Is Wealthfront Really Safe?

[r0ckyreed]

Hello, I recently heard about the collapse of Synapse and how many Yotta customers were unable to access their money despite of the fintech company being FDIC insured. The FDIC stated that since the failure wasn't a "bank failure" there is nothing they could do.

It just makes me wonder whether HYSA fintech companies like Wealthfront are safe at all despite its $8 million dollar FDIC protection through its partnered banks?

I would appreciate any insight. I am thinking about transferring my money over to Marcus HYSA that offers 4.40% right now.

Here is the article: https://www.forbes.com/sites/emilymason/2024/06/17/is-your-money-really-safe-in-an-fdic-insured-fintech-account/

Edited June 24 by r0ckyreed

[Leo Gura]

Use a better company.

[r0ckyreed]

1 hour ago, Leo Gura said:

Use a better company.

What do you have in mind? Wealthfront and Marcus by Goldman Sachs seem like good hysa accounts to park money for savings. I invest in index funds in my Vanguard account. But I park the rest of my money in an hysa to maximize the interest I can save. 

Edit: @Leo Gura I saw your reply on my other post. Thanks! Do you personally use an hysa and see any benefit to them? I still keep my account at a local credit union for emergencies and easy cash and right now I have my money spread out among Wealthfront, Marcus by Goldman Sachs and Capital One to see which one I like better. Thanks for your suppprt.

Edited June 25 by r0ckyreed

[r0ckyreed]

I’ve been doing some more research and it seems like the YOTTA situation is different from Wealthfront and how they operate. Yottas issue is that it had a middleman intermediary which was Synapse and when Synapse collapsed, it froze funds in Yotta customers accounts. Wealthfront seems to operate similarly to a brokerage account like Vanguard. If Vanguard or Wealthfront went under, there are things in place to secure customers their money back. It seems like it may be frozen, but it isn’t lost. Wealthfront doesn’t use an intermediary middleman, so what happened to YOTTA won’t happen to Wealthfront.

Here is a referral link: https://www.wealthfront.com/c/affiliates/invited/AFFB-779H-ULPY-HRG3 

If you sign up to Wealthfront through the link, you will get 5.50% APY for 3 months. 

Edited June 25 by r0ckyreed