'Robo-adviser' Wealthfront launches cash account
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[February 15, 2019]
By Anna Irrera
NEW YORK (Reuters) - Wealthfront, one of
the largest digital wealth management firms known as "robo-advisers",
said on Thursday it is expanding its suite of financial products by
introducing a cash account with a rate on deposits of 2.24 percent,
significantly higher than the average U.S. rate.
The accounts will be launched through partnerships with several banks,
including East West Bank and New York Community Bank, and will be
protected by the Federal Deposit Insurance Corporation (FDIC) for up to
$1 million, the company said.
Average rates at insured U.S. depository institutions, including
mainstream banks, are 0.06 percent for checking and 0.09 percent for
savings, according to the FDIC.
"Our clients hold almost $12 billion in cash and a lot of it is earning
next to nothing," Dan Carroll, Wealthfront's founder and chief strategy
officer, said in an interview. "We think they have an opportunity to get
more out of it."
Wealthfront clients will be able to open the account by depositing as
little as $1, the company said.
Financial technology companies have started to move beyond their initial
area of focus, and several are seeking to lure deposits through higher
interest rates than those offered by banks.
Student lender Social Finance last year launched a checking account with
a 2 percent interest rate, and British money transfer company
TransferWise introduced a low-cost multi-currency account.
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Dan Carroll, Founder and Chief Strategy Officer of Wealthfront,
speaks during an interview in New York, U.S., November 29, 2018.
Not all launches have gone smoothly, however. In December, trading startup
Robinhood suspended the launch of what it called a "checking and savings"
service offering 3 percent interest after reports that the deposits might not be
insured by the Securities Investor Protection Corp, which covers cash accounts
at brokerages, as originally marketed by the company.
Wealthfront, which has more than $11 billion in assets under management, is best
known for its robo-adviser function of automating the creation and management of
portfolios made up of low cost exchange-traded funds (ETFs).
The Silicon Valley start-up hopes to be able to automate the management of all
of its customers' finances and said that the launch of the cash account was a
step towards that goal.
(Reporting by Anna Irrera; Editing by Sonya Hepinstall)
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