As I’ve discussed in my Mint.com review, I think Mint is great as budgeting tool but poor for investment planning. Mint is targeting people who are just starting out with their finances (Generation Y and Z). As I mentioned previously, I wished for a web 2.0 app that focused more on the investing side of personal finance; retirement, asset allocation, and taxes.
I discovered Personal Capital over one year ago, and it appears to have answered most of my wishes. This review has been updated for 2015.
Personal Capital History
Bill Harris is the founder of Personal Capital, and has a long history in the personal finance app space. In case you don’t know, Harris is the former CEO of Intuit and PayPal. In addition, Personal Capital’s portfolio recommendations is powered from another four year old company he co-founded. MyVest has raised $52.3 million in venture capital.
From my research, many of the Personal Capital employees are former Intuit employees – including the product manager I spoke with. Oddly enough, many parts of the application has a “Quicken like” feel.
Over 200,000 users are now using Personal Capital, and has in excess of $20 billion assets being tracked on the platform. Personal Capital is a Registered Investment Adviser (RIA) with the SEC, and recently passed the $200 million dollar mark in accounts under management.
Personal Capital is targeting aspiring wealthy people whose net worth is from $100,000 to $2 million in liquid assets. A market that is under-served by Wall Street.
High enough in net worth to have complex finances, but previously not profitable enough for Wall Street to target. This is where companies like Personal Capital, FutureAdvisor, and Betterment are targeting. In my opinion, this is the future of financial management.
The high-end brokerage houses typically only target individuals in the ultra high net worth category. 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.
Testing Personal Capital
To give Personal Capital a complete test, I added over fifteen accounts: bank accounts, credit cards, mortgage and investment accounts (which I especially focused on). For the tests I setup accounts that contained: taxable investments, IRA, 401(k), 403(b) and alternative investments such as peer-to-peer lending service Lending Club.
Just like Mint, the process is quick and easy. I had no issue syncing up the same accounts in Personal Capital.
Personal Capital has a lot of features and focused (not surprisingly) primarily with investing and retirement planning.
- 401(k) Fee Analyzer – This useful feature tells you how much your retirement plan is costing you. For many, the amount lost to fees is surprising.
- Investment Checkup – This tool has been recently improved. Get high level recommendations to your investment asset allocation. By determining your risk profile, Personal Capital will recommend an asset allocation that right for you.
- Asset Allocation Target – Are you overweight or underweight in any of the major equity categories?
- Fund Costs – How much in annual expenses does it cost you with each fund you own?
Personal Capital vs. Mint
- More Reliable Synchronization – Mint.com uses their own in-house system to sync with the financial institutions. At times it has been unreliable and breaks synchronization. Personal Capital uses Yodlee to perform the syncing, which has been a much more stable service from our testing.
- Customer Service – This is a sticking point with many Mint.com users — no customer service. Every time I’ve contacted Personal Capital, I’ve gotten a quick response (less than 24 hours) to my questions.
- Investment Focus – More focus on investing and retirement planning with Personal Capital, rather than just budgeting.
- Ad Free Service – Besides offering their advisory service (see below) there’s much less up-selling of products and services. Mint constantly recommends third-party products and services to you.
- Better Reporting – The interactive investment graphs in Personal Capital break down your investments with ease.
- Security – With their two factor authentication, security is more robust with Personal Capital.
- No Budgeting – This is one area in which Mint is better. Mint allows you to create budgets with their service, whereas Personal Capital can only show cash flow.
- Holistic View Of Your Personal Finances – Encompasses all of your finances in one easy to use service. While I use Betterment’s service for investing, it doesn’t include the big picture. Personal Capital, on the other hand, gives you access to all your finances in one location. Personal Capital calls it a “360° View of Your Financial Life.”
- Integrated Investment Portfolio – With retirement accounts with one broker and taxable investments with another, it’s hard to have a complete picture of your asset allocation. Personal Capital imports them all into one central location.
- Great Reporting – Similar to Morningstar’s X-ray tool, Personal Capital offers a great way to drill down into asset allocation and performance.
- Apple iPhone, iPad and Android apps – The app’s features are similar to the desktop edition and can be used on the go.
- The You Index™ – It’s a performance metric of all of your current stock, ETF and mutual fund holdings extrapolated backward. It does not include your cash, money market funds, individual bonds, options or other alternatives. Basically showing how your stock portfolio is performing over time.
- Powerful Investment Checkup – It’s a decent starting point and should be adequate for most individuals though doesn’t give specific actionable items.
- No Budgeting – As mentioned in the difference between Mint.com and Personal Capital there’s no budgeting feature available. For some this might be a show stopper. For me, personally, I’m more concerned about monitoring my investments. I already know our monthly outflows, and Personal Capital shows this in one of their reports.
- Unaware of Tax Deferred Accounts For Reporting – This isn’t as much of an issue than previously. Personal Capital used to have a report that’s no longer available showing annual tax costs. The current reports no long focus on taxes but about asset allocation and expenses.
- Asset Allocation is Not Customizable – Personal Capital has predetermined asset allocation models. This is adequate for most, but not if you want to vary from their recommended allocations.
- Incorrect Allocation of Investments – In my tests, some investments were not categorized for one reason or another. You unfortunately cannot manually change an unknown or incorrect to it’s correct investment sector.
The security is similar to Mint.com’s service, but overall much better. Unlike Mint, Personal Capital requires you to register each computer you use. To authorize the device you are using, Personal Capital will send you either an Email or phone call to verify.
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 Personal Capital has this feature. I wish this level of security was available with all financial institutions like banks.
Once your computer is registered, you will not need to go through this process again. All of these features, in my opinion, are needed with Mint but isn’t available.
Personal Capital’s Wealth Management
Their web site, of course, is free to use (following the freemium model), so you have no obligation to use their fee-based services. Personal Capital Advisors help manage your financial portfolio. Their annual fees for investment services are as follows:
Personal Capital recently introduced a new fee schedule, and is lower than previous. For individuals with $1 Million or less the fee is now 0.89%. Previously the fee started at 0.95% basis points.
For clients who invest $1 Million or more the fee schedule is as follows:
|First $3M||Next $2M||Next $5M||Over $10M|
With these changes in pricing they are obviously trying to go after higher net-worth individuals and squarely compete against the high fee financial advisors.
The fees are 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, even if you don’t use their wealth management service. It’s been reported 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 well aware that 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.
By investing in individual securities your portfolio is more tax efficient as well (if your investments are in a taxable accounts). 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. In addition with individual securities, Personal Capital can better manage the taxes you pay via a process called tax loss harvesting.
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. You are at no obligation to use their wealth management services. Personal Capital’s investing section is currently the best online service to monitor your portfolio. It does right with investing that Mint.com does not. This is why Personal Capital is on our list of recommended investment tools.
For some, a lack of a budgeting tool within Personal Capital is a showstopper. For me personally I’m not a big fan of budgeting tools, and their usefulness is overblown. Once you know your monthly expenses it should be pretty straightforward. If you really need budgeting — signup for Mint.com as well and use both services simultaneously.
Their investment checkup tool is very useful for high level recommendations. 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. I actually enjoy researching and managing our investments.
I could see for others, Personal Capital is a godsend because they have no idea how to properly allocate their investments. If this describes you, then you should consider their lower than average cost financial advisory service.
Readers: Have you used Personal Capital? Please make your comments below.