Personal Capital Review – A Look at This Firm’s Wealth Management Services

About Personal Capital

PersonalCapital.com is combination robo-advisory and live human wealth management firm that integrates investment management and personal finance tools onto a single intuitive platform. It enables users to link all their financial accounts to track, analyze and manage investments and finances. The intuitive design and layout cannot be understated here. Everything is linked in one place to provide a seamless and transparent picture of all the components that comprise your net worth. Highly sophisticated algorithms, innovative models and seasoned human advisors are at the ready, but it comes at a price with a minimum account balance of $100,000.

History

Launched in 2009 as SafeCorp Financial by co-founders Bill Harris, Louis Gasparini, Rob Foregger and Paul Bergholm, the Redwood City, CA-based company became an SEC registered investment advisor and rolled out its services by 2012 under the name Personal Capital. The Company added an all-star roster of experts including a former SEC commissioner and Nobel Prize winner and father of Modern Portfolio Theory to refine its offerings. Evolving through the years, Personal Capital’s wealth management services have grown to over 19,000 customers with over $9 billion in assets under management.  

How Personal Capital Works

Personal Capital provides free personal finance tools and premium robo-human wealth management services. They have established the highly effective model of combining automated portfolio strategies with human advisors.

Free Financial Tracking Tools

The free Personal Capital financial tracking tools enables budgeting and financial planning functions. Users can link all their brokerage accounts, bank accounts and even credit card accounts onto a single platform to derive an accurate net worth. Users can monitor their investments, assets, liabilities, debt and spending. Retirement Fee Analyzer provides some shocking insights into the amount of annual expenses incurred in 401Ks and IRAs by retirement. It’s astounding like sub-1% fees can add up and compound eroding performance. The convenience of having all this data is an eye opener. As users gets acclimated to the tool, higher net worth investors can migrate to the paid wealth management services.

Personalized Wealth Management Services

Personal Capital is one of the few hybrid robo-advisors that successfully merge algorithmic and interactive human advising services. Every wealth management client is assigned a personal licensed human advisor. Once users get their complete financial overview through the tracking tool, the next focus is on growing investments. The robo-advisor portion will analyze your accounts and suggest recommendations including optimized portfolios. There’s plenty of flexibility for clients to adjust settings like risk levels, financial target levels, scheduled deposits and investments. The robo-advisor performs automated rebalancing as well as tax optimization strategies including tax-loss harvesting where they will swap out similar ETFs and offset capital gains with underperforming assets to minimize tax liabilities. Unlike most robo-advisors, Personal Capital also invests in individual stocks via personalized baskets. Clients are assigned a dedicated investment advisor at the ready to address any questions and to help plan and execute strategies anytime.

Account Requirements

Personal Capital Managed Accounts require a minimum $100,000 balance to become a client. Clients receive full access to robo-advisor and human advisor services. Accounts are U.S.-based and clients must be 18-years of age. 

Personal Capital Pricing and Fees

Personal Capital’s wealth management fees range from 0.89% on balances up to $1-million down to 0.49% on balances over $10-million. The powerful financial management tools are free with no obligations, just for registering. 

Indirect Fees 

As with most exchange-traded-funds (ETFs), there are indirect fees to consider in the form of expense ratios. The average indirect fee on the index ETFs range around 0.08%. 

Personal Capital Platform 

Personal Capital is accessible via online, mobile and even wearable devices including Apple Watch via iOS and Android operating systems. The intuitive design gets right to point with your net worth and investments. Users can then use the tabs to delve deeper into the data. The tools are literally self-explanatory and very simple to use.  

Personal Capital Investing Tools

Personal Capital has many investing tools for users of all skill and experience levels. The retirement analyzer  is one of the best on the market in terms of ease-of-use. The various fee analyzers illustrate how tiny fees add up through the years and suggest ways to minimize fees and optimize investments. Users can set goals and let the algorithms determine what needs to be invested and where to meet them. 

Automated Investing

Once deep investor profile is created, the robo-advisor takes over. It’s sophisticated modeling technology is a result of oceans of big data personally applied to each individual situation. Automated re-balancing and tax optimization is integrated seamlessly and transparently. 

Personal Capital Portfolios

Personal Capital develops personalized portfolios that align best with deep investor profiles. Human Certified Financial Planners expertise id combined with personalized, data-driven goal-planning and management. They take cash flow needs into consideration utilizing their Monte Carlo engine to predict needs. 

Smart Weighting and Dynamic Portfolio Allocation

Personal Capital is very strict with its allocation modeling and that is one factor that users can’t adjust. For most, it’s likely for the best based on oceans of historical data. Unlike other robo-advisors, Personal Capital doesn’t shy away from investing in individual stocks. Risk is mitigated with their Smart Weighting diversification and Dynamic Portfolio Allocation strategy that is form-fit to changing market conditions and client lifestyles. 

Efficient Frontier 

The Efficient Frontier is the area where performance is best optimized. Portfolios that fall outside of the range tend to underperform. Personal Capital’s algorithms always try to maintain portfolios on or near the Efficient Frontier by applying mean-variance optimization to all six asset classes to maximize returns while minimizing risk.

Personal Capital Performance

They also have the confidence to post their performance on six portfolios, which have mostly matched or beat the comparable benchmark since inception. Notably, their Aggressive Composite Personal Strategy Portfolio has outperformed the benchmark by nearly 100-basis points since inception. 

Comparisons

Personal Capital offers both a free finance management tool and the sophisticated robo and human advisor wealth management services. While many of the larger robo-advisors like Betterment and Wealthfront provide access to human advisors, Personal Capital seems to be more streamlined with the integration from the get-go by assigning a personal advisor.

Personal Capital Key Differentiators

Personal Capital is exceptionally user-friendly and intuitively designed. Users can monitor their Net Worth displayed boldly right from the dashboard and login, whereas key competitor Mint users must navigate through the Trends tab to find it between Net Assets and Liabilities. Mint also doesn’t compare with Personal Capital in terms of managing investment accounts. Linking financial accounts to the app is seamless and can have users manually enter in assets and liabilities that can’t be linked. This is an advantage over the Mint app, which is restrictive when manually adjusting items. 

Trustworthiness

Personal Capital is a broker-dealer member of FINRA and investment accounts are covered by SIPC. The company has been around since 2009 and has over $10 billion in assets under management. 

Who is Personal Capital Best Suited For?

Personal Capital is suited for higher net worth investors due to the $100,000 minimum account value requirement to take advantage of its wealth management services. As for investor skill levels, it helps to have some market experience but the access to human advisors and controlled asset allocation models makes it easy for newer investors to get acclimated. The higher starting balance makes it more appealing to older investors who have built up a nest egg to work with. Millennials just starting out will find other apps with micro-investing functions more suitable. 

Pros

• Free Personal Finance tools enable users to link financial accounts and monitor net worth and cash flow on a single platform
• Sophisticated data-driven portfolio optimization using Smart Weighting and Efficient Frontier strategies
• Automated tax-loss harvesting and tax-efficient strategies
• Human Certified Financial Planner assigned to every Wealth Management client
• Strong management of notable all-stars
• Intuitive and easy-to-use layouts and self-explanatory financial tools like Fee Analyzer and Portfolio Checkup

Cons

• Expensive wealth management fees
• High account minimum of $100,000 is prohibitive for smaller investors