The first quarter was particularly volatile for Wealthfront, which started off the year with a controversy surrounding the launch of a new proprietary risk/parity fund.
“Some in the investment community are pointing out that by offering a proprietary
mutual fund, Wealthfront is introducing the common conflict of interest of selling one’s own products,” said the report.
The controversy may have led a down round of $75 million in fund-raising. As a result, Wealthfront saw a decrease in valuation, $500 million, down from $700 million in 2014. But the report’s authors also figure that the robo-advisory space is becoming saturated. “As the market has become more competitive and many early adopters have already likely signed onto a robo, new customer acquisition is likely becoming more difficult.”
Wealthfront also eliminated a promotion in which it managed the first $10,000 of users’ assets at no charge.
More robo-advisors have looked toward investments overseas to create more attractive returns for their users.
In the first quarter of 2018, Backend Benchmarking began tracking three socially responsible investing portfolios from Betterment, Morgan Stanley and TIAA with plans to add additional providers in upcoming quarters, starting with WealthSimple and Hedgeable in the second quarter of 2018.
“The addition of impact portfolios and hybrid advice was a strong trend we saw in 2017,” wrote the authors of the report, noting that Ellevest also added a gender lens robo-advised portfolio to its offerings near the end of the year.