April 27, 2017

Personal Capital Review: Is It Worth It?

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Personal Capital bills itself as a robo-advisor with a human touch. You get personalized service, but the fees are slightly higher. Is it worth it?

Personal Capital has an interesting all-in-one wealth management approach.

One part of Personal Capital is a robo-advisor, but with real human financial advisors to help design a personalized strategy for your needs. This makes it a stand-out from other robo-advisors.

The other part of Personal Capital is a free money management tool. You can link all your financial accounts to get a snapshot of your financial life all in one place, including net worth, spending analysis, retirement planning progress, and portfolio performance.

Personal Capital's goal is to help you manage your financial life with confidence. It combines cutting-edge tools with real experienced advisors to come up with the best plan for you. They aim to make investing more affordable so you keep more in your pocket.

Does it live up to the promise? Read on for a full review of Personal Capital to determine if it's right for you. In this article, we'll cover:

PROS:

  • Easy setup
  • No cost to join
  • Robo-advisor, but with real human advisors included in fee
  • Advanced money management tools
  • User-friendly mobile app

CONS:

  • Higher fees than competitor robo-advisors
  • $100,000 minimum; aimed at the affluent
  • No budgeting software

HOW MUCH DOES PERSONAL CAPITAL COST?

Personal Capital is aimed more towards very high net worth investors. The more you have to invest, the lower the fees. The minimum required for investment services is $100,000.

The annual fee structure is:

  • 0.89% for the first $1 million
  • 0.79% for $1 million - $3 million
  • 0.69% for $3 million - $5 million
  • 0.59% for $5 million - $10 million
  • 0.49% for over $10 million

These are all-inclusive management fees. So there is no additional trade commission fees or any other hidden fees. The fees are higher than competitors (like Betterment), but you do get financial advisors to help design a strategy best for you.

Tip: Personal Capital has higher fees. For example, if you have $100,000 worth of assets, you would need to pay $890 a year for their management service. In comparison, Betterment's fee of 0.25% (for the basic service) means you'll only pay $250. Even if you choose the Plus service, it'd still be just $400. More on Personal Capital vs. Betterment later.

Personal Capital's fees are even higher than Vanguard, which has a Personal Advisor service for those with $50,000 or more. The flat rate fee for Vanguard is just 0.30%, or $300 for $100,000 worth of investments.

Personal Capital also offers a set of completely free money management tools (which we'll get into later). Even if you don't want to enroll in the investment service, you can still use Personal Capital for free to manage your financial life.

GETTING STARTED

Initial setup is pretty simple. Sign up for a Personal Capital account and link all your external financial accounts. This can be your current banks, CDs, trading platforms, etc. Personal Capital is linked to over 12,000 financial institutions, so you should have no problem finding your accounts.

Once you are satisfied that you have linked everything, you can schedule a free consultation. The advisor will go over your current financial state, retirement goals, risk tolerance, and any big financial plans in the future. You'll get a personalized investment strategy based on your goals. If you choose to go ahead with it, you'll open an investment account and fund it.

A WORD ABOUT SECURITY

Is it safe to link all your finances to a company that's only been around a short time? Personal Capital uses a 2-step authentication process and encryption similar to that used by other financial institutions. You'll have to authenticate each device you use via a text or phone call, which should give you some peace of mind if you have multiple devices.

But personal responsibility is also important - always make sure you sign out of any financial-oriented program you use.

Did you know? Personal Capital's CEO is Bill Harris, who was the former CEO of PayPal and Intuit. He also co-founded PassMark Security, which designed the authentication process used by most of the major banks in the U.S. It provides the highest level of security to Internet bankers.

PERSONAL CAPITAL'S MONEY MANAGEMENT TOOLS

As we mentioned earlier, you can use Personal Capital for free to just manage your financial life. You don't have to enroll in the investment service. So even if you have just a bank account and a credit card or two, this site is still useful.

Here are some of the free money management tools Personal Capital offers:

  • See your cash flow: Personal Capital will track your deposits and spending based on your debit and credit card use and ATM cash withdrawals across all your accounts. It's hard to calculate yourself exactly how much you spend, so with this, you can see just how much of your income you use each month.

  • Track your spending habits: Do you know where your money goes each month? Personal Capital will gather all your transactions in one place, so you can see the exact amount you spend for each merchant and category. If you find that way too much of your income goes to baked goods, then perhaps it's time to cut down.

  • Learn your net worth: Your net worth is simply your assets minus your liabilities. Once you have linked all your accounts, Personal Capital will calculate your net worth. It'll also continue to automatically update it based on your ever-changing financial situations (such as investment gains or losses). You'll get a weekly update of your current net worth.

  • Fee analyzer: This is the place where most people lose money without even realizing it. Most investment accounts charge fees, including trade and administrative fees, and banks even charge you fees for checking and savings accounts if you don't keep a minimum.

    A bit like your own private financial detective, Personal Capital tracks fees and shows you where you might be wasting money. You can use this information to call your bank and see if they can reduce the fees or find a better account for your needs.

  • Portfolio performance: The Investment Checkup tool helps you analyze whether your current strategy is meeting your financial goals. Based on your goals and risk tolerance, Personal Capital will advise you if you need to change your allocation (like more bonds and less stocks). It will give you suggestions on how to reduce risk while maintaining performance.

  • Retirement planner: This is one of the most advanced retirement calculators out there. Based on all the accounts you have linked, it will automatically calculate projected income, investments, and Social Security distributions. You can also manually add in big financial events like buying a house, wedding, having a baby, and kids' college expenses. The program will take all this info and come up with a realistic look at what your retirement will look like.

PERSONAL CAPITAL'S ROBO-HYBRID INVESTMENT SERVICE

What sets Personal Capital apart from other robo-advisors is that you get the full support from a team of financial advisors.

Most robo-advisors work off of a computer algorithm based on goals and risk tolerance that you input. Personal Capital adds a more human touch. It has a whole committee of advisors and researchers who manage your assets. They take the time to understand your current situation and goals to design a customized strategy.

The level of service you get depends on your balance. Here is what you get at different balance levels (keep in mind that the minimum required for financial advice is $100,000):

  • Up to $200,000: you get a financial advisory team, a tax-efficient ETF portfolio, dynamic tactile weighing, 401k advice, and cash flow and spending insights

  • $200,000 to $1 million: you get 2 dedicated financial advisors, customizable stocks and ETFs, a full financial and retirement plan, college savings and 529 planning, tax loss harvesting, and financial decisions support

  • Over $1 million: you get priority access to advisors, customized investment portfolio mix, family-tiered billing, private banking services, private equity and hedge fund review, deferred compensation strategy, and estate attorney / CPA collaboration

How it works: During your consultation, the advisors will come up with a personalized strategy for you. After that, the automated software will do the investing and maintenance of your portfolio. But you still have access to advisors anytime you want if your situation changes. They are there to help and will make any necessary adjustments. Advisors are available by phone, emails, and video chat.

PORTFOLIO MANAGEMENT

Personal Capital's goal is to yield the highest returns with the least risk. Some of the features it has includes:

  • Diversified portfolio: Like most robo-advisors, Personal Capital invests your assets with ETFs, because they don't incur too many expenses. The portfolio is also globally diversified with U.S. stocks and bonds (it contains over 70 stocks), international stocks and bonds, and cash for liquidity. A financial advisor works with you to identity the optimal investments for your goals.

  • Disciplined rebalancing: Once you have an investment strategy, it's not unusual for it to drift over time, since investments increase (or shrink) at different rates. For example, let's say you wanted 50% stocks, but with growth, your assets are now 60% stocks. When the allocation is skewed, it may no longer be at the correct risk level for your goals. Personal Capital reviews your portfolio daily and automatically rebalances it whenever it identifies an issue.

  • Optimal tax strategy: Personal Capital helps reduce your taxes with a strategy called Tax Loss Harvesting, which works to take a tax deduction on the loss to offset capital gains. And it'll automatically place high-yield stocks into accounts with tax breaks (like IRAs). Note that this feature is only for those with over $200,000 invested.

APP

The Personal Capital app is available for both Android and Apple devices. Like the computer software's easy-to-read platform, the app breaks down your assets, liabilities, investments, credit card debt, mortgages, and any other financial information in a mobile-friendly manner. You can also access your info via a date range (back to the prior year), read tips and research online, or contact your financial advisor.

The app is easy to use at a glance, and even changes colors (green for assets, red for liabilities) as you scroll to readily point out what you own and owe.

How It Compares

PERSONAL CAPITAL VS. BETTERMENT

Betterment is one of the most popular robo-advisors out there right now. It has a much lower fee structure than Personal Capital, so beginners may feel more comfortable with that. The annual fee for the basic service is just 0.25%. Plus, there is no account minimum, whereas Personal Capital's minimum is $100,000.

However, because of the low fee, Betterment is truly just a robo-advisor. The software invests for you based on your age, goals, and risk tolerance. Low net worth investors do not get any kind of real human financial advisor services. So you are basically completely trusting a computer to correctly design and allocate your investment strategy.

If you have a balance of $100,000 or more, you could choose to upgrade to the Plus service (0.40% fee) and you get one yearly call with an advisor. And if you have $250,000 or more, you can get the Premium service and get unlimited calls with financial experts. The annual fee is 0.50% at that level, which is still lower than Personal Capital's fee of 0.89% for the first million. But you will get more personalized service with Personal Capital.

Betterment does not have such advanced money management tools. We do like its SmartDeposit feature though, which automatically sends money to Betterment when your bank account exceeds a certain balance. This is an easy way to make sure you're investing your extra cash.

PERSONAL CAPITAL VS. MINT

Another user-friendly financial assessment program is Intuit's Mint. This popular software is also free and operates similar to Personal Capital's money management service. But unlike Personal Capital, Mint is aimed at more of a mass market and people who are just starting out, rather than high net worth investors.

It focuses more on your everyday spending and budgeting than it does your future income. Mint might be a better choice for those who just want to see their financial life all in one place. There's no focus on investments and strategy. Mint is simpler and doesn't flash a neon sign about what you're worth, like Personal Capital does (perhaps Mint is really for the less secure among us).

But Personal Capital has proven to be more dependable when it comes to interfacing with your accounts, syncing them, and calculating the data quicker. Both platforms are strong when it comes to giving you a clear view of your financial life, so it's certainly worth trying both out and seeing which one suits your needs best.

BOTTOM LINE

Personal Capital aims to be different by providing excellent wealth management tools, a robo-investment platform, and real human financial advisors.

You can use Personal Capital's money management tools at no cost. These are some of the most advanced tools on the market. It doesn't hurt to sign up for the free account to get a handle on your financial life.

But if you want to enroll in the investment service, the fees are much higher than other robo-advisors. You do get personalized service from financial advisors, which is supposed to justify the cost. But beginners with not too much to invest may still find it high. If you have a LOT to invest (as in, millions), the fees get lower and is good value for the level of service.

Cynthia Cohen is a retail analyst at CreditDonkey, a stock broker comparison and financial education website. Write to Cynthia Cohen at cynthia@creditdonkey.com. Our data-driven analysis has been recognized by major news outlets across the country and has helped investors make savvy financial and lifestyle decisions. (read more)

Disclaimer: Opinions expressed here are those of the author's alone. Please support CreditDonkey on our mission to help you make savvy financial decisions. Our free online service is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content.

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March
27
2017

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