Wealthfront now offers 2.51% APY

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nisiprius
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Re: Wealthfront now offers 2.51% APY

Post by nisiprius » Mon Jul 15, 2019 6:25 am

I don't think the issue is the short gap during which your money is in limbo, nor do I think it is a "lose-all-your-money" issue.

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?"
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.
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.

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.
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Re: Wealthfront now offers 2.51% APY

Post by indexfundfan » Mon Jul 15, 2019 6:52 am

boglenomics wrote:
Sun Jul 14, 2019 8:13 pm
SlowMovingInvestor wrote:
Sun Jul 14, 2019 7:59 pm
From their description:

Until the sweep occurs, your Cash Balance will remain uninvested Free Credit Balances in your Cash Account. Because Wealthfront Brokerage is a member of the Securities Investor Protection Corporation (“SIPC”), our customers are protected up to applicable SIPC limits if Wealthfront Brokerage were to go out of business and there were customer securities or funds unaccounted for.

So there is SIPC protection if the funds aren't deposited with a bank, IIRC.

Does ACH out of Wealthfront take more time than with a regular bank account ?
In their disclosure they claim "within 1 to 3 business day" it will get to the FDIC institution.
My friend has an account. He told me the money starts earning interest on the same day it leaves the external bank.

This means that if you submit a pull request on day T, the money leaves the external bank on T+1 and is also credited at Wealthfront on T+1. So I think the risk of no FDIC insurance is on day T+1.
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Re: Wealthfront now offers 2.51% APY

Post by boglenomics » Mon Jul 15, 2019 7:50 am

HEDGEFUNDIE wrote:
Sun Jul 14, 2019 8:44 pm
boglenomics wrote:
Sun Jul 14, 2019 8:37 pm
SIPC is not a government organization where the FDIC is backed and operated by the federal government. Considering the FDIC is government backed I consider it less risky than SIPC. Also it's SIPC, not what you just said. That is something very different.
SIPC was founded by an act of Congress, so to call it “not a government organization” is a bit rich.

Both the FDIC and the SIPC are funded by member firm dues. Both also have lines of credit with the Treasury as a backstop.

So what exactly is the distinction?

To be perfectly clear on what we are arguing about, it is the case where:

1. Somehow Wealthfront fails.

2. Somehow that happens at the moment that a portion of your cash has yet to be moved to a FDIC bank.

3. Somehow Wealthfront is unable to account for that portion of your cash, or a creditor makes a senior claim on it.

4. Somehow the SIPC is unable to pay out on your claim.

How much yield are you willing to give up to insure against 1, 2, 3 and 4 occurring simultaneously?

Apparently you are willing to pay the equivalent of a 10% expense ratio.
To be clear my concern is not necessarily losing my money but the recovery of funds taking an extended period of time to sort out.

I do not keep enough cash on hand to have it be worth my time chasing 20 or so basis points. So yes, in this case I am willing to pay a 10% expense ratio as a premium for holding directly with an FDIC institution or the Treasury. I highly doubt they will be able to sustain their rates beyond the industry average for long anyway.

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Re: Wealthfront now offers 2.51% APY

Post by njinvestor2019 » Mon Jul 15, 2019 8:05 am

Wealth front has really annoying policies in place. For example if I transfer from Bank A to wealthfront they do not allow me to transfer to Bank B. Thy will override my transfer and send it back to Bank A. You lose control of your hard earned money.

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Re: Wealthfront now offers 2.51% APY

Post by SlowMovingInvestor » Mon Jul 15, 2019 8:09 am

njinvestor2019 wrote:
Mon Jul 15, 2019 8:05 am
Wealth front has really annoying policies in place. For example if I transfer from Bank A to wealthfront they do not allow me to transfer to Bank B. Thy will override my transfer and send it back to Bank A. You lose control of your hard earned money.
Sorry, I don't understand this. You're saying they wouldn't allow you to ACH out to any other bank you're linked to ? Is this just for a waiting period until they actually get the money from bank A ?

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Re: Wealthfront now offers 2.51% APY

Post by njinvestor2019 » Mon Jul 15, 2019 8:13 am

They keep track of the total it seems like of how much you transfered from each bank and allow up to that amount transferred back. I emailed them and they said there's nothing I can provide to override this. This is even after the 7 day holding period.


"we have internal anti money laundering regulations that we have to comply with, which may mean that we may not be able to send the funds to a different bank account or we may have to verify the transaction with you further before sending funds.

Generally speaking, the best way to withdrawal funds would be to withdrawal funds back to the bank account where the funds originated from, but there isn't anything that you would typically provide us. We would suggest that you keep an eye on your email once you submit a transfer request. If we need to verify any information, email is how we would communicate with you.

Best,
iori
Wealthfront Client Services
support@wealthfront.com
For answers to common questions, visit https://support.wealthfront.com"
Last edited by njinvestor2019 on Mon Jul 15, 2019 8:18 am, edited 1 time in total.

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Re: Wealthfront now offers 2.51% APY

Post by njinvestor2019 » Mon Jul 15, 2019 8:16 am

In Marcus you start earning interest immediately in wealthfront it seems to be the next business day.

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Re: Wealthfront now offers 2.51% APY

Post by jeffyscott » Mon Jul 15, 2019 8:56 am

boglenomics wrote:
Mon Jul 15, 2019 7:50 am
HEDGEFUNDIE wrote:
Sun Jul 14, 2019 8:44 pm
Apparently you are willing to pay the equivalent of a 10% expense ratio.
To be clear my concern is not necessarily losing my money but the recovery of funds taking an extended period of time to sort out.

I do not keep enough cash on hand to have it be worth my time chasing 20 or so basis points. So yes, in this case I am willing to pay a 10% expense ratio as a premium for holding directly with an FDIC institution or the Treasury. I highly doubt they will be able to sustain their rates beyond the industry average for long anyway.
Earning 0.27% less is not equivalent to a 10% expense ratio, it is equivalent to a 0.27% expense ratio. Also to determine the effective cost, you should be looking at the difference in after tax yield, not the difference in TEY.

I have more taxable cash than normal right now, in anticipation of a vehicle purchase. In Vanguard settlement fund, the net after tax yield (assuming 70% gov't interest) is 1.96% for me. Were it in a fully taxable savings account at 2.57%, I would be earning 2.07% after tax. Net cost of not moving it is about 11 bp.
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Re: Wealthfront now offers 2.51% APY

Post by LegendaryRed » Tue Jul 16, 2019 3:16 am

IMO the concerns over Wealthfront integrity and FDIC insurance are very overblown. In the case that somehow Wealthfront shut down or experienced significant banking issues, I would expect a far faster, more convenient, and higher-tech transition than a medium sized local credit union or a scandal-ridden random bank going down. For sure a non-profitable fintech company is less likely to be around in 30 years than Bank of America, but in terms of "place a bet on whether you get your Wealthfront cash back within 5 business days if Wealthfront goes out of business", many poster here seem to be betting lower than I'd expect. For reasons of only running sweep accounts, they are unlikely to actually "fail" in the same sense of a bank.

They are quite reliable on the support front, and there are tons of very high profile investors and names involved with all their reputations. And I say this as someone who voluntarily left Wealthfront (and felt "burned" slightly) over long-term sketchiness concerns over their utility, Risk Parity, and fees. There is concern over being able to get money out in times of technical issues, but they seem more competent than even your average brokerage website on that front, Silicon Valley pedigree and all.

The biggest risk here to most investors is that they they use the 0.1-0.3% APY advantage as a "gateway drug" to the much higher profit center Wealthfront managed investment accounts with Risk Parity fund (and Direct Indexing), and you suddenly find yourself investing in a product you may not like and may not understand well, and have to keep paying 0.25% annual management fees forever. Good marketing, though.
Last edited by LegendaryRed on Fri Jul 19, 2019 9:57 pm, edited 1 time in total.

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Re: Wealthfront now offers 2.51% APY

Post by jeffyscott » Tue Jul 16, 2019 9:03 am

LegendaryRed wrote:
Tue Jul 16, 2019 3:16 am
The biggest risk here to most investors is that they they use the 0.1-0.3% APY advantage as a "gateway drug" to the much higher profit center Wealthfront managed investment accounts with Risk Parity fund (and Direct Indexing), and you suddenly find yourself investing in a product you may not like and may not understand well, and have to keep paying 0.25% annual management fees forever. Good marketing, though.
I'd not be at risk of slipping into that and would not really worry about the FDIC thing, but since the higher rate on cash is the only part of Wealthfront that I would have any interest in (AFIK), it is not worth the trouble of adding another account in order to end up with 0.1% or so higher yield than my current options for cash. And if I did want to go to the trouble of adding another account, there are a handful of banks paying about the same, so I'd probably just go directly to one of them.
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Re: Wealthfront now offers 2.51% APY

Post by harvoolio » Mon Jul 29, 2019 11:22 am

I had a very negative experience with Weatlhfront, specifically about what njinvestor2019 above alluded to in that Wealthfront not only restricts the withdrawing of funds into a different account than the one used to initially fund the account (FDIC-members do not have this restriction, but also neither discloses it or provides a way to remedy this as their competitors do. Personal Capital, Stockpile, Titanvest and Robinhood at least all publicly disclose this policy on their websites as well as provide the type of additional identity verification requirements (government photo, bank statements, etc.) to then initiate these transfers. But Wealthfront does not disclose either their policies or remedies, and just abrogates these withdrawals while ambiguously referring to anti-money laundering laws without specifying a time limit that these withdrawals will be frozen or additional verification means for lifting these restrictions.

The problem with restricting these types of withdrawals is that people normally have two separate high-yield savings and checking accounts because of the limit in monthly transactions for savings accounts and disparity in interest rates between the two accounts. Wealthfront’s withdrawal refusal jeopardized my short-term liquidity needs (bills, mortgages, contractor payments, etc.) – public disclosure and remedies would have at least enabled me to conform to the rules (although this is still a restriction compared to FDIC-members).

I had opened a high-yield account at Weatlhfront only for them to refuse a withdrawal 17 days after deposit into my account, (2) send the money to a different bank without my permission and (3) subsequently terminate my account after I attempted to provide additional verification (U.S. Passport, State Driver’s License, bank statements, etc. that adhere to FINRA’S Special NASD Notice to Members 02-21 “Anti-Money Laundering NASD Provides Guidance To Member Firms Concerning Anti-Money Laundering Compliance Programs Required By Federal Law” and the publicly disclosed policies of their competitors (given that Wealthfront refused to explicitly state either their policy or remedies).

Addressing nisiprius’ concern, Wealthfront might not even have these direct banking relationships, but actually be a reseller of a reseller, “Total Bank Solutions”, per this article.

Finally, given Wealthfront’s spotted record at failing to disclose and for falsely disclosing, I am happy my money is now at an FDIC-insured and -member institution with only .12% less APR that ACH’s funds out and received by my other bank in one day. I would lose more than that APR being forced to keep enough liquidity in my normal checking account for 60-days or more.

Does anybody know the specific FINRA or SEC regulation most of these roboadvisors are adhering to in the similar publicly-disclosed policies of Personal Capital, Stockpile, Titanvest and Robinhood above?

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Re: Wealthfront now offers 2.51% APY

Post by walletless » Mon Jul 29, 2019 12:51 pm

harvoolio wrote:
Mon Jul 29, 2019 11:22 am
Does anybody know the specific FINRA or SEC regulation most of these roboadvisors are adhering to in the similar publicly-disclosed policies of Personal Capital, Stockpile, Titanvest and Robinhood above?
Plainly going by experience here since I am not familiar with any FINRA rules: WF allows withdrawal to a different bank ~1 month after the bank is added. Until then, they will only allow withdrawals into accounts that deposited the said money. Atleast that is what seems to have happened with me.

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Re: Wealthfront now offers 2.51% APY

Post by schismal » Mon Jul 29, 2019 1:00 pm

Didn't seem like this warranted a new thread, but Betterment has a promotional rate of 2.69% on their new savings account (good through 2019). You have to join the waitlist for their checking account, otherwise you get the standard 2.43% rate. Seems mechanically very similar to Wealthfront's offering.

https://www.betterment.com/resources/be ... ryday-faq/

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Re: Wealthfront now offers 2.51% APY

Post by H-Town » Mon Jul 29, 2019 1:15 pm

harvoolio wrote:
Mon Jul 29, 2019 11:22 am
I had a very negative experience with Weatlhfront, specifically about what njinvestor2019 above alluded to in that Wealthfront not only restricts the withdrawing of funds into a different account than the one used to initially fund the account (FDIC-members do not have this restriction, but also neither discloses it or provides a way to remedy this as their competitors do. Personal Capital, Stockpile, Titanvest and Robinhood at least all publicly disclose this policy on their websites as well as provide the type of additional identity verification requirements (government photo, bank statements, etc.) to then initiate these transfers. But Wealthfront does not disclose either their policies or remedies, and just abrogates these withdrawals while ambiguously referring to anti-money laundering laws without specifying a time limit that these withdrawals will be frozen or additional verification means for lifting these restrictions.

The problem with restricting these types of withdrawals is that people normally have two separate high-yield savings and checking accounts because of the limit in monthly transactions for savings accounts and disparity in interest rates between the two accounts. Wealthfront’s withdrawal refusal jeopardized my short-term liquidity needs (bills, mortgages, contractor payments, etc.) – public disclosure and remedies would have at least enabled me to conform to the rules (although this is still a restriction compared to FDIC-members).

I had opened a high-yield account at Weatlhfront only for them to refuse a withdrawal 17 days after deposit into my account, (2) send the money to a different bank without my permission and (3) subsequently terminate my account after I attempted to provide additional verification (U.S. Passport, State Driver’s License, bank statements, etc. that adhere to FINRA’S Special NASD Notice to Members 02-21 “Anti-Money Laundering NASD Provides Guidance To Member Firms Concerning Anti-Money Laundering Compliance Programs Required By Federal Law” and the publicly disclosed policies of their competitors (given that Wealthfront refused to explicitly state either their policy or remedies).

Addressing nisiprius’ concern, Wealthfront might not even have these direct banking relationships, but actually be a reseller of a reseller, “Total Bank Solutions”, per this article.

Finally, given Wealthfront’s spotted record at failing to disclose and for falsely disclosing, I am happy my money is now at an FDIC-insured and -member institution with only .12% less APR that ACH’s funds out and received by my other bank in one day. I would lose more than that APR being forced to keep enough liquidity in my normal checking account for 60-days or more.

Does anybody know the specific FINRA or SEC regulation most of these roboadvisors are adhering to in the similar publicly-disclosed policies of Personal Capital, Stockpile, Titanvest and Robinhood above?
I have a different perspective. I’m glad that WF put such restriction. Withdrawal goes back to the original account. It’s simple and secured. But I can see that you ran into inconvenience because you didn’t know about this upfront.

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Re: Wealthfront now offers 2.51% APY

Post by lukestuckenhymer » Mon Jul 29, 2019 1:30 pm

Vanguard also has similar restrictions about moving money in and out of their MM funds. Try to move money from your checking account to VMMXX, then the next day try to move it to another bank account. They won't let you. You can only move it back to where it came from.

I'd worry more about giving my money to a precarious tech startup.

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Re: Wealthfront now offers 2.51% APY

Post by anon_investor » Mon Jul 29, 2019 1:53 pm

Wealthfront's current 2.57% APY is sure beginning to look real attractive compared to Ally's current 2.10% APY/no penalty CD at 2.30% APY. With the shrinking yield of VMFXX (currently ~2.27%), even with the reduced state tax hit, Wealthfront still comes out ahead. However, with questions about, how quickly money can be moved around, the long term viability of Wealthfront and whether the high interest rate will stand up, it is still a pass for me especially since I'd rather not take any unnecessary risks with my emergency fund (Ally's combo of HYS, no penalty CD and checking granting instant access to funds is pretty unbeatable).

I am starting to accumulate some cash for a shorter term goal though, so if competitor's interest rates continue to fall and Wealthfront remains at 2.57% APY, based on no real negative experiences I am seeing posted on BH, I may have to reevaluate my position... although if I can find an actual online bank (vs. a fin tech start up) I feel more comfortable with with only slightly lower yield I'd likely do that...

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Re: Wealthfront now offers 2.51% APY

Post by harvoolio » Mon Jul 29, 2019 6:44 pm

I am a little confused as to why you would be glad that your money is restricted from being withdrawn into another one of your banking accounts in the first place. At best, you would be neutral, because you do not have the need to withdraw into multiple accounts, and hence this limitation is immaterial to you. If your concern is about someone hacking your account, you are protected from that liability.

Another one of my issues with Wealthfront is the lack of transparency about the limitation and no way to remedy it (by providing additional authenticity measures that conform to FINRA regulations and guidelines and is offered by Wealthfront competitors).

But granted, my money is now at a bank with a slightly lower APR at 2.45% instead of 2.57%; however, the ease with which to transfer money along with the other concerns is worth the difference to me. List of banks with high APY's.

My two cents.

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Re: Wealthfront now offers 2.51% APY

Post by hagridshut » Tue Jul 30, 2019 8:43 am

How long will these relatively high rates last, especially if the Federal Reserve sets a lower target rate this week?

If someone moved cash from Citibank at 2.36% APY to Wealthfront at 2.51% APY, the gain would be 0.0015, or $15 per year for each $10,000 on deposit. I can see that moving cash makes sense from a brick & mortar bank paying 0.10% APY, but if one is already parked at above 2%, the trouble hardly seems worth it.

I used to churn savings accounts and chase yields, but dealing with many accounts, opening new ones, and closing old ones, got annoying. I ended up winding down most of my accounts and keeping only a few based on ease of use. All Vanguard brokerage accounts use VMFXX as the default built-in sweep, which is currently at a 2.25% compound yield. Any cash outside my emergency funds gets parked in the sweep account now. It is convenient and I can just forget about chasing rates.
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Re: Wealthfront now offers 2.51% APY

Post by Ricchan » Fri Aug 02, 2019 10:30 am

Wealthfront reduced their rate to 2.32%

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Re: Wealthfront now offers 2.51% APY

Post by schismal » Fri Aug 02, 2019 10:49 am

hagridshut wrote:
Tue Jul 30, 2019 8:43 am
How long will these relatively high rates last, especially if the Federal Reserve sets a lower target rate this week?
Evidently, 3 days.

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Re: Wealthfront now offers 2.51% APY

Post by nisiprius » Fri Aug 02, 2019 10:53 am

LegendaryRed wrote:
Tue Jul 16, 2019 3:16 am
...I would expect a far faster, more convenient, and higher-tech transition than a medium sized local credit union or a scandal-ridden random bank going down...
Why would you expect that?

I personally experienced a medium sized local credit union going down. At that time we had the bulk of the family's cash savings in it, and fairly important money to us.

It was a non-event.

If I hadn't noticed the change in the sign over the door... over one weekend... and the change in the logo on the printed statements, which kept the same CD account numbers, rates, and maturity, I would not have known anything had happened. (This was before ATM machines; the FDIC and other federal deposit insurers typically manage the failure over a weekend, and I don't know if the ATM machines typically experience an outage).

A colleague of mine experienced a failure in a savings-and-loan bank. Same story. A complete non-event for depositors.

See if you can find me a news story about a failure of any Federally-insured credit union or bank, in which the depositors experienced anything you'd call a serious problem in their accounts.
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Re: Wealthfront now offers 2.51% APY

Post by jeffyscott » Fri Aug 02, 2019 10:58 am

Ricchan wrote:
Fri Aug 02, 2019 10:30 am
Wealthfront reduced their rate to 2.32%
Thanks for posting the update. This shows that it's not worth going to too much trouble to chase the current highest rate, since it may not last long. For many the Vanguard Treasury or Federal Money Market may be about as good or better than that 2.32%, after considering state income taxes.
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Re: Wealthfront now offers 2.51% APY

Post by junior » Fri Aug 02, 2019 11:19 am

Be aware your money is not FDIC insured at Wealthfront until it goes into their partner banks, it says it right on their web site:

FDIC insurance is not provided until the funds arrive at the program banks.

What that means in practice, I don't know. I'd stick with a real bank.

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Re: Wealthfront now offers 2.51% APY

Post by columbia » Fri Aug 02, 2019 12:00 pm

junior wrote:
Fri Aug 02, 2019 11:19 am
Be aware your money is not FDIC insured at Wealthfront until it goes into their partner banks, it says it right on their web site:

FDIC insurance is not provided until the funds arrive at the program banks.

What that means in practice, I don't know. I'd stick with a real bank.

I assume that means if someone swipes your money while it’s in a sweep account (before electronically hitting the back), then you are quite out luck.

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Re: Wealthfront now offers 2.51% APY

Post by StillLearning1977 » Fri Aug 02, 2019 1:10 pm

walletless wrote:
Mon Jul 29, 2019 12:51 pm
harvoolio wrote:
Mon Jul 29, 2019 11:22 am
Does anybody know the specific FINRA or SEC regulation most of these roboadvisors are adhering to in the similar publicly-disclosed policies of Personal Capital, Stockpile, Titanvest and Robinhood above?
Plainly going by experience here since I am not familiar with any FINRA rules: WF allows withdrawal to a different bank ~1 month after the bank is added. Until then, they will only allow withdrawals into accounts that deposited the said money. Atleast that is what seems to have happened with me.
This is same with Vanguard.

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Re: Wealthfront now offers 2.51% APY

Post by hagridshut » Fri Aug 02, 2019 5:42 pm

schismal wrote:
Fri Aug 02, 2019 10:49 am
hagridshut wrote:
Tue Jul 30, 2019 8:43 am
How long will these relatively high rates last, especially if the Federal Reserve sets a lower target rate this week?
Evidently, 3 days.
:o
jeffyscott wrote:
Fri Aug 02, 2019 10:58 am
Ricchan wrote:
Fri Aug 02, 2019 10:30 am
Wealthfront reduced their rate to 2.32%
Thanks for posting the update. This shows that it's not worth going to too much trouble to chase the current highest rate, since it may not last long. For many the Vanguard Treasury or Federal Money Market may be about as good or better than that 2.32%, after considering state income taxes.
That's been my thinking recently. Way back around 2006, I remember online banks kept jumping each other with higher and higher rates, which I kept chasing. Nowadays I keep things simple: Emergency Fund in FDIC accounts for total safety and in-person instant availability at ATM or bank branch, all other cash in Vanguard sweep account.
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Re: Wealthfront now offers 2.51% APY

Post by indexfundfan » Fri Aug 02, 2019 6:31 pm

It is possible that with the fintech savings accounts, you don't have to shop and chase yield continuously. The fintechs will source the program banks that provide the highest yields.

Wealthfront's new 2.32% is still in the top tier. The yields of Vanguard's MMFs will move down similarly within the next few weeks.
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Re: Wealthfront now offers 2.51% APY

Post by sarabayo » Sat Aug 03, 2019 3:24 am

indexfundfan wrote:
Fri Aug 02, 2019 6:31 pm
Wealthfront's new 2.32% is still in the top tier. The yields of Vanguard's MMFs will move down similarly within the next few weeks.
VMMXX, the somewhat comparable Vanguard MMF, is currently at 2.24%, so it's already lower, though I imagine that for many people the tax-advantaged Vanguard MMFs are still better than Wealthfront in tax-equivalent terms.

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Re: Wealthfront now offers 2.51% APY

Post by lukestuckenhymer » Fri Sep 20, 2019 12:17 pm

Email from Wealthfront today:
Because of the Fed’s decision to decrease interest rates, the interest rate on your Wealthfront Cash Account is changing from 2.32% APY to 2.07% APY beginning today.
Crashed back down to earth, as expected. VMMXX is at 2.06%.

anon_investor
Posts: 592
Joined: Mon Jun 03, 2019 1:43 pm

Re: Wealthfront now offers 2.51% APY

Post by anon_investor » Fri Sep 20, 2019 2:42 pm

lukestuckenhymer wrote:
Fri Sep 20, 2019 12:17 pm
Email from Wealthfront today:
Because of the Fed’s decision to decrease interest rates, the interest rate on your Wealthfront Cash Account is changing from 2.32% APY to 2.07% APY beginning today.
Crashed back down to earth, as expected. VMMXX is at 2.06%.
Even VMFXX (Vanguard Federal Money Market Fund, the default Vanguard sweep account) is at 2.04% and that has partial state income tax exemption for folks with state income tax (like me), which results in an after-tax yield that beats Wealthfront. I guess that's the risk you take with rate chasing...

krafty81
Posts: 241
Joined: Thu Jul 05, 2018 2:01 pm
Location: San Diego, CA

Re: Wealthfront now offers 2.51% APY

Post by krafty81 » Fri Sep 20, 2019 7:12 pm

Yes Wealthfront just became a lot more "common". Wondering if the high original rate was just a way to drive money into their accounts to build assets for the brokerage offerings.

Leemiller
Posts: 1257
Joined: Sat Jun 01, 2013 12:42 pm

Re: Wealthfront now offers 2.51% APY

Post by Leemiller » Fri Sep 20, 2019 7:46 pm

drk wrote:
Sun Jul 14, 2019 7:16 pm
boglenomics wrote:
Sun Jul 14, 2019 7:02 pm
Hypothetically speaking what if Wealthfront were to go out of business? The program banks are probably not aware of who the money belongs to besides "Wealthfront Inc.". This means it would be up to the SIPC to figure out who owns the money and make sure it gets back to them. The program banks have no liquidity issues and the funds still exist so there is nothing to trigger the FDIC to get involved.

Maybe I am missing something but that is how I understand their setup.
Yes, you are missing that that is not how it works. The funds are held in FDIC-insured accounts in the actual customer's name. This is why it's important to know which banks they partner with: your FDIC insurance only extends to $250k per individual per institution, so you need to manage that limit. This isn't a novel set-up. Fidelity does the same thing with its FDIC-insured sweep accounts.
No, the account is not in each customer’s actual name. You are also mistaken with respect to how FDIC insurance works which is also based on how you hold the account, for example joint accounts vs individual.
Last edited by Leemiller on Fri Sep 20, 2019 7:49 pm, edited 1 time in total.

Leemiller
Posts: 1257
Joined: Sat Jun 01, 2013 12:42 pm

Re: Wealthfront now offers 2.51% APY

Post by Leemiller » Fri Sep 20, 2019 7:49 pm

nisiprius wrote:
Fri Aug 02, 2019 10:53 am
LegendaryRed wrote:
Tue Jul 16, 2019 3:16 am
...I would expect a far faster, more convenient, and higher-tech transition than a medium sized local credit union or a scandal-ridden random bank going down...
Why would you expect that?

I personally experienced a medium sized local credit union going down. At that time we had the bulk of the family's cash savings in it, and fairly important money to us.

It was a non-event.

If I hadn't noticed the change in the sign over the door... over one weekend... and the change in the logo on the printed statements, which kept the same CD account numbers, rates, and maturity, I would not have known anything had happened. (This was before ATM machines; the FDIC and other federal deposit insurers typically manage the failure over a weekend, and I don't know if the ATM machines typically experience an outage).

A colleague of mine experienced a failure in a savings-and-loan bank. Same story. A complete non-event for depositors.

See if you can find me a news story about a failure of any Federally-insured credit union or bank, in which the depositors experienced anything you'd call a serious problem in their accounts.
Agree 100%

Leemiller
Posts: 1257
Joined: Sat Jun 01, 2013 12:42 pm

Re: Wealthfront now offers 2.51% APY

Post by Leemiller » Fri Sep 20, 2019 7:56 pm

For this type of account you are completely depending on Wealthfront’s system of allocating funds between banks, which they do in-house, unlike most of the rest of the market. At least skim through the disclosures before you move your money.

mpsz
Posts: 375
Joined: Sat Jan 09, 2016 7:11 pm

Re: Wealthfront now offers 2.51% APY

Post by mpsz » Sun Oct 27, 2019 7:02 pm

I'm one of the folks who jumped on this when it was new...

Has anyone else noticed that every month, your funds have been moved to a different partner bank? In August my funds moved from CrossFirst to Wells Fargo, in September they moved from Wells Fargo to TriState. Am I overreacting by being a bit nervous about this? I totally understand how a sweep account like this works, as I also use Fidelity CMA, but I am a bit surprised at the frequency that funds are being moved. Are there days where the funds are not FDIC insured because they are being moved around behind the scenes?

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