Personal Capital has carved out a niche in a sea of robo-advisors for being less robo, more advisor: The service uses computer algorithms in the background, but each client is paired with dedicated human financial advisors. That high-touch approach makes it unique in the field and allows it to charge higher account management fees: Costs here range from 0.49% to 0.89% per year depending on account balance.
Separate from its managed accounts service, Personal Capital also offers a slew of financial and investment planning tools that are completely free. Users can link their existing accounts and track spending, net worth, portfolio performance, retirement progress and fees.
January 1, 2017
Personal Capital is best for:
- High-net-worth investors.
- Hands-off investors.
- Tax optimization.
- 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 0.09%
|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 nonretirement accounts
• Roth, traditional, SEP and rollover IRAs
* Personal Capital will advise on 401(k) and 529 plan allocations, but does not directly manage those accounts
|Tax strategy||Tax-loss harvesting included on all accounts; assets are allocated across tax-advantaged and taxable accounts according to tax impact
|Automatic rebalancing||Free on all paid accounts|
|Customer support||Access to financial advisor via phone, email or video chat. Clients with $100,000 or more get a second dedicated financial advisor.
Where Personal Capital shines
Investments: Personal Capital’s paid services fall into two tiers: Clients with $25,000 to $100,000 are invested in a customized portfolio of exchange-traded funds that carry a weighted average expense ratio 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 the piece of the puzzle that sets Personal Capital apart from a standard robo-advisor: Clients have access to financial advisors who can answer questions about everything, including retirement planning, refinancing and obtaining a mortgage. This, too, is a service divided by account balance: Clients with under $100,000 invested have access to one dedicated advisor; those with $100,000 or more have two dedicated advisors assigned to their account. These advisors are available via phone, email or video chat.
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 stacked up against robo-advisors, Personal Capital is clearly on the high end when it comes to fees: Investors with under $1 million will pay 0.89% of assets managed; many robo-advisors charge closer to 0.25%. Even compared with similar hybrid service Vanguard Personal Advisor Services, Personal Capital is more expensive: Vanguard charges 0.30% for that offering, though clients get a dedicated advisor only if they invest $500,000 or more in assets.
Account minimum: The $25,000 minimum puts the paid service out of reach for many customers. That said, given the fee structure, the service clearly caters to higher-net-worth investors.
Is Personal Capital right for you?
Personal Capital should appeal to two main kinds of investors who fall on opposite ends of the spectrum: DIY investors who can use the company’s free and comprehensive tools to gain valuable insight into their portfolios, and high-net-worth investors who want access to a financial advisor at a discount.
Updated Jan. 3, 2017.