Robo-adviser Wealthfront has proudly vaunted its recent crossing of the $1 billion mark in assets under management, but it remains to be seen whether the startup will achieve its goal of becoming a Charles Schwab-like investment firm for Millennials.
Wealthfront chief executive Adam Nash says $1 billion in just two and a half years marks a gratifying milestone that showcases the startup's innovative focus on automated, low-cost and index-based investing. Indeed, he openly compares Wealthfront's innovative business model to The Charles Schwab Corp., and says it will do for Millennials what the discount brokerage did for baby boomers in the 1970s — namely, bring low-cost investing to a huge audience.
“If you look at history, every generation in the U.S. tends to look at investing differently than their parents' generation. What Charles Schwab found was that the only people who wanted to invest over the phone was people in their 20s and 30s,” Mr. Nash said.
He added that Charles Schwab himself told Wealthfront co-founder Andy Rachleff in 2012 that he saw parallels between what his firm had done and what the startup is now doing.
Schwab spokeswoman Susan B. Forman wrote in an e-mail that she didn't have any comments on Wealthfront's business model.
But robo-naysayers believe Wealthfront is no Schwab.
Schwab had a unique, once-in-history opportunity when it launched the discount brokerage in 1975, after commissions were deregulated, said Michael Kitces, a partner and director of research at Pinnacle Advisory Group Inc. and author of the Nerd's Eye View blog.
“Wealthfront hasn't had any significant regulatory events that created a blue ocean that never existed before,” Mr. Kitces said.
And according to Alex Murgu�a, managing principal at McLean Asset Management Corp. and chief executive of financial planning software firm inStream Solutions, if Wealthfront's future resembles anything Schwab-like, it will more likely be th