Wealthfront CFO Alan Imberman on $100B Milestone: Growth, Buybacks & Road to $1T

On this episode of After Earnings, Wealthfront Corporation, the digital-first wealth platform that just crossed $100 billion in total platform assets. And they have been quietly compounding alongside their 1.5 million clients for two [music] decades. Now, I'm joined by Alan Kerman, the CFO of Wealthfront, to discuss what it actually means financially to hit $100 billion in assets, and why revenue growth lagged asset growth by 29 percentage points last quarter. There's also the capital allocation story. The company is sitting on $450 million in cash and trading below its IPO price. And they're buying back stock aggressively. [music] We'll also talk about how how the home lending expansion changes the financial model of a business that has historically operated at near 100% gross margins. All right, Alan, thank you for stopping by the studio for After Earnings. It's great to have you with us today. >> Thanks for having me, Katie. >> Well, I know you're coming off your earnings just a few days ago. So, eager to get caught up on everything you covered and and kind of the state and vision of the business thus forward. Um let's start with with the earnings and sort of what some of those key highlights were uh that you really want to make sure that retail investors understand as they as they continue to explore and understand Wealthfront. >> Yes, so I'd say the first big milestone that we announced was going over $100 billion. That was actually doubling from 50 billion less than three uh yeah, 3 years ago. Um so, that's obviously a huge milestone. I think it speaks to the trust of the business. Um you know, we continue to uh grow assets. Um so, that was uh 12% year-over-year growth. Uh investment assets in particular grew 30% year-over-year. Um and then from a you know, cash management continues to be an important driver of new clients, but our goal uh in what we call transition environments when rates are going down, markets are going up, is to get people who we uh initially brought in the door for cash to cross product adopt into investing and we've been very successful with that. This quarter was our second best quarter for cross product adoption in terms of net asset flows from cash to invest. The the best quarter was actually Q4 of 20 our fiscal year 26 which ends January 31, 2026. So in our last three quarters we've had two of our best years are two of our best quarters ever. And so we're pretty excited about that. That's a big of ours to get most of our assets held by clients who have both a cash and investing account. That makes them sticky. Our clients are very young. This quarter continues to show that there's a long runway of growth for the digital natives, people born after 1980 that we serve. >> Great. That's a great summary. You're coming up on a year almost of being in the public markets. IPO'd at $14 a share, currently at about $10 a share. I want to get into some of the nuances of the gap numbers, specifically around the stock based compensation and the nuances around that. Can you help us understand that SBC normalization story and how that impacted some of the numbers to give our our viewers some context? >> Sure. So I would say that it's not uncommon for tech companies that IPO to have a wall of stock comp hit right when they go public because we issued awards that vested both based on time as well as a liquidity event. And under GAAP actually those type of award do not get expensed until the liquidity event is considered probable and and under GAAP a liquidity event is not considered probable until it occurs. So once we went public the awards we had been issuing since 2021 in this case all the ones that had vested expensed immediately. So our Q4 2026 had a very large one time charge putting us in a a net income position and until we get you know we lap essentially Q1 of 2027 so Q1 of 2028 which will be our you know period beginning February 1st 2027 then we'll continue to have periods that are hard to compare because we've expensed stock comp in one and not in the other. But it's not like I said it's not rare and we let investors know about this both in our prospectus and on the road show it's a very important number for people to see because it looked really low when you looked at our historical numbers so people were asking how is your stock comp going to be that low we'd say no actually we're going to start expensing it this is why and people were pretty understanding of that. But I think what is rare is actually as a tech company coming to market very profitable so even after stock compensation today we're still very GAAP profitable. And I'd say that that's probably more rare than having a lot of stock compensation expense occur post going public as a tech company. >> Yeah these forums are really great for for digging more behind the headlines sometimes you don't catch that you're scrolling through an app through the headlines so it's a great great to have that voice over and I also thought it was interesting I I read the company kind of started with almost a similar situation a lot of people maybe experiencing an IPO event exit event young people and wanting to create an alternative platform for those people so I think that's a an interesting parallel. I want to get into the the stock repurchase and the hundred million dollars that's been I guess greenlit for lack of a better word 30 million already sort of has been reinvested back into the company. Why why is now a good time or why do you believe now is the right time to deploy some of the cash you have on hand to repurchasing shares of Wealthfront? >> Yeah so we've spent actually since the authorization was given in March we've spent over 60 million dollars on repurchases on a on the average price is just below nine dollars. You know, we look at repurchases as we would look at any investment. What's the, you know, uh next best opportunity? Is it attractive relative to that use of capital? Um, and given that again, our clients have an extremely long runway of wealth accumulation, um the business is extremely cash flow positive, requires very little capital expenditures, uh and has a very great growth profile, which is typically you don't get all three. You can be, you know, have a very high free cash flow or uh generation prior to CapEx, but you require a lot of CapEx like a railroad or something or a utility. Um, or you have that and you have no growth. We have all three and so we think given the profile of our business, um which continues to generate cash. So, in the previous in the most recent quarter, we spent over 30 million on repurchases and we still increased the cash balance. Um, and so we think that, you know, that's under appreciated by the market when we look at the price. Um, and we have uh very little CapEx requirements, so you know, purchasing shares is one of our capital allocation uh kind of waterfalls. Um, and so that's why we continue to do that as the price remains attractive. >> All right, let's shift to the the story of the cash to investment uh shift within your platform. So, Q2 is one of the best quarters ever for net transfers from cash management to investment advisory. Walk us through kind of what was behind that and what some of the implications are on the economics of the business. >> Yeah, no, that's a great question and something we also uh put in our earnings call uh transcripts when we talk about this because I think one of the things that's really important to understand about Wealthfront is we've tried to create an all-weather business model that can grow in any macro because we obviously can't control interest rates in the stock market, which are very important to our business, but we should be prepared for them. So, cash management was a great way for the business in 2019 when it was launched to be able to grow in in high-rate environment where maybe the market's not doing well. And uh what we have found is that that's the best time to attract clients, but then once you have a transition environment, it's the best time to get them in the other product. And so in the most recent quarter, we have both I think I would say since the end of last year calendar year and in early this year, we've launched some incentives to uh help clients make the decision to move cash to invest. And so uh right now, if you move if you if you have a cash management account and you do direct deposit with us, uh and you give us $1,000 a month in direct deposit as well as open an investment account, you get an extra 25 basis points uh on your um cash management account, which as of the time of this recording would make you have a 3.55% interest rate, which is really good, uh one of the best on the market. And it's it's is funny because we actually found by giving people a better cash management incentive, we'd encourage them to open an investment account, which is the goal. So the economics are we actually earn less on investment than on cash account. So you would ask yourself, why would you encourage people to move the mix from cash to invest? Because our fee rate on invest is around 22 basis points, whereas our fee rate on cash is 55. So it's almost a two and a half times different. But what There's a couple of reasons why we do that. Investing one grows faster. It has the market appreciation. And once you reach a certain level of savings, start putting flows into invest. So it gets the benefit of more money going into it over time, uh as well as the market growth. Um and to be honest, it's better for clients. So not only does it make our business bigger over time, thinking longer term, it's better for clients to have their money in investing because it's going to help them keep up with inflation and meet their you know, goals in life from a financial perspective. And so we're okay uh you know, taking a little bit of delayed gratification uh, in terms of doing what's right for clients, which also happens to be right for the business, just not in the immediate near term. >> Yeah, I think there's something interesting there when you're your business seems to really be about growing and maturing with your your user base, which is large but young. >> Yep. >> And so, you know, the the mix right now could look quite different from a user 5 10 years ago when you think about the compounding of what could be in their investment account. I'm curious on on how you land on the APY rate cuz you're in a very competitive environment with a lot of wealth platforms. Favorable APY is a great way to attract new customers, right? You can kind of get into a little bit of a race there. How do you think about making that favorable enough that it's going to attract and retain your customers, but also sort of balancing, you know, how that fits within within the overall business. >> Yeah, that's a really important strategic question and we've had our cash management account since 2019. And in 2019, we were actually at one point, you know, the highest rate on the market among reputable places someone would keep their money. And we learned that you do attract a lot of rate chasers when you do that and those are lower quality clients. So, we try to be competitive from a rate perspective, but not the highest. Um, I do think the other thing we do is, uh, you know, we have a lot of features that come with our cash management account that allow you to do everyday banking while earning a high rate all in one account. Many brokerages and banks have a separate savings account with a separate checking account. You have to move money around. Uh, they don't make it easy actually to earn the higher rate. Uh, we're trying always to find ways to help automatically sweep money into our sweep program uh, so people can earn high rate the high rate paid by our program banks. Um, you know, we offer $8 million of our through our program with that our banks have 8 million of FDIC insurance. So, um if you look at uh our our account on a kind of point-by-point basis, it's actually I think the best account on the market paying you a high rate. We're not going to be the highest, but we're very close to the highest again because we're not looking for somebody who's constantly trying to find the next basis point. It's actually not even good for them because while your money is in flight not earning interest, you're actually losing out if you would have just kept your money in one of the higher rate accounts anyway. So, >> Yeah, the rate chasers is a a good term. I I've definitely seen that types of behavior. Um when let's let's continue with the sort of progression and and the product mix how they work together. So, you have the cash management and that potentially flows into you know investment management and then now home lending and that's sort of the next phase of you know your saving, your investing and and your a lot of people looking to buy a first home. This is a huge topic among your your digital native >> Sure. >> uh users. Uh it's it's harder. Um so, tell me a little bit about home lending product, how you think about that. I know the the margins and the economics of that are quite different than some of your other products. How do you how do you think about that fitting within the ecosystem of what Wealthfront is offering? >> Yeah, so taking a step back, we wanted to do this in 2019 and in the more past few recent years, we've actually seen clients send over $2 billion annually in wires to title and escrow companies from our platform using our wire rails. So, we think there's some multiple of that happening, you know, using some other bank that they have a relationship with. If you assume that's a 20% down payment, then there's at least $10 billion annually of homes being purchased by our clients every year. Um and the problem we had why we haven't done it until now is you know one of the criteria that we have in order to launch a product is that we need to be be to automate pretty much everything in the end-to-end process. And that just wasn't really the case until COVID. COVID really sped up the digitization of of the mortgage market. Um and so we have the captive audience who are, you know, again, digital natives who save, who, you know, the affordability is less of a problem for them, uh but high rates is obviously not great. Um and uh we felt like we could build a better experience than is out there, which honestly is not that hard uh if you've ever bought a home, um while also offering a great rate. Uh and part of the reason we can do both of those things is the um you know, the experience we build in a end-to-end mobile app is just, you know, if you look at our app relative to traditional players, it's just much better. Um and the fact that we don't have the largest cost in uh home purchasing, which is acquiring a client, cuz like you said, we have uh today over a million and a half clients who are uh a very attractive client base in the stage of their life where they're looking to buy a home. Um so all of that got us interested in in home lending. Um we have now today we're in Colorado, California, and Texas. Um we're slowly doing a measured rollout, really dialing in the customer experience, uh trying to make sure that, you know, it behaves the same way, you know, someone who's used to buying things on Amazon, DoorDashing, getting an Uber would expect uh a purchase should happen even though it's in a home, you know, purchasing a home. Um and you're right about the economics. So our existing businesses are extremely profitable. Uh asset management and brokerage are some of the most profitable businesses in the world. Um obviously home lending uh I don't think is going to be as profitable, but it opens up a really large total addressable market, allows us to evolve with our clients, um and really helps uh with other recent launches to continue to be kind of a place where um a family can do everything at Wealthfront with custodial accounts as another recent launch we've had. So we have trust accounts, joint accounts, uh 529 custodial, now you can buy a home. And so we'll just continue evolving with our clients as they mature. >> Is there any are there any certain pockets that you can share, maybe places you might be thinking about expanding in terms of the suite? I think you're touching on something that's like a very big topic among a lot of wealth fintechs right now, which is how do you kind of become the everything app with that while still maintaining who you are as a business? You mentioned needing to automate and and I know the the origins of the company were really about the the insight that, you know, people didn't necessarily want to call up a broker or talk to a wealth advisor. They wanted to use tech as a way to empower them to meet their goals. Are there any even general pockets that are interesting that you could share? >> Um I think that you know, we will continue to I think build additional investment and cash management products. There's still a lot to do there. We want to own more of that infrastructure to make an even better experience than we have today. Um you know, things like tax planning is an is an obvious next step for us because once you you know, get older in your career, you start having kids, you buy a home, and start to thinking about a will or you know, making a trust. So we have trust accounts today. Um we don't have trust creation, so you would create it somewhere else and then have your money with us so we could do that all in in one account and I think you know, the obvious kind of uh elephant in the room is AI can help supercharge a lot of that advice as well. So it can help somebody you know, come up with whether or not like the best way to do their trust and whether or not you know, you know, what I should be doing from a tax advantage perspective you from gift tax perspective. And so I think there's more to do there. We just rolled out our first kind of AI experiment around emergency savings. We're doing a very again measured roll out. We want to make sure that our use of AI engenders trust. It's not difficult to build, you know, an AI product on top of the frontier models, um, but we don't want to lose client's trust cuz at the end of the day that's the main business we're in is the business of trust. People are giving us on average $70,000 on the platform. Um, and so we'll continue to to do something there, but I think that uh, there's a lot of opportunity uh, from with AI to help, I think, bring more education to our products and uh, really the right way to save and invest. >> Yeah, I was we'll skip around of it cuz I was I wanted to ask I was going to ask about AI. Um, and I I like your articulation of that cuz I think right now it seems like especially the current environment even politically right now is a lot of um, kind of AI fears, concerns, but to your point about what you're saying about even seeing the wire behavior of your users with home lending, if people are using AI to educate themselves about their finances anyway, >> Right. >> um, and so why not have that data connected within the platform they're in as a way to give context and inform, not necessarily uh, transact on behalf of them. Um, but uh, yeah, that's it's just interesting cuz as like a digital first company you seem um, plausibly more uh, positioned to to navigate that than maybe some of the legacy players that have been around for hundreds of years and they're they're still a little behind you guys on on the digital transformation front. >> Yeah, and I think we're sensitive to the fact that actually younger people, ironically enough, are some more of the bigger skeptics. >> Mhm. >> And so David, our CEO, likes to, you know, point out that uh, it's very possible we could have something in the app that's kind of a toggle of like, I don't want any AI at all in, you know, my experience and, you know, give me as much AI as possible. Um, whereas I don't think many people are talking about that. Everyone's trying to roll out as much as they can as quickly as they can and, you know, get AI all over the place and uh, for us uh, we're being, you know, very measured and like I said, we're talking with clients literally looking over their shoulder as they play with the experience to see what they like and they don't like so we can again uh make sure we create more trust with it rather than less. >> Yeah, interesting. You have a front row seat to kind of how people interact and I assume you'll share some of those insights in the future so that'll be really >> Yes. >> really interesting. Um I wanted to shift back a little bit to the the numbers a bit. I want to talk about the the cash position. You have $450 million in cash. Um how are you thinking about kind of allocating that priorities, you know, coming quarters, year? Um and how do you think about that having that position overall as a benefit to the business and potential signal in your investor story? >> Yeah, so I think that, you know, being having that much cash, being debt free is very important and being profitable for our clients and that was part of the reason we came public is build awareness, more awareness. And so as a client, I can see Wealthfront has audited financials, they're very cash flow positive, they have a lot of cash on their balance sheet. In terms of capital allocation, you know, the first thing we do is organically invest in the business with all the things we've talked about and a couple of other things we've mentioned on our recent earnings calls like tax aware long short um many other types of things we're building currently. But then after that, we look at the attractiveness of our stock which is something that you know, we've already been working on pretty quickly after becoming public. I would I was looking to see whether or not we may have been one of the fastest companies to announce an authorization post going IPO. And then we will do M&A but we have a preference to build versus buy. Home lending is a good example. We did a very small kind of acquisition to help accelerate that product development, get some licenses but it wasn't very large in terms of cost. Um and uh is something that we kind of think as a capital allocation. Um it's also kind of the way we do marketing. Because we charge less fees uh and we pay a higher rate, we're somewhat at a structural disadvantage in doing traditional paid marketing for people who are charging 1% where we charge a quarter of a percent or people making 3% on their cash where we make five 55 basis points. Um but incentives is something given our infrastructure that we built, um we can uh have a structural advantage and that's something we look at uh from a capital allocation perspective. And then as the CFO, uh I don't mind, you know, stacking cash um especially in, you know, a business that's uh in financial services because uh you don't want to raise money uh when you need it. That's the worst time to go looking for money and you don't want a crisis of confidence. So, I like being very flush with cash. I think it creates a lot of opportunity uh in when when the you know, times get tough. If you have a lot of cash, you can come out stronger. Um and so we'll, you know, we'll be happy to sit on a lot of cash if there are no opportunities in that waterfall I just spoke to, uh but currently we've been able to find ways to to use it. >> Yeah, it sounds like gives you some nice optionality. Uh I know you guys described 2026 as as a banner year. >> Mhm. >> Coming up on the end of this year, what what makes this year better than last year? Um and and when you think about, you know, your 100 billion or so 100 yeah, 100 billion AUM right now, how do you get to 200 billion? >> Right. Yeah, so um I think that, you know, we're very much a product-led business. Um we grow actually half of our clients come from referrals and that's because we build great products. Um and so if you look at the rate of product velocity this year, uh with home lending, multiple states, uh custodial accounts as I discussed, and AI product, um you know, all the different features that we've added to our cash management account and we'll continue to add as well as um you know, direct indexing with the S&P 500 and NASDAQ 100, um which have grown really nicely. Um all of this velocity, I think is how you get to the next. And that's what we've done. So, in '23, we went, you know, we launched stock investing, our single stock investing product. We're now building a self-directed brokerage product, which we'll actually announce next month. Um we built our bond ladders, automated bond ladders. People we buy personalized Treasuries. You own actual Treasuries in your account. Um and so, as we added more of those products, we saw this growth from 50 to 100 billion in 3 years. Um I think that's how you get to the to the next, you know, 200 billion. I think we're our our sights are bigger on that. We'd like to have a trillion dollars. Uh we think that that's kind of uh a very doable goal for us. Um and and even larger, to be honest. If you look today, there's many $10 trillion-plus managers, and we're again catering to the largest and wealthiest generations ever. Um and so, we have very high ambitions to to be kind of, you know, it's not a winner-take-all. You today you have, like I said, multiple of those, and so we think there's a place for many people to have multiple trillion dollars under management, some of the companies out today, and uh I think Wealthfront's definitely going to be one of them. >> Yeah, it seems like a good spot to be in. Everyone references the $124 trillion wealth transfer, that incoming generation expecting different experiences. You mentioned uh bonds, Treasuries. Got to ask about crypto. You're not alone in not having uh direct crypto products within the app. Schwab, I believe, doesn't have yet. Uh JP Morgan, I think they just said in May that Jamie Dimon said that they would be open to offering it. How do you How do you guys think about that as you kind of You mentioned expanding into other types of assets? >> Yeah, I do think Schwab actually has just recently brought on crypto, and they're doing prediction markets. Um not sports, but I think kind of economic uh related ones, but um the way we think about it really is, you know, there's tried and true ways to develop long-term wealth. Um crypto is very speculative uh and you know, you can see that with the both the price of some of the the kind of major coins, Bitcoin and Ethereum, but really the other coins that and the kind of the frenzy and mania and the up and down and that's just not to us a an asset that, you know, deserves to be a large portion of a long-term portfolio, which is why we do offer it through the ETFs. >> Yep. >> Only up to 10% of your portfolio if you want exposure, you want to scratch that itch. Uh but we don't think it has uh you know, and similar with like prediction markets and every other kind of fad. I mean, we've been pitched, you know, alts, we've been pitched uh you know, doing crypto, prediction markets, all of the fads that have come and uh some are still here and some are gone and you know, it's not it unfortunately good investing is boring. >> Mhm. >> Uh and you know, when you think about kind of um the market has outperformed 90 plus percent of active managers over long periods of time and even the ones who do outperform from year to year, it's they don't do it consistently and it's very unlikely that you will find them. Um and so it's not really that hard, you just lower your fees, you lower your taxes and you diversify. Um and you know, we've built products that have allowed us to do that and I think that um you know, crypto is something that uh we don't plan on expanding into. >> Yeah, it's interesting now it seems like the environment all the platforms are sort of taking their own POV on on what they believe that mix should be and you see some people going all the way like sure, sports betting, prediction markets, put it in there. Others taking a harder stance and I think it um yeah, you'll continue to see companies like Wealthfront really making a a stance and and that's part of almost the brand uh that you're building. Um, so it's >> It's also a part of our business model, right? So, we have alignment of incentives with our clients. We make money when our clients make money. We, you know, make money as a percentage of their assets, whether it's on the invest side or on the cash side. Other platforms, they make money on transaction velocity. And so, that's why, um, you know, if you look at incentives, you can typically find behaviors. And so, if you look at why they would be wanting to encourage those types of behaviors of, you know, lots of transactions, whether it's for prediction markets or crypto, um, it's because that's how they make their money. And, you know, for us, we like the alignment of incentives that we have because, um, you know, as our clients are getting wealthier, we're doing better. And, uh, I sleep very well at night, you know, knowing that that's that's kind of how our business is run. >> Yeah. And, um, my last question, Alan, for you is, uh, you know, you went public uh, December 2025, uh, coming up 1 year. What What have you What have you learned or what's surprised you the most about being the CFO of a public company that is so different than before you were public or even preparing to go public? >> Um, yeah, that's a good question. I think that, you know, the investors you talk to are obviously going to be a lot different, uh, as a public company versus a private company. Uh, you have many investors looking to get an edge on, you know, consensus, uh, or know like this week's numbers or this month's numbers. Um, now, most of the long only like larger investors are very strategic and forward-thinking. And, uh, but that's obviously, you know, questions we didn't have to answer to when we were private. Um, there's obviously the travel and the earnings calls, um, and, you know, filing financial statements constantly. Um, but we were a regulated business prior to going public because of we are registered investment advisor and a broker-dealer. Um, so, we were used to doing filings, uh, being very disciplined about our controls and things like that. So, it is a little bit more of the public speaking and the earnings and you know, having to report quarterly on a business that, you know, we think decades about. And so, I think that's kind of the mismatch of outlook. If you look at some of the more mature platforms, they have 60-year-old average clients. So, we're thinking decades of the opportunity we have and you know, a lot of investors and I totally get what their incentives are. They're looking at next quarter. And so, trying to find that alignment is more difficult, but you know, we try to stay authentic and I think you get the investors you deserve. And so, you'll see we don't do things like offer guidance. And but we do give monthly metrics to help people get, you know, a monthly update on the business and form a consensus so there are less surprises. So, we've tried to navigate that and we were very thoughtful before we went public about this whole approach of being a public company. We're very much students of history both in the financial markets as well as how companies have successfully gone public and being able to communicate to investors. >> It seems like going public, a lot of it is you have to do the work and then you have to make sure everyone knows you did the work and talk about it, which seems add a whole other layer of labor. So, we appreciate you traveling in for this, doing the work, talking to our listeners. This is a really great overview. And again, we we appreciate your time. >> Yeah, thanks for having me, Katie. Look forward to coming back. >> All right, we'll have to have you back soon. Thank you. >> Awesome. >> I'm Katie Perry. Thank you for tuning in to After Earnings, the show that brings you up close and personal with the executives behind the world's most interesting publicly traded companies. If you learned something today, don't forget to like, subscribe, and share.