This case focuses on a financial technology firm, Wealthfront, which is based in Palo Alto, California. The Wealthfront is a fully automated, low-cost, online investment platform designed to target the millennial generation. This case study solution seeks to look into how scalable is the company's business model and on what should the company focus on.
​Luis M. Viceira and Allison M. Ciechanover
Harvard Business Review (216085-PDF-ENG)
June 20, 2016
Case questions answered:
- Is The Wealthfront Generation business model scalable to other market segments?
- What are the pros and cons of expanding via new channels?
- Is there a need for constant innovation? Are there enough problems to be solved?
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The Wealthfront Generation Case Answers
Introduction – The Wealthfront
The Wealthfront is a fully automated, low-cost online investment platform designed to target the millennial generation.
- Top 100 independent registered investment advisors, AUM $1.5 Bn
- Lack of sophisticated investing: High-quality advice came with a high minimum account size and expensive fees
Consumers
The traditional consumers in this industry are composed of the Baby Boomers. On the other hand, the consumers of the Wealthfront are the Millenials.
The former is composed of those 50+ in age with high earning capacity. They are the type of persons who equate quality with high cost. Examples of those in this industry targeting baby boomers are established brokerage houses.
The Millenial consumers are those in their 20s who are cynical about the sales-driven process of the traditional industry. Millennials were delegators and trusted software more than financial advisors.
The high minimum account requirements forced a sales-driven process, which is considered a gap.
Business Model of the Wealthfront
- Value proposition: Transparency at low cost, best practice investment tools leveraged by automation.
- FREEMIUM business Model: Wealthfront managed the first $25000 for free and offered an additional $5,000 for every newly referred client.
- Customer Friendly user interface: Simple, engaging, and offered an interface via desktop and mobile devices.
- Did not employ sales professionals or open retail stores. The company’s services were automated in the cloud.
Marketing Strategy
As to their marketing strategy, Wealthfront conducts Investment Seminars that are purely educational and directed to individuals wary of Wall Street. Investment influencers were used to build credibility. This also encouraged word-of-mouth marketing. The company used a viral system to acquire customers free of cost.
Its Social Media presence employs content marketing using high-quality blog posts containing actionable personal finance advice.
Overall, the company practices simple, transparent, and fair pricing.
WEALTHFRONT, FALL 2014
- Funded by prominent VC firms (DAG Ventures, Spark capital) and prominent Silicon Valley individual investors (at Google, FB, LinkedIn).
- Least employee turnover
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