Wealthfront's Record-Breaking Growth

Wealthfront, a leader in digital wealth management and automated investing, announced on Thursday that it now manages more than $50 billion in assets. The firm also predicts a growth in revenue by over 140% this year.

A Post-UBS Era of Profitability

This announcement comes a year after the termination of a proposed $1.4 billion acquisition of Wealthfront by Swiss bank UBS. The deal was reportedly called off due to shareholder disapproval over the terms of the agreement. Since then, the automated investment provider has achieved profitability, according to CEO David Fortunato.

The company’s primary focus is on organic growth and long-term business operation, with a current client base of over 700,000. At present, Wealthfront is not considering acquisitions or an Initial Public Offering (IPO).

Innovation Attracts More Clients

The firm has seen a surge in new clients this year, which is attributed to the introduction of new products. These include automated bond portfolios designed to cater to each customer’s tax situation, aimed at providing higher yields than traditional savings accounts.

“We’re pretty excited about fixed income,” Fortunato stated, expressing his enthusiasm for the new offering.

Wealthfront also revealed that its EBITDA margins are now above 40%, a key indicator of profitability.

A Pioneer in Automated Investing

Founded in 2008 by Andy Rachleff and Dan Carroll, Wealthfront launched its automated investing services in 2011. The firm is known for its innovative use of automation to offer low-cost investment portfolios to Americans. It also incorporates elements of artificial intelligence in its financial planning software.

Regulation and AI in Investment Advice

The U.S. Securities and Exchange Commission (SEC) recently proposed a rule to regulate how AI is employed in providing investment advice. Wealthfront, along with brokers, investment advisors, and hedge funds, has urged the SEC to retract this proposal, labeling it as overly broad.

Fortunato emphasized that Wealthfront’s models are not akin to generative AI services offered by tech giants like Google and OpenAI, which are currently under regulatory scrutiny. Instead, they are based on academically tested investment advice.

“We’re trying to take the best investment advice that we can through academic research and make that available at low cost to as many clients as we possibly can,” Fortunato concluded.