How does the Wealthfront Cash Account keep my funds safe?

How is the Wealthfront Cash Account regulated?

The Cash Account is offered through Wealthfront Brokerage LLC, which is a broker-dealer, not a bank, and is regulated and overseen by the SEC and FINRA. All broker-dealers, including Wealthfront Brokerage, are required to protect customer funds and to retain and preserve records—including ledgers—rigorously. This enables regulators to have access to them in the unlikely scenario of a trustee needing to step in to distribute funds on behalf of Wealthfront. 

As a regulated broker-dealer, Wealthfront Brokerage undergoes regular examinations by regulators and annual audits by a Big Four audit firm each year so that our internal controls are reasonably designed and effective in practice for the purposes of protecting client funds and meeting our regulators’ requirements. 

Additionally, as a broker-dealer we are required to segregate customer assets from firm assets and to maintain a cash reserve account for clients under the Customer Protection Rule (SEC 15c3-3) so that customers have continued access to their funds. These controls are maintained, monitored (internally), and tested (externally) as described above. 

Are my Wealthfront Cash Account funds covered by SIPC or FDIC insurance?

Funds received for deposit in clients’ Cash Accounts are protected initially by SIPC up to $250,000 (plus any excess insurance we have purchased) and, once swept to program banks, by FDIC insurance. Subject to FDIC rules, pass-through FDIC insurance is provided up to $250,000 for all client assets held in the same capacity at each individual program bank. By placing no more than $250,000 at up to 32 program banks, clients can access to up to $8 million of federal deposit insurance across those 32 banks (i.e., $250,000 times 32) for individual and trust accounts and up to $16 million of federal deposit insurance for joint accounts (i.e., $500,000 times 32).

Does Wealthfront use a third party to sweep Cash Account deposits to program banks?

Wealthfront uses R&T Deposit Solutions as our cash sweep administrator. R&T Deposit Solutions acts solely as the administrator helping us to determine the allocation of client funds between program banks. R&T Deposit Solutions does not hold or process customer funds. Unlike some fintechs who outsource the ledger and reconciliation process to a partner, Wealthfront Brokerage keeps its own client books and records and owns the reconciliation process to each of the program banks that hold client money. We do not outsource the reconciliation process to other businesses or individuals. We perform regular reconciliations of balances held at each FDIC insured Program Bank against both our books and records and R&T's books and records. We also maintain records of our reconciliation process as evidence of compliance with the Customer Protection Rule (15c3-3) as required by our regulators, the SEC and FINRA.

In addition, Wealthfront maintains a Third Party Risk Management Program which periodically assesses the operational and financial risks of all third parties that provide services to Wealthfront, including R&T and all program banks.

What happens to Cash Account funds if R&T were to fail?

As mentioned above, R&T acts as the administrator only and does not hold or process client funds. Wealthfront and R&T validate that our client records match multiple times per day. In the unlikely case that R&T were to fail, there would be no client impact. 

What happens to Cash Account funds if a program bank were to fail?

In the event a program bank were to fail, the FDIC is often appointed as receiver for the bank. It’s worth noting that our system is intended to maintain your balance at or below the FDIC limit at a particular program bank. Generally, no more than $250,000 (up to $500,000 for joint accounts) will be swept into any one program bank. Wealthfront will support our clients in this process and have tested the necessary steps to ensure timely delivery in the unlikely event a program bank fails. It is important to note that these processes can vary depending on the situation of the specific institution. 

What happens to Cash Account funds if Wealthfront Brokerage were to fail?

In the unlikely event of insolvency, Wealthfront Brokerage would rely on a set of extensive technical and procedural controls designed to protect client funds and to comply with the above-described regulations and also the requirements of the Securities Investor Protection Act (SIPA), which governs broker-dealer liquidation in the event of insolvency. Wealthfront Brokerage would continue operations and work with the SEC, FINRA, SIPC, and the FDIC to implement procedures that would allow clients to access their funds. Client funds held directly with Wealthfront Brokerage (recent deposits or withdrawals in process) would remain covered by SIPC until dispersed. Client funds on deposit with program banks would remain FDIC-insured. And, since client funds must be strictly segregated from the firm’s operating capital, in the event that Wealthfront Brokerage became insolvent, client funds would not be subject to separate claims against Wealthfront Brokerage in connection with its operating capital.

How long does it take to sweep Cash Account funds to program banks, and how are funds protected while in transit?

In most cases, the sweep of your cash deposits to one or more of our FDIC insured program banks occurs on the same day that we receive your funds. However, there are situations (e.g., deposits received later in the day, after the last scheduled sweep to program banks) where it can take an extra day or two for the funds to be swept into the program bank. In this situation, your funds are protected by SIPC coverage. This is common for Sweep Deposit Programs and is not unique to Wealthfront. Whether your funds are covered by FDIC insurance or SIPC coverage depends on where your funds are at the end of the day.

How can clients track which program banks are holding their funds? 

You can view which bank(s) have your funds on deposit using your mid-month snapshots or end of the month monthly statements found under the Documents tab on Wealthfront.com or by clicking here. 

The FDIC insures up to $250K per depositor, per institution, and per ownership category. So, if you have any other accounts with our program banks (outside of our Cash Account), those balances may count toward the total amount that the FDIC insures.

Here’s a list of our program banks. If you maintain one or more separate accounts with a bank on the list and expect you might exceed the $250K limit, please send us a support message. We can exclude your Cash Account deposits from that program bank.

Need additional help?

If you have additional questions, please email us at support@wealthfront.com