Wealthfront was founded in 2008 by Andy Rachleff and Dan Carrol, initially taking the form of a mutual fund analysis company, before pivoting into the wealth management sector. The company quickly grew its assets under management, recording a 450% increase (based on $97 million) from 2013.
Moves into a 529 tax-advantaged college savings plan in 2016 helped solidify Wealthfront as a leading saving, planning and investing ‘robo-advisor’ platform. Today, the company offers a multitude of automated services, from banking through to investing, borrowing, planning and educational financial materials.
The Rise of the Financial Robo-Advisor
Wealthfront’s management services utilize automation for hands-off investment. Advertised as ‘passive investing on autopilot’, their diversified portfolio product maximizes returns through pre-defined parameters. The software automatically balances the appropriate exposure to low-cost index funds over time.
Potential customers are led through a simple financial health and goals questionnaire, with key questions such as “How soon can I retire?” and “What sort of home can I afford?” It’s no understatement that the rise of robo-advisors has dramatically changed the landscape of affordable support available for consumers. But how is Wealthfront’s success in delivering accessible financial support being replicated within DeFi markets?
The Wealthfront for Crypto
Just as Wealthfront identified a gap in the wealth management sector for user-friendly, automated finance, APY.Finance has set its sights on democratizing access to high-interest yield farming opportunities.
To achieve their meritocratic vision, APY.Finance is in the process of launching their exciting suite of consumer-facing, decentralized products. Leveraging a proprietary robo-advisor, investors will be able to access the high return, one-click yields normally reserved for advanced traders.
Funds are collateralized into a secure investment fund, and routed via smart contract transactions to the most advantageous revenue-generating opportunities. Every strategy is assigned a clear risk score using a risk assessment framework that calculates exposure of smart contract risk, financial risk and centralization risk. APY automatically distributes liquidity across its portfolio of yield farming strategies, balancing exposure for risk-adjusted returns.
More Than Just a Robot
The innovation doesn’t stop at robo-investing, high interest DeFi returns. In order to incentivize investors, the APY governance token will allow the community to propose and vote on any system parameter. Examples of future ecosystem governance benefits include proposing and agreeing on what percentage of yield generated will go to APY token holders in exchange for maintaining the protocol.
Other governance abilities include being able to change system parameters (such as fees, risk score, rebalancing thresholds) as well as updating existing or proposing entirely new strategies. By incorporating a decentralized governance token mechanism, long-term project buy-in is reinforced through incentive design. The greater community involvement, the greater potential for the platform to thrive – creating an exponentially positive network effect.
A Glimpse into the Future
Predicting future success in any industry is difficult at the best of times. Some decentralized finance applications attract criticism for their introspective, complex solutions with little in the way of accessibility.
Just as Wealthfront helped to transform the face of automated, democratized finance, APY.Finance’s goal of becoming the Wealthfront for DeFi stands as testament not just for their goal to deliver user-friendly, accessible, high-interest yields, but also the potential for their platform to genuinely attract mainstream investors – the holy grail for any DeFi team.