| NEW YORK, April 19
NEW YORK, April 19 Wealthfront Inc, the digital
financial advice company, will begin letting some customers
borrow against their investment accounts in its first foray into
The privately owned Redwood City, California-based firm,
which competes against traditional brokerages like Morgan
Stanley and Bank of America Corp's Merrill Lynch,
said on Wednesday that customers with at least $100,000 in their
investment accounts can borrow up to 30 percent of the balance.
The loans can be used for almost anything except buying more
investments on Wealthfront.
The entire loan application and approval process occurs
online without needing to speak to a representative, much like
Wealthfront's all-digital investment accounts.
Known in industry parlance as a "robo-adviser," Wealthfront
and its peers like Betterment have turned up competition and put
pressure on fees across the wealth management industry.
Until recently, robo-advisers largely avoided offering other
types of financial services. But, like other
financial-technology startups, they are beginning to diversify
in search of bigger profits. Wealthfront, for instance, has also
launched a college savings tools and by a service for investors
to sell stock options.
Securities-based lending, like what Wealthfront is now
offering, is popular among big brokerages as a relatively
low-risk way to improve margins. The loans generate interest
income and because firms hold the investments that are used as
collateral, there is more certainty about getting repaid.
Wealthfront said its loans will cost between 3.25 and 4.5
percent. Any money deposited into a Wealthfront account after a
customer takes out a loan will be used to pay off the balance
rather than making more investments, spokeswoman Kate Wauck
Wealthfront has about $6 billion in assets under management
for some 115,000 clients, most of whom are younger than 49.
(Reporting By Elizabeth Dilts; additional reporting by Anna
Irrera; Editing by Lauren Tara LaCapra and David Gregorio)