ETFC E TRADE Financial Corporation

In a bid to attract more assets, Wealthfront Inc. is joining other robo advisers in providing free advice to investors about their accounts at other financial institutions.

On Wednesday, the four-year-old startup launched Wealthfront Portfolio Review, a service that recommends ways to improve diversification and reduce fees in accounts at nine brokerage firms, including Charles Schwab Corp., Fidelity Investments and the Merrill Lynch unit of Bank of America Corp.

The goal, says Wealthfront CEO Adam Nash, is "to help people answer the question, 'Am I invested the right way?' "

In the process, of course, the Redwood City, Calif., firm hopes to entice more people to hire it to manage their money. Currently, Wealthfront—with about $3 billion in assets under management—charges nothing to oversee the first $10,000 a client brings it and 0.25% a year above that threshold.

Such free evaluations function as "lead generation" tools for other robo advisers, said Alois Pirker, research director at market research firm Aite Group, who specializes in wealth management. While investors can always implement the recommendations they receive on their own, the firms hope to get authorization to manage some or all of the assets they get a look at.

But only a fraction of the users of these services have become paying customers. For example, while investors use Personal Capital Corp.'s software to track over $200 billion in investment accounts, the firm manages $1.9 billion, said Mark Goines, chief marketing officer. "We're very happy about the conversions we get," he said.

Two months ago, Betterment LLC—which manages $3.2 billion—began offering a way for investors to link their 401(k), individual retirement accounts and brokerage accounts to its free RetireGuide service, which provides advice on how much to save and how to invest for retirement. SigFig Wealth Management LLC, with an estimated $100 million under management, has offered a free portfolio-evaluation service for the past year, says Tomas Pueyo, vice president of growth. Personal Capital and Jemstep have had similar services for about three years.

Jemstep's free service has given investors "an opportunity to understand the benefit of advice," said Simon Roy, president of the Los Altos, Calif., company. Jemstep, which has mainly sold its robo technology to financial advisers, was acquired on Tuesday by asset-management firm Invesco Ltd. for an undisclosed price.

Wealthfront said it expects its new service to help it triple the number of people who sign up for its asset-management service this month, in comparison with January 2015.

The portfolio-review service is more limited than those of some rivals. For example, Personal Capital's recommendations can encompass 401(k)s, IRAs and 529 college savings plans as well as brokerage accounts, said Mr. Goines. In contrast, Wealthfront evaluates only brokerage accounts, although it plans to "add retirement accounts over time," Mr. Nash said.

Wealthfront Portofio Review starts by asking prospective clients to fill out a questionnaire. In addition to income, age, and savings, the questions assess investors' feelings about market volatility, says Mr. Nash. Users supply the usernames and passwords of their brokerage accounts. The other firms on the list of nine are Vanguard Group, E*Trade Financial Corp., TD Ameritrade Corp, Scottrade Inc., Morgan Stanley, and Wells Fargo & Co.

Users receive a report analyzing their asset allocations and the investment-related and advisory fees and commissions they pay. If total fees are above 0.5% of assets, the report identifies the funds with high fees.

In an analysis of the thousands of portfolios clients transferred to Wealthfront in 2015, the firm found that 92% had at least one problem, said Mr. Nash. For example, he said, more than one-third had more than 10% of their assets in cash, an allocation that can substantially reduce returns over time.

Wealthfront also calculates how much investors will pay in taxes if they sell assets to purchase the low-cost exchange-traded funds it recommends, and it estimates a "payback period" over which they might recoup those costs through higher returns.

(END) Dow Jones Newswires

January 13, 2016 13:45 ET (18:45 GMT)

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