Palo Alto’s Wealthfront startup faced a setback when UBS scrapped a $1.4 billion acquisition deal, leaving the company and its venture capital investors in a tough spot. However, CEO David Fortunato focused on offering high-yield cash accounts, which proved to be a successful strategy. By 2023, Wealthfront’s revenue had more than doubled, reaching nearly $200 million, and the company recorded its first full year of profitability. The success continued in the first quarter of the following year, with revenue up 79% from the previous year and assets totaling $64 billion.
Wealthfront has a history of reinventing itself to stay competitive in the fintech industry. Originally founded as KaChing in 2008, the company pivoted to robo-advising in 2011, offering managed investment portfolios at a rock-bottom fee of 0.25% of assets. This low-cost, automation-only model has been a key factor in Wealthfront’s success, attracting a more affluent user base compared to other fintech companies. The company has also differentiated itself by offering automated tax-loss harvesting and direct indexing services for accounts over $100,000.
Despite facing challenges in the competitive robo-advisor space, Wealthfront has continued to innovate and grow. The company launched its high-yield cash accounts in 2019, offering market-leading interest rates and attracting new customers. Wealthfront’s focus on keeping expenses low while increasing revenue has led to profitability, with the company spending just $6 million on marketing in the previous year. As interest rates eventually fall, Wealthfront plans to focus more on its investing accounts to maintain profitability.
Wealthfront’s success has led to continued growth and expansion, with the company introducing new products and features to attract more users. In addition to its automated bond ladder service and bond portfolio, Wealthfront offers convenient features like same-day transfers to 400 banks and zero-commission purchases of individual stocks. The company has also expanded its appeal to more active investors with exposure to cryptocurrency through funds like BlackRock’s iShares Bitcoin Trust and Grayscale’s Ethereum Trust.
Looking ahead, Wealthfront may explore new opportunities such as becoming a lender, according to board member Mike Volpi. The company’s focus on innovation and continuous improvement, coupled with its emphasis on low-cost, automated services, has positioned it for long-term success in the competitive fintech industry. Despite the setback with the scrapped UBS acquisition, Wealthfront remains optimistic about its future and the potential for an IPO in the coming years.
