Financial planning and wealth management used to be complicated and costly. Our roundup of the costliest retirement planning and savings mistakes gets into some of the reasons why.
These days, technology-driven tools and services allow for a more streamlined experience. Among my favorites is Personal Capital, a hybrid financial planning and wealth management platform that blends the high-touch service of human financial advisors and certified financial planners (CFPs) with the efficiency and budget-friendly cost structure of robo-advisors.
If you’re looking for a new investing partner, or simply want to engage in DIY financial planning with some unique financial tools, Personal Capital is worth a closer look. Here’s how the platform works, how to use its key features, and the advantages and drawbacks to consider.
Personal Capital Services
Personal Capital consists of two main services: free financial tools and investment management services. Personal Capital’s free financial tools are designed to illuminate your day-to-day and month-to-month cash flow, provide a clear snapshot of your assets and liabilities, and make it easier to create and stick to a realistic personal budget.
Like many investment managers, Personal Capital’s wealth management team charges clients based on the value of their assets under management (AUM).
To get started, you’ll provide some basic personal information and create a password. If you want to access Personal Capital’s tools on your mobile device, you can download the free mobile app, though the website works quite well on small screens too. For best results, link all of your financial accounts, including deposit accounts, investment accounts, and credit cards.
Once all your accounts are connected, Personal Capital’s financial tools provide a complete picture of your near-term, medium-term, and long-term finances. You can use them to:
- View and analyze your net worth and cash flow
- Analyze your current investment portfolio and spot opportunities or weaknesses, including unnecessary fees using Personal Capital’s Fee Analyzer tool
- Create a realistic monthly budget that incorporates recurring expenses, non-recurring expenses, savings, and income
- Create a retirement plan and analyze how well you’re adhering to it
- Plan and prepare financially for other major life events, such as buying a house and saving for your kids’ college education
Free Financial Tools
Read on for more information about each Personal Capital financial tool.
1. Account Dashboard
Your account dashboard is the hub of your Personal Capital account and the main gateway to the company’s free financial tools. Through your account dashboard, you can view your:
- Net worth
- Cash flow
- Portfolio balances and allocations
- Top portfolio holdings by percentage of your total invested assets
- Top portfolio gainers and losers
- Projected investment account fees
- Investment account returns
- Bank and credit card account balances and transactions
- Spending by account and category
- Customized spending reports
- Upcoming bills
- Income reports
2. Net Worth Tool
The net worth tool synthesizes information from your linked bank accounts, investment accounts, credit cards, and loans to deliver a quick snapshot of your net worth – the difference between the value of your household’s assets and liabilities. You can compare your net worth to other households in your age group or income bracket.
3. Budgeting Tool
Use this tool to build a sustainable household budget that aligns with your long-term saving and investing goals while honoring the core financial principles that should guide your spending and saving at any age. Set monthly budget targets and category-based spending limits, then use Personal Capital’s powerful analytics to find opportunities to save even more.
4. Cash Flow Tool
See how your cash flow is doing in the near term and adjust on the fly. This tool is a financial snapshot of the past 30 days – what’s coming in, what’s going out, and what you need to do to stay on track.
5. Fee Analyzer Tool
Personal Capital’s fee analyzer tool includes a calculator that adds up the fees charged on your current investments, including management fees, custodial fees, transaction fees, commissions, and expense ratios on mutual funds. You can use this information to make projections about the total impact of these fees over time.
6. Investment Checkup Tool
The investment checkup tool pits your current portfolio against the ideal portfolio for your financial goals and risk tolerance.
This tool lets you review your current level of risk and receive personalized allocation recommendations to reduce or optimize that risk. You can also play with various target allocations aligned with your risk tolerance, compare the to-date and projected performance of your current portfolio against different market benchmarks, and back-check your portfolio’s performance against your recommended target allocation.
Though this tool is useful, it’s a not-so-subtle pitch for Personal Capital’s wealth management services, which put your recommended target allocation into practice.
7. Retirement Planner Tool
The retirement planner tool is similar to the investment checkup tool, with a narrower focus on building the ideal retirement portfolio. It includes:
- A “retirement readiness” feature that assesses your current financial preparedness for retirement based on your stated retirement date
- A calculator that accounts for major income events (such as inheritances) and expenses (such as a child’s college education)
- A Monte Carlo analysis of the long-term implications of your current spending and saving patterns
8. Education Planner Tool
This tool helps you estimate your family’s future higher education costs, whether your last kid is about to ship off to college or your oldest is still in diapers. Personal Capital’s proprietary algorithms help project the likely cost of a four-year (or more) degree in the near, medium, and far future and help you set a sustainable plan to save and invest to reach that goal.
Investment Management Services
To qualify for Personal Capital’s investment management services, you must have at least $100,000 in liquid, investable assets, such as cash and securities, to place under management with Personal Capital.
Personal Capital built its wealth management services on the principles of modern portfolio theory (MPT), a famous investment ideology developed by Nobel Prize-winning economist Dr. Harry Markowitz. MPT is designed to allocate assets in diversified, periodically rebalanced portfolios that reliably match the broader market’s performance, achieve tax efficiency to the greatest extent possible, and honor investors’ risk tolerance.
Sign-Up & Onboarding Procedure
Signing up for Personal Capital’s wealth management services is easy. First, you’ll create a password-protected account, if you haven’t done so already, and provide some basic personal information. You’ll then be invited to schedule a quick free consultation with a Personal Capital advisor. There’s no obligation to move forward after this meeting; if you don’t like what you hear, you can move on without paying anything out of pocket.
As part of the onboarding process, you’ll conduct a longer onboarding call with your advisory team to outline your general financial goals, major life events in the past or future, investing risk tolerance, and other factors likely to affect the makeup of your portfolio and the services your advisor provides. Your advisors will be available during business hours to discuss your portfolio, goals, changes to your financial outlook, and other issues.
Wealth Management Tiers
Personal Capital’s wealth management vertical has three distinct tiers. Your tier is determined by your investable asset reserve:
- Investment Service ($100,000 to $200,000 in Investable Assets). This is Personal Capital’s basic tier, a solid entry-level option for younger and lower-asset investors who meet the $100,000 liquid asset minimum. Its features and benefits include all-hours (including nights and weekends) access to Personal Capital’s financial advisory team, portfolios built with tax-efficient ETFs and Personal Capital’s proprietary Smart Weighting™ technology, and custom advice on topics such as company retirement account asset allocations.
- Wealth Management ($200,000 to $1 Million in Investable Assets). This tier is appropriate for investors with substantial investable assets. Its features and benefits include two dedicated human financial advisors, tax-loss harvesting, customized advice and guidance on buying a home or refinancing a mortgage, college savings and 529 college savings plan allocations, and a broader range of investment options, including individual U.S. stocks.
- Private Client (Over $1 Million in Investable Assets). This is Personal Capital’s highest-touch tier. Features and benefits include priority access to Personal Capital’s investment committee and support team, bespoke investment opportunities (including venture capital, private equity, and angel investing), coordination with other financial and legal professionals (such as estate attorneys), hands-on retirement and estate planning, assistance with charitable giving activities, legacy planning (including trusts), and private banking services, such as non-purpose lines of credit.
No matter your tier, all Personal Capital advisors act as sworn fiduciaries, meaning they’re bound by oath to act in your best financial interests.
Based on your discussions with your advisor, your wealth management tier, and your long-term financial picture, Personal Capital develops a personalized portfolio for you.
In accordance with your risk tolerance and time horizon, your money may be allocated among six investment classes:
- U.S. stocks
- U.S. bonds
- International stocks
- International bonds
- Alternatives (a catch-all category that includes ETFs and commodities)
- Cash instruments
Conservative portfolios skew toward high-quality bonds and cash, while aggressive portfolios have higher stock and alternative weightings. If you start as an Investment Service client, bear in mind that your portfolio will consist exclusively of tax-efficient ETFs.
To compensate for market movements, Personal Capital periodically rebalances client portfolios when asset allocations or individual securities holdings stray too far from their targets. It also uses sophisticated tax-loss harvesting techniques – selling underperforming stocks to reduce taxable gains without adversely affecting the portfolio’s overall performance – and avoids investing in mutual funds, which can be less tax-efficient than stocks or ETFs.
If you care about the impact your investments may have on the world, look into Personal Capital’s socially responsible investing option, which you can read more about in this whitepaper. Be sure to read all investment prospectuses carefully as performance may deviate from mainline instruments’ averages.
All Personal Capital wealth management clients have access to The Financial Roadmap, a personalized financial planning tool that generates a prioritized list of 19 planning topics – like estate planning and employer plan analysis – based on each client’s data. The tool nudges clients to discuss high-priority topics with their advisors, reorders topic priority over time as clients’ needs evolve, and offers timely advice around smart money management moves like paying down debt or building an emergency fund.
Personal Capital’s wealth management fees are straightforward – a major selling point compared with traditional wealth management options, which are often intentionally complex. Personal Capital wealth management clients pay an all-inclusive annual management fee based on their assets under management, with no hidden fees or charges.
For clients with less than $1 million under management, the annual management fee is 0.89%.
For clients with more than $1 million under management, the management fee structure is as follows:
- $0 to $3 Million: 0.79%
- $3 Million to $5 Million: 0.69%
- $5 Million to $10 Million: 0.59%
- $10 Million and Over: 0.49%
For example, a client with $500,000 under management pays 0.89% on the entire amount. A client with $2 million under management pays 0.79% on the entire $2 million. A client with $12 million under management pays 0.79% on the first $3 million, 0.69% on the next $2 million, 0.59% on the next $5 million, and 0.49% on the final $2 million.
Here’s why you might want to plan and invest with Personal Capital.
- Financial Tools Are Always Free to Use. You never have to pay to use Personal Capital’s financial tools. They’re clearly designed to capture your attention and draw you into Personal Capital’s wealth management fold, but you’re never unduly pressured to become a paying customer.
- Easy-to-Understand Fee Structure. One of Personal Capital’s biggest advantages over traditional financial advisors is the simplicity of its fee structure. You pay a single, all-inclusive fee based on your assets under management, with no transaction fees, commissions, or other add-on charges. And should a dispute ever arise over pricing, you can easily check Personal Capital’s work with a calculator.
- Personal Capital Advisors Are Sworn Fiduciaries. Personal Capital’s wealth management team consists of sworn fiduciaries – advisors legally bound to act in their clients’ best financial interests, rather than in a way that maximizes their own earnings through fees and commissions. The benefit of the fiduciary model is self-evident, but investing novices are often shocked to learn just how many financial advisors are not fiduciaries.
- Holistic Approach to Financial Planning and Investing. Unlike its lean robo-advisor competitors, Personal Capital is about more than just efficient investing. And unlike project-based financial advisors, it’s more than a temporary pit stop on the road to financial independence. It’s a one-stop shop that helps you manage your entire financial life – one that scales as your wealth grows and flexes to accommodate inevitable life changes.
- Lots of Value-Added Advisory and Planning Services. Personal Capital has a slew of human-driven advisory and planning services – far more than robo-advisor platforms such as Wealthfront and Betterment. Depending on how much guidance you need, these additional services can easily justify Personal Capital’s higher fees.
- Low Fees for High-Net-Worth Individuals. If you’re fortunate enough to have a seven-figure pool of liquid assets at your disposal, your management fees will be lower than Personal Capital’s headline 0.89% annual rate – as low as 0.49% for assets over $10 million. Considering the advisory firepower you get with Personal Capital’s private client services, that’s a real steal. Most traditional fee-only advisors charge high-net-worth clients upward of 0.75%, and advisors with more complicated fee models can easily push their clients’ total annual obligations north of 1%.
- Automatic Tax Efficiency. Personal Capital uses an algorithm-driven tax-loss harvesting system that systematically sells underperforming securities for losses, reducing clients’ taxable capital gains. Advisors also optimize asset allocations for maximal tax efficiency – for instance, by holding high-yield dividend stocks and fixed-income securities in tax-deferred retirement accounts and tax-free instruments, such as municipal bonds, in taxable accounts.
- No Sales Pressure. Personal Capital’s business model is built around its wealth management services. That’s good for two reasons. One, the wealth management vertical subsidizes the company’s powerful financial tools. And two, Personal Capital doesn’t have to pursue partnerships or affiliate relationships with other financial institutions, such as credit card companies or insurance providers. Unlike totally free financial tools such as Mint, Personal Capital never serves you with ads for various financial products that you may or may not need.
Consider these disadvantages before opening a Personal Capital account.
- Investment Management Requires at Least $100,000 in Invested Assets. You must have at least $100,000 in liquid assets to invest with Personal Capital. Though this minimum is much lower than many traditional advisors’ (which can run as high as $500,000 or even $1 million), it’s nevertheless out of reach for millions of younger investors with limited incomes and assets. Robo-advisor competitors such as Wealthfront, Betterment, and Acorns have much lower minimums (in some cases, none at all).
- Management Fees Are Significantly Higher Than Robo-Advisor Competitors. Personal Capital’s management fees are significantly higher than pure robo-advisor platforms such as Wealthfront and Betterment – 0.89% annually for clients with less than $1 million in assets under management, compared with 0.25% to 0.35% at the typical robo-advisor. If reducing your management fees is an overriding concern, Personal Capital might not be the best fit – though you do get what you pay for.
- No High-Touch Option for Regular Clients. If you have less than $1 million in investable assets, you won’t qualify for Personal Capital’s private client services. While you’ll still have access to human financial advisors and the full range of Personal Capital’s reporting and analysis tools on demand, you won’t have a truly bespoke advisory experience. If you’re big on personalization and face time, look for a low-cost, fee-only advisor in your geographical area instead.
- U.S. Stocks Exposure Includes Individual Stock Holdings. The U.S. stocks portion of Personal Capital’s portfolio consists of 70 to 100 individual stocks. That’s a bit unusual in the fintech space; most competing online advisors, including Wealthfront and Betterment, populate their equity portfolios with baskets of low-cost ETFs and index funds. Personal Capital stresses that portfolios with at least 70 individual stocks have “statistically been shown to minimize stock-specific risk and achieve the desired factor weightings” and argues that stocks allow for better tax-loss harvesting opportunities. However, many economists and financial analysts remain wary of portfolios comprised entirely of individual company equities. If you’re aiming for the broadest possible diversification, ETFs and index funds may be preferable – though it’s best to consult a licensed financial advisor before making your final decision.
I devote a good chunk of my waking hours to poring over financial companies’ websites and testing out various fintech apps, and I can’t think of a website or app that’s left me with a better feeling than Personal Capital. More than any other portal, Personal Capital’s website combines an exhaustive level of detail with a clarity of purpose, thematic consistency, and unmistakable air of competence that, taken together, inspire confidence in the people behind the curtain.
If Personal Capital leaves you as impressed as it left me, you might be tempted to open an account with them. Just remember that the real proof is in the pudding – or, in this case, the performance.
Do you have any experience with technology-driven financial planning and wealth management? What’s your favorite platform?