Wealthfront eyes crypto market as part of expansion beyond robo-advice

Robo-advisory company Wealthfront is planning to offer access to the cryptocurrency market to its user base of hundreds of thousands of Millennial and "Gen Z" investors.

The move, announced Wednesday, signals not only a shift away from Wealthfront's core robo-advisory business — which has long touted the benefits of set-it-and-forget-it passive index-based investing – to a more broad financial services business. It also signals the evolution of sentiment in favor of bitcoin and other crypto-assets taking place in finance circles.

Wealthfront said that the addition of crypto will come after the roll-out of a portfolio feature allowing users to invest in a wide range of vetted exchange-traded fund products as well as Environmental, Social, and Governance (ESG) investment vehicles. The move is notable, considering how chief executive Andy Rachliff has been a strong advocate for passive investing, contending in a conversation with The Block that the firm is "boring!"

"We do broad market ETFs, which the research shows is a much better way to invest," he added. "The research is very, very clear that people, even professionals over the long-term, are not good at outperforming the market. They actually way underperform the market. People like Robinhood serve do-it-yourself-ers who are trying to beat the odds that the research clearly shows are against them."

In a conversation with The Block, Wealthfront co-founder Dan Carroll said the incorporation of these new investment options, however, will provide investors a more responsible alternative to stock brokerage platforms. 

"We believe that Wealthfront can be the place where people invest responsibly alongside a diversified portfolio," he said. 

Of course, Wealthfront stands to benefit as well from the move. The firm said its customers have over $50 billion in assets linked to other brokerage and cryptocurrency exchange accounts. If the firm can capture a fraction of those flows it could see a bump in assets under management. 

"$50 billion in linked brokerage accounts and we can see what is in these locked brokerage accounts," Carroll said. "And we can see what those linked assets are."

Carroll went on to say:

"There is a huge opportunity that we’ve seen looking at the particular data. Our average client links six accounts to us. We know what they have and they know what they need. This can help inform what type of services that we can offer."

Indeed, the addition of cryptocurrency-related services has been a boon for other fintech companies. The most prominent example is Square, which began supporting bitcoin buys and sells in 2018. Last year it generated nearly $100 million in profit from selling bitcoin to its customers.

The firm reported that 1 million users bought bitcoin for the first time in January. Robinhood, which jumped into crypto in 2018, has seen its crypto business grow rapidly this year despite a number of platform-related problems. The mobile brokerage added six million new users to its crypto platform during the first two months of the year. 

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