I think the issue is "are you dependent on the integrity of Wealthfront's IT and accounting practices that
--keep records that link your name to your money, and
--provide you with an access mechanism by which you can get your money out?"
That sounds like the answer is "yes." You are dependent on Wealthfront, the bank holding your money doesn't know your name and doesn't know whose money is whose.Wealthfront Brokerage has established omnibus Deposit Accounts at each of the Participating Banks on behalf of all of its customers who participate in the Cash Sweep Program, and it will maintain records of your beneficial interest in each Deposit Account at each Participating Bank. Wealthfront Brokerage will sweep your Cash Balance into Deposit Accounts at Participating Banks, which will become eligible for FDIC insurance and is referred to as your “Program Deposit.” You will only have access to your Cash Balance through your Cash Account. You cannot make deposits or withdrawals directly from the Deposit Account at Participating Banks, even if you contact the Participating Bank.
The nightmare scenario is that a failing Wealthfront suddenly collapses, the website goes dark without warning, you no longer can click a button and move money from your Wealthfront account... anywhere, and there is no clear path by which you can get your money out of the bank that is really holding it. "You will only have access to your Cash Balance through your [Wealthfront] Cash Account," says Wealthfront.
The double nightmare is that a failing Wealthfront for whatever reasons starts taking shortcuts--maybe as gross as accepting your money now, in good faith intending to put it in a bank. And since really mean to, they little-white-lie show you online that it's happened, but they don't get around to it. Your money is not actually lost, but it's no longer clear whose money is really where, and it takes a long time to straighten out.