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  • Writer's pictureNathan Zarcaro

Acorns vs. Wealthfront: Which is Better for Student Loan Borrowers?

Updated: Dec 20, 2023


Over the past decade, the financial services industry has trended towards robo-advising models as a way to manage clients' investments. These models, which oftentimes are controlled by proprietary algorithms, handle asset allocation, diversification, and the other principles of investing.


All of this can be good news for millennial investors, many of whom are eager to bolster their investment portfolio without having to lift a finger.


Two of the most popular companies in this space are Acorns and Wealthfront.


In this article, I'll settle the Acorns vs. Wealthfront debate and tell you which company is best for those with student loan debt.






Investing min

​$5

​$500

Better for:

​Beginners

​Those with more assets

Overall rating:

​4/5 stars

​4.5/5 stars


What are Acorns and Wealthfront?


Acorns and Wealthfront are two investment services firms that cater to clients looking to invest within a robo-advisor model. Both offer automated investment services based on your preferences, and these services will take into consideration your risk tolerance, time horizon, and target asset allocation.


Both companies have established themselves as an alternative to the traditional financial advisor/client relationship.



What is robo-advising?


Robo-advising is a contemporary approach to investing in which your portfolio is managed without much human intervention. Financial advice and investment decisions are typically made by a computer or algorithm based on a number of inputs that you'll provide.


These models are highly technical by nature, and don't require human intervention to buy, sell, or rebalance funds or positions within your portfolio.




Robo-advisor benefits


The benefits to robo-advising are plentiful.


First, the information you provide regarding your time horizon, risk tolerance, and other specifications will be used to automatically create a portfolio that works for you.


Secondly, robo models also tend to be cheaper than hiring an investment advisor.


Finally, they oftentimes (but not always) invest in exchange-traded funds (ETFs for short), which oftentimes carry lower transaction and management fees than actively managed mutual funds, for example.



Acorns vs. Wealthfront: A comparison


To decide whether Acorns or Wealthfront is a better option for you to invest with, I will compare these two platforms based on a number of characteristics. Among them are:


  1. Minimum amounts to start investing

  2. Fees assessed

  3. Investment options available

  4. Special features

  5. Account types supported



1. Account minimums


Acorns customers can get started investing with as little as $5, which I think is a huge win. Plus, you don't even need any money to open your account. With Wealthfront, you'll need a minimum of $500 to start an investment account.


This brings us to what will be a common theme. Though both companies have embraced the robo-advising model, Acorns and Wealthfront do cater to different niches within the investing community.


Regardless, the $5 minimum is a win and an advantage for Acorns.



2. Fees assessed


The second metric by which I will compare Acorns and Wealthfront is their ongoing monthly fees. Now, there are numerous ways in which investment companies can structure fees. So to assure that I am making a fair comparison, I will look at a number of different fees, including:


  • Monthly account fees

  • Asset management fees

  • Investment fees

  • Other fees





Account Fees

​$3/$5 per month

​None

Asset Fees

​None

​0.25% advisory fee

Transaction Fees

​None

​None

Other Fees

​Fund expense ratios

​Fund expense ratios


Monthly account fees


Acorns assesses a $3 monthly fee on brokerage accounts, IRAs, and other account types, and a $5 fee on family plans with investment accounts for children. Wealthfront, on the other hand, does not assess any fees just to maintain your account.



Asset management fees


Acorns does not charge any asset management or advisory fees for investing through the platform, which is a huge win.


Meanwhile, Wealthfront goes with the more traditional model, charging clients a 0.25% annual advisory fee. To contextualize this fee, somebody with $10,000 in assets with Wealthfront will pay $2.12 per month, actually making Wealthfront cheaper than Acorns. Those with more assets, however, will end up paying more.


Even more so than Acorn's $3 per month account fee, this advisory fee is where Acorns and Wealthfront are most different.



Transaction fees


With their respective fee models, neither Acorns nor Wealthfront charge any transaction fees each time the robo-advisor buys, sells, or transfers any securities. And while this is the way the entire industry has trended over the past couple of years, it is nonetheless nice to see.



Other fees


As far as other fees go, they are very limited! In fact, the only other expense that you'll incur with either company are the expense ratios on any of the mutual funds or ETFs that you're invested in.


 

Whether Acorns or Wealthfront offers more value for you in terms of fees probably depends on the amount of assets you're looking to invest. If you only have a few dollars to invest, the Acorns fee could eat away at your investment returns, but if you have a $5,000-$10,000 to invest, this shouldn't be a huge problem, though you'll still feel it.


For this reason, I will give the edge to Wealthfront.



3. Investment options


Both Acorns and Wealthfront offer a number of different investment options.


Acorns offers a series of nearly 25 ETFs that their algorithm will use to create your portfolio, while Wealthfront offers a much more robust lineup of ETFs, depending on what type of account you open.


Of course, different investment options are better suited for different types of investors. Personally, I don't believe in evaluating the number of funds in a company's lineup, since too many options can lead to confusion and overdiversification.



4. Other features


When comparing these two companies, it is important to evaluate any special features, since they could present an advantage to working with either Acorns or Wealthfront, respectively.



Tax strategies


Wealthfront offers an awesome tax loss harvesting feature, which can really make a difference in helping you save come tax time. In fact, the company advertises that this feature's tax savings is enough to offset the 0.25% annual advisory fee for 96% of its classic portfolio clients.


Acorns has no such program.



Customer service


When it comes to my money, I only deal with companies that provide a good customer service experience and have favorable reviews. So, I decided to do some research for this piece. Here is what I found.


According to Consumer Affairs, Acorns scores a very respectable 3.5/5 stars, with most client qualms seemingly about accounts being locked for large transfers in an attempt to avoid fraud. And while I would be annoyed as well, I am willing to look past this in the light of account security.


Wealthfront, on the other hand, scores a more solid 4/5 stars, with customers seemingly more satisfied with their service.


 

As far as special features go, I am giving the edge to Wealthfront.



5. Account types supported


Both Acorns and Wealthfront allow you to open different types of accounts, depending on your investing goals. Let's start with Acorns, which offers:


  • Individual brokerage accounts

  • Roth IRAs

  • Traditional IRAs

  • SEP IRAs

  • UTMAs

  • UGMAs


This means that clients looking to save/invest for themselves, their retirement, and their children all have options available to them.


Wealthfront offers a number of options as well, but since this review is intended to compare their robo-advising services, I will exclude their high-yield cash account options.


This considered, your account options with Wealthfront are:


  • Individual brokerage accounts

  • Joint accounts

  • Trusts

  • Roth IRAs

  • Traditional IRAs

  • SEP IRAs


As far as this review goes, I'm calling the account options a draw, as both companies offer plentiful options meant to support a number of different financial goals and investing priorities.




Acorns or Wealthfront for student loan borrowers?


With all of this information in mind, I believe Wealthfront to be the better option for those with outstanding student loan debt. Here is why.


Acorns' fee model of just $3 per month is simple to understand and track, but it can really eat away at returns for some investors.


Furthermore, Wealthfront's bells and whistles offer great value, and even if they provide services that you don't need at this point in time, they are nice to be included with the low 0.25% annual fee. Plus, you may be ready to use some of these extra tools in the next couple of years anyway,


Part of the draw to Acorns is the simplicity of the experience for those that are new to investing. The ability to link a payment method to roundup your purchases, as well as invest in more traditional ways, make Acorns seemingly the perfect introduction to investing for millennials and Gen Z members nationwide.


And while I would not hesitate to use Acorns now or in the future, those aiming for a more sophisticated experience will likely embrace the Wealthfront experience.



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About Nathan Zarcaro

Nathan Zarcaro is the founder of The Student Debt Destroyer and is passionate about personal finance related causes.  A 2018 graduate of Providence College's Liberal Arts Honors Program, Nathan studied Finance, and has worked for industry leaders in both finance and healthcare.  In his free time, Nathan enjoys playing golf and traveling with his wife Brigid.

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