Personal Capital Review 2020: Pros, Cons and How It Compares

Personal Capital is an online financial advisor, combining robo-advisor algorithms with access to human financial advisors for a more personal experience. The service requires a $100,000 minimum investment, and account balances of $200,000 or more get assigned two dedicated financial advisors; those below that have access to a team of advisors. Personal Capital charges an 0.89% account management fee, though that fee is discounted to as low as 0.49% for larger account balances.

Personal Capital's fee comes with a slew of financial and investment planning tools (some of which are free to non-customers), as well as the ability to link existing accounts and track spending, net worth, portfolio performance, retirement progress and fees. A retirement paycheck feature helps clients plan their withdrawals come retirement, including tax-optimized withdrawal strategies.

Personal Capital is best for:

• High-net-worth investors.

• Hands-off investors.

• Tax optimization.

• Free financial management tools.

• Access to human financial advisors.

Where Personal Capital shines

Investments: Personal Capital has three tiers of service:

• Clients with $100,000 to $200,000 in assets are invested in a portfolio of exchange-traded funds that carry a weighted average expense ratio of 0.08% and are designed to be tax-efficient.

• Clients with $200,000 to $1 million in assets receive all the benefits above, as well as the ability to customize a portfolio that includes individual stocks and ETFs.

• Clients with $1 million or more in assets receive the services above and the ability to invest in individual bonds.

Personal Capital's personalized approach takes a holistic view of a client's financial picture — not just the assets it manages. The company uses a portfolio selection process it calls Smart Weighting, which invests equally in all sectors, rather than mimicking an index like the S&P 500. The company says its portfolio management strategy reduces risk while increasing returns, the holy grail for investors. In Personal Capital’s hypothetical backtests, the strategy outperformed the S&P 500 by more than 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.

Personal Capital also has socially responsible strategies, which screen U.S. equities based on environmental, social and governance factors.

Tools: Personal Capital offers a variety of free and comprehensive tools, including an investment checkup, a 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.

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 tools and services increase along with the assets managed to include college savings planning; financial decisions support that covers insurance, home financing, stock options and compensation; private banking services; and estate, tax or legacy portfolio construction.

Dedicated financial advisors: This is clearly the piece of the puzzle that attracts high-net-worth clients: Those with balances of $200,000 or more get access to two dedicated financial advisors who can answer questions about a wide range of issues, including retirement planning, refinancing, estate planning, taxes and obtaining a mortgage. Clients with $100,000 to $200,000 invested have access to a team of advisors, all of whom have a fiduciary duty to clients. These advisors are available via phone, email or video chat. Advisors aren't always certified financial planners, but CFPs are available upon request.

Personal Capital Cash: Personal Capital joined a growing list of advisors that offer high-interest cash management accounts by launching Personal Capital Cash in June 2019. The account pays a 0.05% APY, requires no minimum balance and is not subject to Personal Capital's management fee — in fact, you do not have to be a Personal Capital investing customer to have the cash account. (However, those who do use both services will get a bump in their cash account's interest rate.) The account is also protected by FDIC insurance up to a balance of $1,250,000, besting competitor Wealthfront's protection of $1 million.

» Want to learn more? Check out our review of the Personal Capital Cash Management Account.

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 more than 1% of assets managed. If you have $200,000 or more, you'll have access to dedicated advisors and customized portfolios, and Personal Capital likely will save you money versus working with an independent advisor elsewhere.

Personal Capital investors with under $1 million will pay 0.89% of assets managed. Compared with similar online financial advisor Vanguard Personal Advisor Services, Personal Capital is more expensive: Vanguard charges 0.30% for that offering (up to $5 million), though clients get a dedicated advisor only if they invest $500,000 or more in assets. Betterment Premium, Betterment's answer to the hybrid model, charges 0.40% for unlimited phone access to advisors.

Account minimum: The $100,000 minimum puts the wealth management service out of reach for many customers.

» Check out our top picks for the best robo-advisors.

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 can deposit enough with the service to gain access to dedicated financial advisors and the services you'd get from working with a traditional human advisor.

Investors who fall in that $100,000 to $200,000 range, which only offers access to a team of financial advisors, can find a similar level of service for less at competitors such as Vanguard Personal Advisor Services.