"Wealthfront, the 'pioneer of robo-advisors,' has assets under management of $92.8 billion, with revenue hitting a record high amid the US stock bull market."

The US stock bull market is driving performance growth in the robo-advisor industry.

On January 12, the first listed robo-advisor company—Wealthfront—released its quarterly financial report for the period ending October 31, showing net profit of $30.9 million, a 3% year-over-year increase; record revenue of $93.2 million, up 16% year-over-year. The total platform assets of the California Palo Alto-based wealth management company grew 21% year-over-year to $92.8 billion.

Company CEO David Fortunato stated that in a dynamic macro environment, the company’s core business continued to push platform assets to record highs at quarter-end. This quarter saw the largest net transfers in company history from cash management accounts to investment advisor accounts.

By quarter-end, Wealthfront had 1.38 million funded clients, a 20% increase from last year. The platform’s total assets of $92.8 billion cover its two main businesses: investment advisory and cash management.

This performance reflects the increased risk appetite of investors in a US stock bull market, resulting in a clear trend of funds moving from savings accounts to stock investment accounts. Last month, Wealthfront completed its IPO, becoming the first publicly listed robo-advisor platform.

Cash Management Business Faces Challenges

Despite rising total assets, net deposit inflows for the quarter were $1.6 billion, down from $4.4 billion in the same period last year. Wealthfront's cash management business has been a growth engine in recent years and currently offers new clients an annualized yield of 3.9%. As the revenue share from this business is large, the company is sensitive to interest rate fluctuations. Analysts noted that while lower interest rates may reduce the attractiveness of cash products, they may also encourage clients to redeploy funds into automated investment accounts.

However, the company is working to diversify its products to target affluent and digitally savvy clients. In addition to expanding tax-loss harvesting services, Wealthfront has recently begun offering mortgage services in regions such as Colorado. Fortunato said during the earnings call that the company hopes to win the market with competitive interest rates and a seamless digital experience, and believes there is an opportunity to achieve substantial business volume over time.

Following the earnings report, Wealthfront shares fell nearly 2%.

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