What is the cost/fee to use WealthStep vs. WealthStepDirect? What is free vs. paid?

WealthStep is 100% transparent about fees and costs, and works hard to keep costs down so that your account value increases faster. With some other services, it may be a challenge for you to determine what the different costs are.

There is no fee to create an online WealthStep advice account and use the Basic advice version. To access the Advanced advice option and more, see options below:

WealthStep 401k:

$0 for plan participants, because WealthStep’s fee is paid by your company as an employee benefit. Also, most 401k plans have no transaction costs. Most 401k plans using custom WealthStep portfolios have weighted average mutual fund expense ratios in the 0.48% range. See your WealthStep quarterly report for plan-specific weighted average mutual fund expenses for each portfolio in your plan, if the plan uses WealthStep custom portfolios.

WealthStep Direct:

WealthStep Direct is for for individuals who also invest outside of retirement plans. Fees apply when you have WealthStep manage your investment portfolio. The WealthStep Direct fee options are shown below (this annual fee is then divided by 4 and deducted from your account quarterly):

• ____ standard fee, annually (TBD)
• ____ smart investor discount fee, annually (TBD) (if you watch the Financial Independence video annually and successfully pass a quiz). This option is not yet available, but should be available soon.
• ____ friend of WealthStep discount fee, annually (TBD) (for those that help WealthStep grow through successfully referring multiple same- or greater-sized clients to WealthStep. This option is not yet formally active, but may be available in the future. In the meantime, if you successfully refer a client to WealthStep, contact us to discuss.
• 1% WealthStep Direct Plus, annually. This level provides higher service and access to financial planners for projects for those with complex financial situations (typically $4,000 – $8,000 per planning project). Asset location tax efficiency benefits are also included. Also, any Processing charges (see below) are waived (if not excessive).

Custodian bank: Transaction charges also apply to WealthStep Direct clients, and will depend primarily on the frequency that you add or remove money to/from your account. When you add to or withdraw money from your account, WealthStep will process those adjustments in a way that minimizes transaction costs and helps rebalance the asset allocation of your account. If no additions or withdrawals are made, rebalancing may be done as a risk control measure (typically annually), at WealthStep’s discretion. Transactions may also periodically occur in taxable accounts when/if tax-loss harvesting is conducted, to reduce your taxes, at WealthStep’s discretion. If small cash contributions are made, WealthStep may wait for cash to accumulate to a certain level, within limits, before implementing into the investments, in order to reduce transaction costs.

Investment costs: The mutual funds or ETF’s (the underlying mutual funds within a WealthStep portfolio) fees vary based on your stock bond mix and whether it is a taxable or tax-deferred account, but generally range between 0.18% and 0.27%. This cost is called an “Expense Ratio” or “Operating Expense Ratio” or “Mutual Fund Management Fee”, and all mutual funds and ETF’s change such a fee. Mutual fund industry average fees are approximately 1.3%, and WealthStep helps you access lower-cost funds, some of which are not otherwise available directly to individual investors.

Processing charges: Do not apply to WealthStep 401k users, and generally does not apply to WealthStep Direct, however WealthStep Direct clients that frequently change asset allocations (more than once a year) or frequently withdraw money (more than twice a year) may be assessed a $100-200 processing charge per transaction (a portion will go to cover processing costs and a portion will be donated or applied to philanthropic financial literacy education). WealthStep is designed for long-term investors and frequent asset allocation changes will generally harm your long-term plans. If you need frequent withdrawals for spending purposes, you may be best served by withdrawing a larger amount annually, and maintaining that cash in a separate checking or savings account of your choosing. If you plan to shift your asset allocation frequently to try to beat the market, see the FAQ about market timing, and WealthStep politely recommends you utilize a service other than WealthStep, and reserves the right to terminate client relationships that involve excessive account activity.

In total, most WealthStep Direct clients with have total fees in the 0.50%-1.00% range, combining the above. Compare that to the benefits of professional management, plus Aim>Save>Invest>Spend advice, plus ongoing education to help you achieve your goals and avoid pitfalls, plus the option to upgrade to a full-service relationship in the future, and the value is expected to materially exceed the total fees above.