Personal Capital Review What You Need To Know

Thinking about getting started with Personal Capital?

Personal Capital is a rapidly growing digital wealth management company that provides free state-of-the-art financial tools to help people better manage their finances. Having free access to their feature-rich technology-driven platform can help people achieve their financial goals and build wealth.

Personal Capital’s digital wealth management arm provides comprehensive services with personalized financial advisors working with you on your investment wealth strategies.

Personal Capital Advisors Corporation (“PCAC”) compensates The Cents of Money for new leads at no cost to you. We have become an affiliate of the company since creating an account.  Thank you.

We provide our Personal Capital Review of the company’s free financial tools with comprehensive features and impressive wealth management services with their pros and cons.  

Note: Personal Capital is offering clients who open an account and fund above $250,000 within 30 days of account opening, six months of free advisory services valid through March 31, 2022.

What Is Personal Capital?

Founded in 2009, Personal Capital offers a comprehensive range of free online personal finance tools. These tools attract clients to its growing fee-based wealth management business serving high net-worth users.  In August 2021, Personal Capital became a wholly-owned subsidiary of Empower Retirement, the leading retirement services provider. The company has been a registered investment adviser with the SEC since 2012.

Founded by Bill Harris, who served as CEO of Intuit and PayPal, Personal Capital has a strong management team supported by key contributors that provide strategic advisory expertise.

Personal Capital has become a legitimate player in a strong field of traditional and emerging wealth capital providers. Key contributors include the economist Harry Markowitz, the “Father of Modern Portfolio Theory” used for portfolio construction for wealth management clients. Also,  behavioral economist Shlomo Benartzi has worked on retirement savings studies.

Free Personalized Tools

Personal Capital’s free money tracking app gives users access to free easy-to-use tools on its dashboard on a robust digital platform. Personal Capital’s holistic ecosystem allows syncing of financial accounts in one place.  Users can gain insights into their budget, track spending, cash flow, retirement savings, investments, and net worth. Once on their platform, a financial advisor will provide you with a free financial assessment of your goals and portfolio.

The company can undoubtedly entice its users with at least $100,000 in investable assets to consider their lucrative wealth management services.

There is a good fit for those using the online tools to develop their financial prowess and amass assets to make the jump to having a dedicated financial advisor in the future. We will discuss both aspects of the company and highlight their respective pros and cons.

Who Is Personal Capital Best For

Personal Capital’s free money tracking can attract all users who want greater control over their finances, but it targets high net worth individuals who will benefit from wealth management. Being able to review your budget, see the inflows and outflows of money, you can become more mindful of your money, set financial goals, and take steps in creating a financial plan

The company’s wealth management services are not just for those already wealthy. It is for people striving to build wealth in an optimized way and will want to protect generational wealth in the future.

As of July 2021, Personal Capital had more than three million people and families using free financial tools tracking over $1 (million or billion). They have over $20 billion in assets under management (AUM), representing wealth management clients from  $100,000 to over $10 million in assets in the US. High net worth individuals with a minimum of assets will want to investigate Personal Capital’s wealth management services and respective tier offerings.

 Not A Robo-advisor

It would be a mistake to categorize Personal Capital’s wealth management as a Robo-advisor. However, Personal Capital does more than that. Instead, Personal Capital uses its digital technology (and artificial intelligence) to serve its clients with human financial advisors and personalized service.

What are Robo-advisors? The first Robo-advisors began providing services during the Great Financial Crisis in 2008. They set up automated investing plans and provide advice based on algorithms designed by human financial advisors. Since their beginning, Robo-advisors have become more mainstream, some offering live advisors at a higher cost, while traditional wealth managers have added Robo-features for investors with fewer assets.

Personal Capital has better features to manage your finances while providing personalized wealth management services to enhance your potential for financial prosperity.

The Bottomline

Personal Capital provides an excellent entry for an average person to take advantage of its superb free suite of budgeting and other financial management tools. They can upgrade to wealth management services and have access to dedicated advisors to help them create a financial plan and achieve long-term goals.

A Quick Glimpse At The Pros And Cons

 

Pros of Personal Capital 

  • Free comprehensive state-of-the-art digital tools and an excellent budget app for financial management.
  • Ability to have 360 reviews of your budget, net worth, cash flow, savings, spending, retirement, investments in one place.
  • Free investment review.
  • Can upgrade to wealth management services and access to dedicated fiduciaries for retirement planning, portfolio construction, and tax optimization strategies.
  • Takes security seriously with its high-grade features. 

Cons of Personal Capital

  • High Account Minimum
  • High Management Fees

 

Pros In Depth

Easy To Open An Account Connecting Your Financial Accounts For The Best Experience

Opening your account is straightforward, starting with providing your personal information. For the best experience, users should connect all their essential financial accounts, notably banking, retirement, investment, mortgage, credit cards, and other loans.

Connect Your Accounts To View Finances In One Place

You are linking all of your accounts to get a 360-degree view in one place. This action is not only convenient but smart as it may highlight problems you may not readily realize when you review your accounts separately. It was eye-opening for me to track my spending, review my investments, and see the heavy exposure I had to growth sectors but less so to financial and energy sectors.

What financial accounts should you link to Personal Capital? You should include:

  •  Bank savings accounts
  • Checking accounts
  •  Emergency funds
  • Money Markets/CDs
  •  529 college savings plans
  • UTMAs
  • Social Security
  • Retirement Accounts, including 401K and Roth IRAs
  • Taxable investment accounts
  • Mortgage Loans
  • Student loans
  • Credit Cards/Debit Cards
  • Any Personal Loans

By aggregating your assets and liabilities,  Personal Capital helps you get a better picture of your budget, spending, savings, net worth, retirement,  investments, and other financial areas that feed into their tables and charts.

If you have never done this before, or even if you did, it might cross your mind to worry about safety and security. It was a concern of ours, and we looked into Personal Capital’s security features and felt more comfortable. We address this issue below. That said, no company can provide a 100% guarantee when there are major cybersecurity threats against companies like Microsoft.

Once on the platform, the company is prompt with reaching out to new users to introduce them to a financial advisor and their wealth management. There is no mandatory requirement to opt into the investment business, but learning about this opportunity is a good idea.

Is Personal Capital Safe?

This question is reasonable to ask when you consider opening an account with Personal Capital or any financial institution and potentially exposing your hard-earned money. Personal Capital secures all data with AES-256 encryption, using the same rigorous standards as the US military.

When logging into your account, you will encounter multi-factor and biometric identification. Personal Capital operates a crowdsourced security bounty program with people looking for security gaps they will fix quickly.

Personal Capital Innovative  Free Money Tracking Tools

The money tracking tools are in Banking, Planning, and Investing, containing several money tracker tools when you sign up for an account. Each area has differentiated tools designed to give you a deeper perspective. The free planning tools are well worth your attention and reap several benefits.

Beyond the free tools is their Wealth Management services, where you can open up a fee-based account if you have at least $100,000 in investable assets. It is not mandatory to sign up for this account to get the free tools. We will review this service below.

A Visually Appealing Financial Dashboard

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The dashboard gives you a sense of your total financial picture in a very pleasing visual way. You see your financial picture based on your connected accounts and profile, and it is efficient to see all of your accounts in one place. You’ll be wondering why you didn’t do it sooner.

You can easily toggle between the different sections, so you can instantly see your net worth, track your income and spending, and review your investments. By pouring through the information, you can track your outflows and consequences of spending too much in the previous month so you can accumulate more savings for investments.

The free financial tools provide essential information to help you better manage money. You receive tips on the dashboard like telling you to add your mortgage even if you are about to close on your property.

Know Your Net Worth At Any Time

Net worth is among the essential benchmarks you need. Everyone should track their net worth and its asset and liability components. When you log on to your dashboard, your net worth statement is what you see first by design. You get a real-time holistic view of your net worth broken into categories that belong to assets and liabilities. You should become familiar with this statement and its inflows and outflows to understand how to build your wealth.

Assets are further split into liquid and less liquid resources. Knowing your liquid assets in the short term is even more essential in the event of emergencies that occur unexpectedly.

Liquid assets reflect cash, checking, high yield banking savings accounts, money markets (e.g., CDs), and your emergency funds. The less liquid assets are retirement savings, 529 college savings, UTMA accounts, and investments.

Liabilities refer to your loan balances on credit cards, car loans, student debt, and personal loans.

You can see your financial transactions listing chronological payments and receipts in the past month or longer. You have the flexibility to search for spending by category, like a restaurant you visited in the past week.  This money tracker helps you monitor your spending, and Personal Capital sends out a daily monitor with your transactions.

Excellent Budgeting App

The budgeting tool by itself is worth opening a Personal Capital account. Many consider the company’s budget app among the best available budget apps and deserve that praise. For those who need to create a budget to help their planning,  this tool is an excellent opportunity to get a comprehensive look at your household’s financial situation. Other budget apps, like Mint, do not offer the same services provided by Personal Capital.

It helps track your spending and loan payments by amount, date, percentage, and category. It is convenient to recognize trends you may be particularly watching. I can see if my spending rose this month and for which type, and make changes.

After a year of not socializing with friends,  I can see my restaurant spending rose significantly since we both got our vaccines and boosters. This trend is not unexpected, but dining out too often has sometimes gotten us in trouble. I’d rather know my spending levels than be surprised when I have to pay a hefty card balance ultimately.

It has been helpful to see my monthly spending down in several areas. The dashboard encourages you to put in spending goals for various categories which feed into your Retirement Planner.

Cash Flow Tool Provides Another View

Closely related to budgeting is the cash flow tool providing another way to look at my finances. I can compare the total cash flow to previous periods. Just like businesses have income, balance sheet, and cash flow statements, Personal Capital’s way of aggregating your accounts, provides different views of your money transactions in one place.

Cash flow gives you a picture of your income and expenses. To be financially secure, you need to spend less than you earn so you can accumulate more savings, pay off debt and invest more to build wealth.

Building wealth doesn’t happen overnight, but these financial tools can help you work on your money habits. You can see the various money relationships and make changes more readily if patterns signal problems.

Cash Management

Although Personal Capital is not a bank, they have a savings product through FDIC-insured banks, providing up to $1.5 billion in FDIC coverage. That is above the standard $250,000 in any bank per person’s account. You won’t get rich by saving money in this bank or any other with the current low rates. As of March 23, 2020, the APY has remained low at 0.05%. If you have an advisory account with Personal Capital, you can earn 0.07 to 0.10%, but that is not a wealth-maker.

Savings Planner

The savings planner uses three inputs: emergency funds, retirement, and debt paydown to calculate your annual savings. You can compare them to the previous year’s level and your savings goal when answering a questionnaire. It will also tell you if this amount is enough to fund your retirement goals or whether you will fall short and need to make changes to your plan. The plan makes recommendations of a more appropriate annual savings level for you.

This tool is especially valuable for young people not yet thinking about retirement savings. Knowing your long-term needs to start saving now is a prudent strategy.  On the other hand, if you are close to retirement and you have saved too little, it may open up a groundswell for you to want to hide. Don’t worry. They provide you with some suggestions to improve your status.

Retirement Planner

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The retirement planner has a retirement calculator that allows you to run simulations based on your portfolio and other significant financial events. You can input buying a home or simulating a recession. The feature-rich retirement calculator can estimate the accumulation of retirement savings and withdrawals over a person’s life based on your current age and possible retirement timeframe.

This impressive tool utilizes your accounts to analyze your monthly spending during your retirement and your portfolio allocation and risk tolerance to calculate your probability of retiring successfully. It can project your retirement spending ability based on your projected portfolio value, estimating your annual social security income and annual savings.

The tool bases the projected market value on 5,000 Monte Carlo simulations of expected cash flows, estimated annual returns, and inflation adjustments. It considers your 401K  and IRA investments, projected contributions, and employer matches. On top of that, you can plug in the recession simulator, which can negatively impact projections.

When you are less than 100% likely to retire successfully, the tool lets you know you need the flexibility to change your goals for spending, savings, paying off debt.

Retirement Fee Analyzer

We may buy individual stocks when we invest, but we often seek diversification through various mutual funds and ETFs. While diversification is essential, we should be paying attention to the respective costs of the funds. As the retirement fee analyzer tells us, we are paying too many fees to the issuers of these actively managed funds that may significantly reduce our potential wealth through high annual fees without necessarily higher returns.

Personal Capital uses a “Smart Weighting” approach using low-cost passive indexing, which provides excellent investment with low expenses. The fee analyzer makes an ideal case for passive investment funds over actively managed funds which may be costing us about 1% or more in fees but do not necessarily provide better performance.

Investment Checkup

This section analyzes your taxable and nontaxable accounts. The investment checkup analyzes your asset allocation and diversification based on your profile, including age, which provides proximity to your potential retirement. Like a medical check-up, it is looking at the asset composition of your investment portfolio.

What Is Modern Portfolio Theory And The Efficient Frontier

Personal Capital uses Monte Carlo analysis to project potential outcomes of Current Allocation and Target Allocation they recommend for your portfolio. The research involves a computer running thousands of simulations to identify probabilities to identify various outcomes. These allocations come from the efficient frontier.

In modern portfolio theory founded by Harry Markowitz, the efficient frontier is the set of optimal portfolios that satisfy the condition that no other portfolio exists with a higher expected return but the same risk.

In analyzing my portfolio’s risk, this tool examined my portfolio and found that having significant exposure to domestic US stocks could be enhanced by reducing domestic exposure and increasing international stocks for a more balanced portfolio.  As you move towards retirement age, you should maximize equity holding proportionately in favor of increased bonds.

The tool calculates historical risk and returns based on the most conservation and most aggressive portfolios, allowing users to slide between the two approaches. Typically, younger investors can accept more risk in their portfolios than older investors, who are more conservative.

In recent years, it has been difficult to find worthwhile returns in the bond market given the low-interest environment since the Fed brought the fed funds rates down to near zero. However, there will likely be more opportunities to buy bonds as inflation rises and the Fed increases interest rates. Series I savings bond with a 7.12% yield is one such security to explore.

Provides A Sector Analysis

The investment checkup looks at your holdings by sector. The checkup indicated that I had too much exposure to the technology sector. Amazon is my most significant individual stock holding at 1.76% of my portfolio, reflecting too much concentration risk among individual stock holdings. Having a 3% stake in any stock is grounds for trimming that position.

They also pointed out that one of my accounts was charging more than 0.30% in fees, signaling that I may need to make a change. This section encourages you to call your financial advisor to discuss potential action to take.

Valuable Feedback On My Investments

I found the checkup analysis of my portfolio to be very worthwhile, warranting some portfolio changes like having more utilities, real estate, and more bonds for a more balanced allocation.

As we get older, reducing risk in our holdings is good, shifting more allocation from equity to money market securities and bonds. Over the past year, the strong stock market has been an excellent place to be, but investors need to adjust to changing conditions.

In the investing section, you can see your investment holdings, balances, performances, your current and target allocations.  Personal Capital introduces the YouIndex, which reflects the performance for all your holdings, comparing your growth to that of the S&P 500 market proxy.

In allocation, you can see a colorful graph that indicates your holdings by market capitalization from small to large capitalized stocks and whether they are small-cap growth, value, or a blend of those traits. This breakdown is valuable as there may be times when you would prefer to have large blend stocks when the market becomes more volatile.

This section analyzes holdings by sectors, domestic/international, equity/debt, and their returns.

Wealth Management Fee-Based Services

Thus far, we reviewed the free tools that can provide a fantastic amount of information you can use to manage your finances better. You can have free access to some of the best tools available without becoming a wealth management client. However, their wealth management services can help you with investment and retirement planning, gain tax efficiencies, and help you better build your wealth. 

Personal Capital encourages you to meet with a financial advisor to get a review of your investment portfolio for free. This free perk gives you a chance to get a professional view of your assets and possible recommendations. Choosing a financial advisor is a significant decision, and don’t be afraid to ask questions of your prospective advisor.

Many people upgrade to this service if they qualify by having at least $100,000 in investable assets and want access to a team of financial advisors.

Personal Capital recently announced it is offering clients who open an account and fund above $250,000 within 30 days of account opening, six months of free advisory services valid through 31, 2022. This means they will not charge fees for six months, and this is an excellent way to experience their wealth management business. 

The wealth management fee-based business can pave the way for you to build long-term wealth by growing your investments, retirement planning, and optimizing tax strategies. They have three tiers to consider:

Tier 1 Investment Services

This entry-level is for those potential clients who have $100,000 to $200,000 in investment assets with fees of 0.89%. Clients will have unlimited fiduciary advice from a team of financial advisors on retirement planning and a professionally managed ETF portfolio. This level will not be able to invest in individual stocks, and they will provide financial and retirement guidance and a review on request. You won’t have a dedicated financial advisor at the tier, which may be a turnoff for some who prefer having a long-term relationship.

Tier 2 Wealth Management

The next tier is for those over $200,000 to $1 million paying the same fees of 0.89% but with more benefits. Clients will have two dedicated financial advisors specializing in areas like real estate or stock options. You’ll get a customized portfolio with individual stocks, regular retirement planning reviews, and tax optimization strategies. You may consult your advisors on areas like 529 college savings plans, buying a home, and estate planning.

Tier 3 Private Client

The highest tier starts for clients with over $1 million, fees will begin to decline to 0.79%, continuing to decrease for those with more significant investment assets. A client with over $10 million pays a lower rate of 0.49% in fees.

There is a bump up to more perks, including two dedicated financial advisors, priority access to Personal Capital specialists, and the Investment Committee with Certified Financial Planners and key experts in their field. In addition, clients will get in-depth support for retirement and wealth planning. If you have $5 million or more, you will have access to private investment options.

When considering Personal Capital, the fees may appear high at first glance. However, it depends on which competitive wealth management firms you are considering.

There is a big difference when comparing Personal Capital to Robo-advisors, who may charge lower fees in the 0.25% to 0.35% for digital-only and smaller minimums. Still, the costs will ramp up when you seek human advisors and other amenities.  Traditional wealth management companies like UBS and Morgan Stanley charge about 1% or more for $1 million assets under their management.

The wealth management services use a personal or customized strategy based on your financial goals. They use low-cost indexed funds and ETFs to keep your fees low. They will accommodate you with constructing their portfolio with an orientation towards socially responsible investing.

The core of its investment approach backed by its strategic experts is its Monte Carlo simulations that test probabilities of your current and target asset allocations. Personal Capital works to maximize your returns relative to your risk tolerance.

The tax optimization strategy helps to gain tax efficiencies in constructing your portfolio. These strategies should help to reduce your income tax liabilities.

Cons of Using Personal Capital

High Minimum For Wealth Management Services

A high minimum of $100,000 to access wealth management services as an entry point may seem out of range for many people. A Personal Capital study of its clients showed the typical American has investments outside of their retirement accounts ranging from $10,711 for the 20s age group to $210,972 for those in the 60s group.

Personal Capital’s minimum is high relative to Robo-advisors, which have minimal amounts, but traditional wealth managers set much higher minimums of $1 million or above for comprehensive financial management.

High Fees? It Depends

Personal Capital has tiered its fees of 0.89% on assets under management from its $100,000 minimum to $1 million. Fees will drop to 0.79% when you have assets over $1 million, continuing to decline to 0.49% for those over $10 million in assets. These fees are high relative to Robo-advisors who offer wealth management services for 0.25%-0.40% but may use more algorithms and less personalized services.

In contrast, Personal Capital uses a personalized approach with dedicated advisors to help individuals reach their goals. Personal Capital’s fees compare well to the higher fees by traditional wealth management firms in the 1%-2%.

Final Thoughts

If you are serious about managing your personal finances and building your wealth, you will want to consider Personal Capital. The company provides an excellent entry for an average person to take advantage of its superb free suite of budgeting and other financial management tools. You upgrade to wealth management services once you have at least $100,000 in investable assets and access dedicated advisors to help you carry out your financial plan and achieve long-term goals.

 Thank you for reading our review! Please visit us at The Cents of Money for more articles of interest. 

 

 

 

 

2 thoughts on “Personal Capital Review What You Need To Know”

  1. Unless they’ve changed their fee structure the drop from 0.89% to 0.79% occurs at $1Million, above $3Million it drops to 0.69%, above $5Million its 0.59% and above $10Million its 0.49%. I’ve got an account with them that’s a little over $1.5 Million and I pay 0.79%. Anyone with over $1Million in their account gets private client services which is as much individual modeling and advising as you want.

    Reply
    • Hi Steve,
      My apologies, I sent a message to you yesterday. and it may have bounced out. They have changed the fees or you are grandfathered in.
      I remember seeing what you are reflecting. The latest document I saw was:
      First million 0.89%
      First 3 million 0.79%
      Next 2 million 0.69%

      A bit confusing, so I am hoping to clarify this, Steve. Is there an email I could reach you?
      Linda

      Reply

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