We are pleased to announce that after weeks of internal testing we are ready to make the Wealthfront 529 College Savings Plan available to everyone. We are so excited about this new plan because we think 529s are the best type of account Congress has provided to parents who are saving to help pay for the college expenses of their loved ones. Why? Because they allow your investments to grow tax-free, so long as they are used for qualified higher education expenses, which include tuition, fees, books, computers and a variety of other expenses. Unfortunately, three out of every four Americans have never heard of a 529 and the plans are therefore being underutilized. A recent Sallie Mae study shows that more and more parents are saving for college, but are nowhere near prepared to meet their goals because they are saving solely through savings accounts earning less than 1% interest. The Wealthfront 529 College Savings Plan was created to help change this.
Higher Risk-Adjusted Returns, Net of Fees
We’ve taken all of the things Wealthfront is known for; the convenience, low cost and automation and applied them to the Wealthfront 529 College Savings Plan to bring a high-end investment solution to the market. Our goal is to be the only financial advisor our clients will ever need, and to do that we plan to offer personalized, relevant advice that will recommend how much to save and contribute each month for your college savings plan. Typically, to receive this kind of advice you’d pay a premium. Thanks to the power of software, we’re delivering it to you at low cost that even rivals plans you would have to manage on your own. The Wealthfront College Savings plan is differentiated along three dimensions:
- Personalized Portfolio. Until now 529 plans have typically offered investors one to three portfolio choices, through which your investment mix changes over time. These “glide paths” automatically adjust your portfolio to be less risky in the years closest to when you will have to withdraw funds for college. Wealthfront’s 529 uses 20 different glide paths, tailored to match both the beneficiary’s age, as well as the account owner’s financial situation and risk tolerance. Our glide paths transition asset allocations much more continuously, which again means you may be less likely to be hurt by market movements.
- More Asset Classes for Higher Returns. We invest your 529 account in a portfolio comprised of up to nine low cost, relatively uncorrelated index-based ETFs that is designed to optimize return for your particular risk tolerance. The typical 529 portfolio consists of only three to four asset classes, but Wealthfront’s 529 has increased diversification to improve your risk-adjusted return over the long term.
- Lowest Cost. Like all of our other services, we do not charge advisory fees on your first $10,000 investment and then charge you just 0.25% in advisory fees on amounts over that. Because our plan is sponsored by the great State of Nevada, Nevadan residents will receive the first $25,000 investment managed for free. It’s our way of saying thank you to a great partner. The “all in” cost ranges from 0.43 to 0.46%. These prices make the Wealthfront 529 the lowest cost plan you can find from an advisor. They’re even less expensive than a vast majority of plans you have to manage yourself!
Start Saving for College Today
It’s important to start saving through a 529 account as soon as possible so your investment can enjoy the power of compounding. That’s why we’ve made our account minimum just $500. We can’t wait for you to try our newest service, and invite you to open an account today. If you’re a new client, then visit our landing page and click invest now to get started. If you’re already a Wealthfront client just login to your account and click the “open new account” button and pick The Wealthfront 529 College Savings Plan.
For more information about the Wealthfront 529 College Savings Plan (the “Plan”), download the Plan Description and Participation Agreement (to be made available on Plan launch) or request one by emailing firstname.lastname@example.org or calling (650) 249-4250. Investment objectives, risks, charges, expenses, and other important information are included in the Plan Description and Participation Agreement; read and consider it carefully before investing. Wealthfront Brokerage Corporation serves as the distributor and the underwriter of the Plan.
Please Note: Before investing in any 529 plan, you should consider whether you or the beneficiary’s home state offers a 529 plan that provides its taxpayers with favorable state tax and other benefits that are only available through investment in the home state’s 529 plan. You also should consult your financial, tax, or other advisor to learn more about how state-based benefits (or any limitations) would apply to your specific circumstances. You also may wish to contact directly your home state’s 529 plan(s), or any other 529 plan, to learn more about those plans’ features, benefits and limitations. Keep in mind that state-based benefits should be one of many appropriately weighted factors to be considered when making an investment decision.
The Plan is administered by the Board of Trustees of the College Savings Plans of Nevada (the “Board”), chaired by the Nevada State Treasurer. Ascensus Broker Dealer Services, Inc. (“ABD”) serves as the Program Manager.
Earnings on nonqualified withdrawals are subject to federal income tax and may be subject to a 10 percent federal tax penalty, as well as state and local income taxes. The availability of tax and other benefits may be contingent on meeting other requirements.
Nothing in this article should be construed as tax advice, a solicitation or offer, or recommendation, to buy or sell any security. Financial advisory services are only provided to investors who become Wealthfront clients. This article is not intended as tax advice, and Wealthfront does not represent in any manner that the tax consequences described here will be obtained or that Wealthfront’s investment strategy will result in any particular tax consequence. Prospective investors should confer with their personal tax advisors regarding the tax consequences of investing with Wealthfront and engaging in a tax strategy, based on their particular circumstances. Actual investors on Wealthfront may experience different results from the results shown. Total fees incurred will include the underlying ETF expense ratio, program management fees, Wealthfront advisory fee and the board fee.
The calculation for the benefits of diversification is a hypothetical calculation that does not take into consideration the effect changing risk profiles, or future investment decisions. Several processes, assumptions and data sources were used to create one possible approximation of how a Wealthfront 529 plan with 9 assets classes might have benefited investors in the past, and a different methodology may have resulted in a different outcome. This simulation does not represent actual client accounts and may not reflect the effect of material economic and market factors. The results are hypothetical only. The results of this simulation should not be relied upon for predicting future performance and is not a guarantee of actual performance. A different methodology may have resulted in different outcomes. Actual investors on Wealthfront may experience different results from the results upon which we based our calculations. Hypothetical results are adjusted to reflect the reinvestment of dividends and other income and, except where otherwise indicated, are presented net of fees.