With the Wealthfront Portfolio Line of Credit the formula is simple, clients can take a line of credit of up to 30% of whatever is invested in their Wealthfront account at an interest of 3.25% to 4.5% depending on their account balance. Uses could include a down payment on a home or vehicle, for example.
To qualify, the client must have at least $100,000 with Wealthfront. According to Wealthfront, there is no pre-approval process either, all clients are automatically approved.
Wealthfront notes that the product is a margin product, for example when investors trade stocks with leverage or short shares, both of which require portfolio margin,
“Portfolio Line of Credit is a margin lending product offered exclusively to Wealthfront clients by Wealthfront Brokerage Corporation, Wealthfront’s brokerage subsidiary.”
On a high level, the product makes sense. I’ve never taken out a HELOC myself, but if it’s anything like a home mortgage, then it must be paperwork intensive. Shaving the application time down while saving a few extra percentage points and still having money invested and compounding in the stock market seems like an easy win/win. Note though, the interest payments on a HELOC are tax-deductible while Wealthfront’s interest payments are not.
For Wealthfront, success with Portfolio Line of Credit could mean more than just capturing additional revenue from current clients. To access the product you must be a client, which means Wealthfront is brewing a fresh angle of marketing, too.
Giving Credit Where Credit’s Due
April 19th, 2017