Personal Capital pairs robo-advisor algorithms with dedicated human financial advisors, a combination the company calls “tech-enhanced” advising. That elevated level of service translates into a higher management fee than other online advisors charge — though it’s lower than the typical fee charged by an in-person financial advisor. The company decreased its account minimum to a still-high $25,000 in 2015, but it also offers a wealth of free tools that let users link their accounts and track spending, portfolio performance and investment fees.
February 1, 2016
Personal Capital is best for:
- High net worth investors
- Hands-off investors
- DIY investors
- Investors looking for free financial management tools
Personal Capital at a glance
|Account management fee||Many tools are free. The financial advisory service has the following fee schedule based on client balances:
• Up to $1 million: 0.89% of assets under management
• First $3 million: 0.79%
• Next $2 million: 0.69%
• Next $5 million: 0.59%
• More than $10 million: 0.49%
|Investment expense ratios||Portfolios have a weighted average of 0.10%
|Portfolio||Customized portfolios of ETFs; clients with balances of $100,000 or more have access to individual securities
|Account fees (annual, transfer, closing)||None|
|Accounts supported||• Individual and joint non-retirement accounts
• Roth, traditional, SEP and rollover IRAs
* Personal Capital will advise on 401(k) allocations, but does not directly manage those accounts
|Tax strategy||Tax-loss harvesting, including the use of individual securities on accounts of $100,000 or more
|Automatic rebalancing||Free on all paid accounts|
|Customer support||Access to financial advisor via phone, email or video chat; offices in Denver and San Francisco where local clients can meet advisors face-to-face
Where Personal Capital shines
Investments: Personal Capital clients with balances of $25,000 to $100,000 are invested in a diversified portfolio of ETFs that carry expense ratios with a weighted average of 0.09%.
The company’s advisory service invests clients with balances of $100,000 or more in ETFs and individual securities through a process it calls Smart Indexing. This process invests equally in all sectors, rather than mimicking an index like the S&P 500, and it’s not unique to Personal Capital; other sources refer to it as smart beta.
The company says Smart Indexing reduces risk while increasing returns, the holy grail for investors. In Personal Capital’s hypothetical backtests, the strategy outperformed the S&P 500 by over 1.5% annually, with lower volatility. It also allows the company to find individual tax-loss harvesting opportunities. Because Personal Capital uses individual securities, it can easily target these and sell them as needed, as Wealthfront does in its direct indexing service.
Tools: These are free and comprehensive, including an investment checkup, 401(k) fee analyzer and a spending tracker. Though you must create Personal Capital login credentials to use them, you don’t need to be enrolled in the company’s advisory service. Once you sign up, you can quickly link your bank, brokerage and credit card accounts. Personal Capital analyzes the asset allocation in your investment accounts based on the information it finds, telling you exactly how much you need to decrease or increase your holdings of certain asset classes to line up with its recommended target. DIY investors can use this advice to make adjustments on their own.
Personal Capital also offers spending analysis, a Mint-like look at your cash flow that divides expenses into categories such as groceries, health care, clothing and restaurants. The tool tracks income sources and bills due for linked accounts as well.
And the retirement planner analyzes your investment accounts to forecast whether you’ll meet your self-determined income needs in retirement. You can adjust those needs, as well as your expected Social Security income and the tax, life expectancy and investment return assumptions made by the calculator. The tool pulls real-time data from your Personal Capital account and incorporates day-to-day financial activity, updating estimates of retirement spending based on current spending figures.
The Personal Capital dashboard — part of the free offering — lets you view your entire financial picture in one place. You can easily view aspects such as net worth, cash flow, portfolio balances and portfolio allocation. A holdings module shows you how all of your investments are performing, letting you view them by percentage of your portfolio, dollar amount, and whether they’re “gainers” or “losers.”
Dedicated financial advisors: This is clearly what sets Personal Capital apart from a standard robo-advisor: Paid clients have access to financial advisors who can answer their questions about retirement planning, refinancing, obtaining a mortgage and more. Clients with less than $100,000 invested have access to one dedicated advisor; those with balances of $100,000 or more have two assigned to their accounts. Advisors are available via phone, email or video chat, and the company has offices in Denver and San Francisco where local clients can meet advisors face-to-face.
Clients who invest $1 million or more are part of the company’s “Private Client Group,” which provides private banking services. Users also receive an integrated investment plan that includes assets not held with Personal Capital, such as real estate investments, stock options and personal businesses.
Where Personal Capital falls short
Management fee: Managing your investments with a financial advisor would cost significantly more than working with Personal Capital; the average advisor charges over 1% of assets managed. But compared with other robo-advisors, Personal Capital is clearly on the high end when it comes to fees. Investors with balances under $1 million pay 0.89%, while competitors like Wealthfront and Betterment charge up to 0.74% less. At all three services, trade costs are included. Personal Capital is also more expensive than similar hybrid offerings, like Vanguard Personal Advisor Services: Vanguard charges 0.30%, with investment fees ranging from 0.05% to 0.19%.
Account minimum: Personal Capital’s $25,000 minimum still puts its paid service out of reach for many customers. That said, given the fee structure, the company clearly caters to higher-net-worth investors.
The bottom line
Personal Capital’s free tool offerings are comprehensive, intuitive and enlightening; it outstrips competitors like Mint when it comes to investing insight, and most consumers could benefit from an account. DIY investors can use the asset allocation and fee analysis tools to check their work. Beyond that, the paid advisory service will appeal to investors who are looking for a high-touch robo-advisor with management fees that are lower than a human financial advisor’s.