses a 128-bit secure browser to log in to customer accounts and for all transactions performed. It also uses SSL to ensure that any data entered into the website is and stays encrypted. The site times you out after a certain amount of inactivity to prevent anyone else from viewing your information.
Vanguard does many of the same things that both Wealthfront and E*TRADE do: timeout features for the website, unique passwords to create an account, asking security questions to verify your login. Vanguard also sends an email and letter for every account transaction — if you don’t recognize an action on your account from these notifications, you can call the help line. Vanguard has an extended validation SSL, granted after an audit by security firm Comodo.
E*TRADE is the most upfront about its security features, which establishes to users that security is really a priority, not just something the site has to do for you. E*TRADE also encourages users to take their safety into their own hands and helps connect them to the tools to do so.’]
Who Are They Best For?
Wealthfront is a great way for new and young investors to get started with their investment accounts. The minimum deposit is low enough for even those who are lower income or working on an introductory salary to swing it. With its hands-off approach, Wealthfront is also an attractive option for people who don’t have the time or desire to manage their investments manually. Finally, Wealthfront does a lot to provide financial education for its users and the public at large. The Money Diaries series profiles famous people, how they use their money today and their financial backstories to help make money accessible.
Vanguard is a trusted investment name and comes with some of the lowest fees in the entire investing world. It’s best for those ready to build a complete investing portfolio and who can regularly contribute $500-plus per month to their investments. This monthly contribution rate probably applies to those in the middle and late stages of their careers.
E*TRADE is best for those who are frequent traders who want to be very hands-on with their investments and continuing their investment education. Its platform is also good for newer investors, with a $0 minimum deposit for IRA accounts. There are no annual fees for accounts, although the trading fee of $6.95 is higher than other brokerages.
Which Is the Best?
Investing is always going to be a very personal decision, and the tools you use will (and probably should!) change as you progress through your career and earning levels.
Robo advisors like Wealthfront are great for those in the early stages of their investing journey and who need to learn how comfortable they feel with investing.
E*TRADE offers valuable educational tools for those who feel ready to really dive into learning about and being involved in investing, so it makes for a good middle of your career.
Vanguard provides solid service in all categories but is fairly expensive to get started with for most accounts.