As I’ve discussed in my Mint.com review, I think Mint is great for budgeting, but poor when used for investment planning. It appears Mint is targeting people just starting out with their finances (Generation Y and Z). As I mentioned, I wished for a web 2.0 app that focused more on investing: retirement, asset allocation, and taxes. I recently discovered Personal Capital, and it appears to have answered most of my wishes.
Personal Capital History
Bill Harris is the founder of Personal Capital. In case you don’t know, Harris is the former CEO of Intuit and PayPal. Personal Capital is powered from another company he’s co-founded called MyVest. Bill and company raised $28 million in venture capital for Personal Capital. Many of the employees are former Intuit employees, including the product manager I spoke with. Oddly enough, many parts of the web app has a Quicken like feel.
Personal Capital is targeting aspring wealthy people whose net worth is from $100,000 to $2 million in liquid assets. This is a market that is underserved by Wall Street. High enough in net worth to have complex finances, but not profitable enough for Wall Street to target. This is where companies like Personal Capital and Betterment are targeting, and it is, in my opinion, the future of financial management.
Typically the high-end brokerage houses target individuals in the ultra high net worth category, and individuals below that threshold typically have to fend for themselves. This is where Personal Capital with technology can offer the personalized service at a much lower price point than previously possible.
To give Personal Capital a test spin, I added a few accounts: bank accounts, credit cards and mortgage. Just like Mint, the process is easy and quick.
Personal Capital vs. Mint
- More focus on investing and retirement, rather than just budgeting.
- Less upselling of products and services. Mint recommends many products and services.
- A really neat interactive allocation graph that can break down your investments with ease.
- Today’s market movers within your portfolio, and your performance compared to the major indexes.
- Performance of your investments. Unlike Mint, Personal Capital currently cannot compare to the major indexes over time (but is a planned feature).
- Security is more robust with Personal Capital.
- Universal Checkbook – Deposit checks via their mobile app. Take a picture of your check and the funds are deposited.
- 401(k) Fee Analyzer – Find out how much your retirement plan is costing you.
- Tax Optimization – Are your investments fully optimized for taxes? Though currently Personal Capital does not understand the difference between taxed deferred accounts and taxable accounts (another planned feature).
- Investment Checkup – Are you meeting your retirement goal? It is simplistic compared to other planners, but a good starting point.
- Asset Allocation Target – Are you overweight or underweight in any of the major equity categories? This currently lacks customization with adjusting allocations and is currently hard coded to their formula (additional future feature).
- Fund Costs – How much in taxes and expenses does it cost you with each fund you own? Currently it does not understand taxable, and tax deferred accounts.
- Stock Option Tracker – Track the value of stock options and exercising from the company you work at.
- Encompasses all your finances. While I liked Betterment’s service, it doesn’t include the big picture. Personal Capital, on the other hand, gives you access to all your finances in one location.
- Gives you a broad overview of your investment portfolio. Many investors are forced to have accounts with multiple brokers. Personal Capital imports them all into one central location where you can view your asset allocation and tax mix.
- Similar to Morningstar’s X-ray tool (which they get their data from), Personal Capital offers a great way to drill down into asset allocation and tax optimization.
- Apple iPad app – Features are similar to the desktop edition and can be used on the go. There is no iPhone or Android app, yet (though planned).
- Deposit and fund Transfers between any accounts you hold. A great feature and unique to Personal Capital. They recently introduced the ability to transfer funds from one account to another (can be unrelated) all from within Personal Capital app. Allows you to transfer funds between accounts effortlessly.
- Has enough features to be useful and is a good product, but currently lacks some features to make an exceptional service. In discussing the issues with the product manager he stated they are constantly adding new features. I suspect some of the current deficiencies will be resolved in future product life cycles.
- Tax cost feature isn’t aware of accounts that are tax deferred.
- Asset Allocation is not modifiable – Personal Capital determines your asset allocation for you (which is good for many), but not if you want to vary from their recommended allocation. I inquired about this, and it was stated to be a planned feature in a future version.
- Incorrect Allocation of Investment – For at least one account I imported it incorrectly categorized my investment. There is no way to adjust this with Personal Capital. I imported my Lending Club account, and it categorized my notes as cash. I contacted customer service, who hasn’t yet determined the asset class Lending Club investments should be categorized. I consider it in the bond category, but they don’t. So in the their asset allocation it currently shows up in the wrong grouping.
The security is similar to Mint.com, but overall much better. Personal Capital requires you to register each computer you use. They will send you either an E-mail or text message via your cell phone. So their registration process is poor-man’s version of two-factor authentication. There’s nothing wrong with this, and in fact I applaud that they have this feature. I believe most financial institutions should implement this feature to thwart cyber attacks.
Once your computer is registered, you will not need to go through this process again. Like many banking sites, they also have a security image that you pick out from a list, preventing scrapped versions of their site from hackers. All of these, in my opinion, are needed with Mint.
Their web site, of course, is free to use (following the freemium model), so you have no obligation to use their fee-based services. Their annual fees for their investment services are as follows:
- $0 – $250,000 costs 0.95%
- $251,000 – $500,000 costs 0.90%
- $500,001 – $1,000,000 costs 0.85%
- $1,000,000 – $5,000,000 costs 0.80%
- Greater than $5,000,000 costs 0.75%
This is much lower than traditional financial advisor fees. Wealth management, trade costs and custody are included – you do not pay trade commissions. Every account gets a dedicated advisor. It’s been stated each advisor within the firm handles approximately 200 clients.
The asset allocation with them get interesting though. Personal Capital uses baskets of individual securities and ETFs to create a model portfolio. Personal Capital is aware annual fees can decrease the performance of your investment for the long haul. The logic is using index funds with their high annual fees adds on top of Personal Capital’s management fee. Therefore, using index funds decreases your annual return. In addition, individual securities are much more tax efficient (if it were in a taxable account). So while their basket of funds won’t mirror an index fund exactly, it will come very close, and should be lower in fees and taxes.
They also offer “Personal Funds” which target a specific investment objective, but unlike a mutual fund, you own the individual securities rather than a mutual fund.
Personal Capital service is free to sign up, and you are at no obligation to use their premium services. So from my experience, I like what I see so far. Though Personal Capital’s service isn’t perfect yet, I believe future versions of their service will be extremely powerful and will tap into an often ignored market.
For me, personally, I’m not sure I would use the wealth management service, though there is a valid argument why someone would want to use their service instead of doing it themselves. For me, it’s not because I don’t trust their service, it’s because of the lack of flexibility and I enjoy researching and managing our finances. If I did use their service, it would be for a small subset of our portfolio. I could see for others Personal Capital is a godsend because they have no idea how to properly allocate their investments for retirement.
Fellow readers try the service out. I’m curious what others think of their service. Please make your comments below.