Wealthfront vs. Acorns for Socially Responsible (ESG) Investing (Review)
Two top robo-advisors, Wealthfront and Acorns, now offer Sustainable or Socially Responsible Portfolios. We have reviewed over 30 robo-advisor portfolios, and we will help you compare Wealthfront and Acorns with sustainability in mind.
SustainFi October 12, 2021
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At a glance
- Both Acorns and Wealthfront offer good ESG options, so the winner depends on what type of investor you are
- Best for beginners: Acorns is easier to use for beginners and lets you save and invest your spare change
- Best for tax-loss harvesting: Wealthfront. Wealthfront can help you reduce your capital gains taxes and exclude certain stocks from your portfolio. (You must have at least $100,000 invested to take advantage of stock-level tax-loss harvesting)
Keep reading to learn more.
What is Wealthfront?
Wealthfront is a top robo-advisor with a focus on tax minimization strategies. The investment team is led by Dr. Burton Malkiel, a famous economist and the author of A Random Walk Down Wall Street, an investing best-seller. Wealthfront has over $21 billion in assets under management.
Wealthfront was late to the game in offering sustainable investments, but they finally rolled out a simple Socially Responsible Investing (SRI) Portfolio in September 2021. The funds in the SRI portfolio are screened for environmental, social, and governance (ESG) factors like greenhouse gas emissions, governance, and worker treatment.
Although ESG ratings and screens are not a perfect indicator of how “good” a stock is for the world, companies with better ESG scores are generally better for the environment and their workers.
The Palo Alto-based firm was founded in 2008 as Ka-Ching, a mutual fund analysis company, but has long since pivoted to robo-advisory. Today, Wealthfront appears to be pivoting again to allow for more self-directed trading.
As a robo-advisor, Wealthfront is best-known for tax-loss harvesting and customization options.
🔔 Check out the full Wealthfront review.
What is Acorns?
Acorns is a robo-advisor that lets you invest spare change from everyday purchases in diversified portfolios made up of exchange-traded funds (ETFs). The company was launched in 2014 by the father and son duo, Walter and Jeff Cruttenden, to make investing accessible to everyone. Acorns has since expanded to retirement and checking accounts.
The robo-advisor grew its assets under management from $3 billion in 2020 to $4.7 billion in 2021. It has over 9 million users.
Acorns is best known for having no minimum balances, letting you save spare change and being beginner-friendly.
Wealthfront vs. Acorns: Account Types
Both Acorns and Wealthfront support:
- Individual and joint taxable investment accounts
- Retirement accounts for traditional, SEP, and Roth IRAs, plus rollover IRAs
In addition, Acorns offers custodial accounts (Acorns Early), which let account-holders create UTMA/UGMA accounts for children. Acorns Early is only available if you sign up for the Family Plan.
In contrast, Wealthfront offers 529 college savings accounts and supports trusts. Wealthfront also offers 401(k)s, but it is up to your employer to decide if they want to use them.
💰 The winner: Tie. Both Acorns and Wealthfront offer enough account types to suit most investors. Acorns also has custodial UTMA/UGMA accounts, while Wealthfront offers trusts and 529 college savings accounts.
Wealthfront vs. Acorns: Banking
Both Acorns and Wealthfront can set you up with checking accounts.
Acorns offers checking accounts that come with a metal Visa debit card. The card offers free access to over 55,000 in-network ATMs. Your account is FDIC-insured for up to $250,000 and includes fraud protection, direct deposit and mobile check deposit options. Acorns Earn lets you earn bonus investments when you shop with over 350 brands like Apple, Chewy and Sephora.
Wealthfront also offers a checking account with a Visa debit card. You can set up direct deposits and deposit checks. Plus, you earn a 0.10% annual interest on your cash and get access to 19,000 free ATMs. Your account is FDIC-insured for up to $1 million through partner banks.
💰 The winner: Tie. Both Acorns and Wealthfront offer checking accounts with a debit card. Although Wealthfront pays a (low) APY, Acorns will give you access to almost three times as many ATMs and let you earn cash back from retail partners.
Wealthfront vs. Acorns: Minimum investment
Both Acorns and Wealthfront have low minimums compared to working with a human financial advisor, some of whom require $250,000 or more.
Although Acorns has no minimum, it will start investing your money when you have at least $5 in your account.
The minimum balance to get started with Wealthfront is $500. More sophisticated features, like stock-level tax-loss harvesting, need a $100,000 balance.
💰 The winner: Acorns. A $0 minimum beats the $500 minimum.
Wealthfront vs. Acorns: Management fees
Wealthfront and Acorns have different fee structures. Acorns charges a fixed fee per month, while Wealthfront charges an annual fee of 0.25% of the assets under management. Neither Acorns nor Wealthfront charges any account opening fees.
Acorns has two membership plans that cost $3 or $5 a month. As of September 2021, Acorns Lite ($1/month) is no longer offered. The two plans offered today are:
- Acorns Personal ($3/month), which includes personal investment, retirement, and checking accounts plus a metal debit card
- Acorns Family ($5/month), which includes all the Personal features plus Acorns Early, which offers investment accounts for kids
The fees are competitive for higher account balances. However, $3-$5/month may be expensive if you have very little invested. If you only have $1,000 in your account and sign up for Acorns Family, you are paying 6% each year. (You could argue that it’s still worth it because Acorns helps you save money you would have spent otherwise.)
💰 The winner: It depends. Because Acorns charges a flat monthly fee, it can be more expensive than Wealthfront for small account balances and cheaper for larger balances. For example, if you sign up for the Acorns Personal plan, it costs the same as Wealthfront if you invest $14,400. Acorns is cheaper if you invest over $14,400.
Wealthfront vs. Acorns: Fund expenses
When you invest through a robo-advisor, you also need to pay the fees of the funds in your portfolio. (They are deducted automatically.) The money goes to the fund manager, not to the robo-advisor company.
The funds in the Acorns ESG Portfolio cost from 0.05% to 0.25% annually (so that, if you have $10,000 invested you pay $5 to $25 to the fund managers each year.) The expense ratio of your combined portfolio will depend on the risk profile you select. For comparison, the Moderately Aggressive Portfolio, which is 80% in stocks and 20% in bonds, costs 0.16% annually.
The funds in the Wealthfront Socially Responsible Portfolio cost from 0.06% to 0.25%. The portfolio with the 8.0 Risk Score is comparable to Acorns’ Moderately Aggressive Portfolio (81% is in stocks and 19% is in bonds.) On a combined basis, that portfolio also costs 0.16%.
💰 The winner: Tie. The funds in Wealthfront and Acorns ESG portfolios cost roughly the same. They are also in line with other robo-advisors with ESG portfolios, like Betterment. Note that the overall cost will change if your risk profile changes, but the difference appears small. (Non-ESG portfolios also cost about the same for Acorns and Wealthfront.)
Wealthfront vs. Acorns: Socially Responsible (ESG) Portfolio
Catching on to the ESG investing trend, both Acorns and Wealthfront offer ESG or sustainable portfolios. Wealthfront calls it the Socially Responsible Investing (SRI) portfolio. Broadly speaking, ESG portfolios score better on environmental, social, and governance metrics like carbon emissions, worker treatment, diversity and governance.
🔔 Read our ESG investing guide to learn more.
The first notable difference is that the Acorns ESG Portfolios invest in more funds. Here are the funds Acorns chooses for its ESG Portfolios:
- Large-cap U.S. stocks: ESGU, SUSA
- Small-cap U.S. stocks: ESML
- International, developed markets stocks: ESGD
- Emerging markets stocks: ESGE
- Short-term corporate bonds: SUSB
- Long-term corporate bonds: SUSC
- Short-term Treasury bonds: SHY (not ESG)
- Long-term Treasury bonds: GOVT (not ESG)
- Long-term Treasury bonds: MBB (not ESG)
- U.S. aggregate bonds: EAGG
Some of the bond funds are non-ESG because there aren’t enough large funds for each type of asset.
Acorns ESG Portfolios are offered in partnership with iShares, the largest provider of low-cost, sustainable ETFs. ESG Portfolios are designed to perform in line with conventional, Core Portfolios.
The Wealthfront Socially Responsible Portfolio invests in fewer funds, though all the ESG funds are also included in ESG Portfolios from Acorns. Here are the funds:
- U.S. stocks: ESGU
- International, developed markets stocks: ESGD
- Emerging markets stocks: ESGE
- U.S. bonds: VTEB (not ESG)
Only stock investments are in ESG funds; the bond fund, VTEB, is a conventional option. With only four funds, the SRI portfolio is very straightforward. All SRI funds are from iShares.
According to Wealthfront, the performance of the funds in the Socially Responsible Portfolio should be similar to the funds in the non-ESG standard portfolio. They believe that based on looking at the data from the past three to five years. In addition, Socially Responsible Portfolios have been less volatile than standard portfolios.
Unlike Acorns, Wealthfront’s SRI Portfolio does not invest in small company stocks or ESG bonds. And Acorns will invest more of your money in ESG funds because they also include ESG bond funds. In contrast, Wealthfront picks a conventional, non-ESG bond fund.
Neither portfolio is fossil free, although both invest less in energy than non-ESG portfolios. ESG strategies try to perform close to the market as a whole while choosing better companies with lower emissions.
Acorns and Wealthfront Sustainable Portfolios Comparison (80% stocks, 20% bonds)
|Robo-Advisor||Expense Ratio||% of Assets in ESG Funds||% of Assets in Energy||MSCI ESG Score||Sustainalytics ESG Rating
|Wealthfront||0.16%||81%||5.7%||7.4 / 10||3.5 / 5|
|Acorns||0.16%||87%||5.6%||7.3 / 10||3.8 / 5|
Data as of 9/30/2021
We’ve compared Acorns and Wealthfront ESG portfolios that are roughly 80% in stocks and 20% in bonds. Although Acorns invested 87% of the portfolio in ESG funds and Wealthfront only 81%, the ratings from ESG rating agencies Sustainalytics and MSCI were comparable.
Wealthfront also lets you customize the portfolio by adding new funds. For example, you can add clean energy funds like ICLN. But most robo-advisor clients probably don’t want to design their own portfolios.
Wealthfront clients with over $100,000 in investment accounts can exclude stocks they don’t like from their portfolios. They can do that by putting stocks on the restriction list.
💰 The winner: Tie. Acorns will invest more of your money in ESG funds. But, when we compared the ESG scores between Acorns and Wealthfront, they were quite close. And if customization options are important to you, Wealthfront may be the better choice.
Wealthfront vs. Acorns: Automatic savings
Acorns lets you save more through automatic round-ups. When you buy something with your Acorns debit card or another linked card, Acorns rounds up your transaction to the nearest dollar and invests the change into your Invest account portfolio. According to Acorns, the average user invests over $30 a month through round-ups.
You can also set up recurring transfers starting with as little as $5 so that you don’t forget to invest.
💰 The winner: Acorns. Wealthfront doesn’t offer round-ups.
Wealthfront vs. Acorns: Tax-loss harvesting
Wealthfront offers stock-level tax-loss harvesting to customers with taxable account balances over $100,000. The robo-advisor will look for movements in individual stocks to harvest more tax losses and lower your tax bill. This is a way of minimizing your capital gains taxes.
You still benefit from tax-loss harvesting if you invest in the Socially Responsible Portfolio.
💰 The winner: Wealthfront. Acorns doesn’t offer tax-loss harvesting.
Wealthfront vs. Acorns: Human financial advisors
Neither Acorns nor Wealthfront offers human financial advisors, though both provide some educational resources.
Wealthfront vs. Acorns: Automatic rebalancing
Both Wealthfront and Acorns will automatically rebalance your portfolio. Automatic rebalancing means that the robo-advisors will buy or sell investments to get to your optimal asset allocation, like 80% stocks and 20% bonds.
Sometimes when one asset class, like stocks, does much better than another one, like bonds, your portfolio may “drift” and become riskier (or less risky) than it should be. Automatic rebalancing solves that.
💰 The winner: Tie. Nearly all robo-advisors now offer this feature.
💰 The Overall Winner
- It’s very close, so the winner depends on who you are.
- Best for beginners: Acorns Invest is a great option for beginners, especially those who are struggling to save
- Best for more advanced investors: Wealthfront is best if you want to customize your portfolio or lower your tax bill through stock-level tax-loss harvesting. (You must have $100,000 in taxable investment accounts to take advantage of that)
🔔 Want to compare more options? Read our guide to ESG robo-advisors.
We compared robo-advisors with an ESG offering based on management fees, ESG portfolio expense ratios, the percentage of the ESG portfolio invested in ESG funds vs. traditional funds, ESG portfolio ratings (from Sustainalytics and MSCI), portfolio exposure to energy, transparency, features like tax-loss harvesting and automatic rebalancing, and access to human advisors.