As I’ve discussed in my Mint review, I think Mint is great as a budgeting tool but inadequate for investment planning. Mint is targeting people who are just starting out with their finances.
Frustrated with Quicken, I wished for a service that focused more on the investing side of personal finance: retirement, asset allocation, and taxes. I discovered Personal Capital over four years ago, and it appears to have answered most of my wishes. Personal Capital has been awarded CNBC’s Disruptor 50 for two years in a row, and rated best personal finance app by Investor Junkie.
History of Personal Capital
Founded in 2009, Personal Capital has currently 1.3 million registered users and more than $270 billion in assets are tracked on the platform. Personal Capital is a Registered Investment Advisor (RIA) with the SEC and recently passed the $3.5 billion mark in accounts under management.
Bill Harris, the founder and CEO, has a long history in the personal finance software space. In case you don’t know, Harris is the former CEO of Intuit and PayPal. According to Crunchbase, Personal Capital is well funded with over $200.3 million in venture capital.
Personal Capital service is targeting aspiring wealthy people whose net worth is from $25,000 to $3 million in liquid assets. This is a market that is traditionally underserved by Wall Street.
These individuals have high enough net worth to have complicated finances but previously were not profitable enough for Wall Street to target. This is where companies like Personal Capital, Wealthfront, FutureAdvisor, and Betterment are focusing. In my opinion, this is the future of financial management.
Traditional financial advisors target individuals in only the ultra-high net worth category. Individuals below that threshold typically have to fend for themselves. Using available technology, Personal Capital can offer personalized service at a much lower price point than previously possible.
What Is Personal Capital?
Personal Capital is really two services combined into one — a free financial tracking tool, and a paid financial advisory service. In this detailed Personal Capital review, I’ve broken it into two sections. Click on the link to jump to the section you are more interested in.
Testing Personal Capital’s Free Financial Software
To give Personal Capital a complete test, I created a free account. I then added more than 15 accounts: bank accounts, credit cards, mortgage and investment accounts (which I especially focused on). For the review, I used accounts that contained taxable investments, IRA, 401(k), 403(b) and alternative investments such as offered by peer-to-peer lending service Lending Club.
I had no issue syncing up these accounts, and the process was painless.
Personal Capital Features
|Mobile App||Yes – Apple iOS and Google Android|
- Retirement Planner (New) — Find out if you are on target for retirement. Currently this feature is available only on the website and iPad app.
- Budgeting (New) — Follow weekly, monthly and yearly income and spending habits with their Cash Flow Analyzer spending tool. Currently this is available only on their mobile app.
- 401(k) Fee Analyzer — This useful feature tells you how much your retirement plan is costing you. For most people, the amount lost to fees will surprise you.
- Investment Checkup — Get high-level recommendations on your investment asset allocation. By determining your risk profile, Personal Capital will recommend an asset allocation that’s right for you.
- Asset Allocation Target — Are you overweight or underweight in any of the major equity categories?
- Upcoming Bills — Shows a report of upcoming bills and their due dates.
- Email Notifications — Get daily or weekly summaries of your investment portfolio and spending.
- Website and Mobile App — Not only can you access the service by their website, but also on iOS and Android mobile devices.
- Apple Watch App — As if using your iPhone app isn’t enough, Personal Capital was one of the first services to add Apple Watch app functionality.
Personal Capital recently improved their cash flow feature — monitor your inflows and outflows.
Personal Capital’s Retirement Planner
With Personal Capital’s Retirement Planner, you can finally answer the question of whether or not you have enough saved for retirement, and with a good degree of confidence.
This feature allows you to access spending goals and income events and project future portfolio value. Then the Retirement Planner pulls all this together and tells you what kind of shape you’re in for retirement.
There aren’t many good retirement planning tools out there. Even the paid tools I’ve seen lack many features. Personal Capital’s tool is perhaps one of the most comprehensive tools I’ve seen — free or paid. There’s a multitude of variables available in it, and you can play many what-if scenarios with your finances.
You do not have to enter your assets and accounts manually, it automatically populates the information.
Similar to the Retirement Planner tool, Personal Capital’s 401(k) Analyzer derives your annual 401(k) expenses from the accounts you add within the service. Then based upon some assumptions, which you can adjust, you can see the annual fees that are eating into your retirement plan over time. Even in my family’s case, where our annual expenses are 0.38%, at the time of retirement the total cost out of our retirement plans is expected to be over $500,000! You must pay close attention to the annual fees within your 401(k) plan.
- Complete View of Your Finances — Encompasses all of your finances in one easy-to-use service. Personal Capital, gives you access to all your finances in one location. Personal Capital calls it a "360° View of Your Financial Life."
- Powerful Investment Checkup — It's a decent starting point and should be adequate for most individuals, though it doesn't give concrete and actionable items, and I suspect the reason is to upsell you on their advisor service.
- Apple iPhone, iPad, Apple Watch and Android support — The app 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.
- Easy To Use — Account setup is brain-dead simple. Their user interface navigation and reporting is well laid out.
- Custom Allocation of Unknown Assets (New) — Personal Capital now allows you to categorize unknown assets.
- Great Reporting — Similar to Morningstar's X-ray tool, Personal Capital offers a great way to drill down into asset allocation and performance.
- All Inclusive Wealth Management Fee — Personal Capital's paid service annual fee includes everything to manage your account. So there's no hidden fees.
- 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.
- Budgeting Tool Needs Improvement — You can monitor cash flow and spending. Budgeting within Mint is easier to use. The spending feature within Personal Capital is available only on the mobile app and not within the website.
- Category Customization — You cannot create customized categories; you're stuck with the ones they've already created. Though the ones created should be sufficient.
- Cannot Reconcile — You cannot reconcile your monthly bank statements to ensure all transactions are accounted for. Though since the transactions are coming from your bank directly they should be in sync.
- Expensive Wealth Management Service — Compared to traditional advisors they are much cheaper, but expensive when compared to robo-advisors without the human guidance.
- $25k Minimum for Wealth Management Service — In order to consider to be a client of Personal Capital you need at least $25,000 of investment assets. This is higher than competing robo-advisor services.
Personal Capital’s Security — Is It Safe?
The security is similar to Mint’s service. Personal Capital, and now recently Mint requires you to register each computer you use. You must authorize the device you are using. Personal Capital will send you either an email or phone call to verify.
Personal Capital’s registration process is a poor man’s version of two-factor authentication. There’s nothing wrong with this, and in fact, I applaud Personal Capital for having this feature. I wish this level of security were available with all financial institutions.
Once your computer is registered, you will not need to go through this process again.
On iOS devices that support the fingerprint scanner, login to Personal Capital’s app is via a swipe of your finger. It’s not foolproof, of course, though it’s a nice touch and an added layer of security.
The account information you enter within Personal Capital isn’t stored in plain text. They store a one-way encryption token to gain future access to your account.
You cannot perform any withdrawals or transfers from within Personal Capital’s service. All information via their service is read-only.
Lastly, unless you enter your account information into comment fields (which you shouldn’t do), your account information is not displayed anywhere.
For more information about Personal Capital’s security, read our interview with Fritz Robbins the CTO of Personal Capital.
Personal Capital’s Wealth Management Service
Their website, of course, is free to use (following the freemium model). You are under no obligation to use their fee-based advisor service. Personal Capital Advisors can help manage your financial portfolio. Their annual fees for investment services are as follows:
Personal Capital Fees
|Deposit Amount||Annual Fee|
|$1 Million or Less||0.89%|
|For clients who invest $1 Million or More|
|First $3 Million||0.79%|
|Next $2 Million||0.69%|
|Next $5 Million||0.59%|
|$10 Million or More||0.49%|
You need at least $25,000 to start using their service. Personal Capital is apparently trying to go after higher-net-worth individuals and squarely compete against the high-fee financial advisors like Edward Jones.
The fees at Personal Capital are much lower than traditional financial advisors. Wealth management, trade costs and custody fees 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. To schedule a consultation with your advisor you do it within the service.
Wealth Management Features
- Smart Indexing — Incorporates Modern Portfolio Theory and equal sector/size weighting.
- Supported Accounts — Traditional IRA, Roth IRA, Joint Accounts, Trusts and Taxable accounts.
- Minimize Fees by Direct Investing — By directly investing in stocks instead of ETFs you can reduce annual fees.
- Tax Loss Harvesting — Minimize taxes in taxable accounts.
- Automatic Rebalancing — When your portfolio varies passes your determined asset allocation, Personal Capital will automatically rebalance your portfolio.
- Advise for 401(k) and 529 Plans — Personal Capital cannot directly manage these accounts but will give advise.
The asset allocation gets interesting, though. Personal Capital uses baskets of individual securities and ETFs to create a model portfolio. Personal Capital is well aware annual fees can decrease the performance of your investments for the long haul. By using index funds with their annual fees adds expenses on top of Personal Capital’s management fee. Therefore, using index funds decreases your annual return. Instead Personal Capital invests in individual stocks in a basket of funds.
By investing in individual securities your portfolio is more tax efficient as well (if your investments are in taxable accounts, of course). So while their basket of funds won’t mirror an index fund exactly, it will come very close and should have lower fees and taxes. Also, with individual securities, Personal Capital can better manage the taxes you pay via a process called tax-loss harvesting (TLH).
They also offer “Personal Funds” that target a specific investment objective, but unlike a mutual fund, you own the individual securities rather than a mutual fund.
Personal Capital’s financial software is free to use. You are under no obligation to use their wealth management services.
Personal Capital’s personal finance app is currently the best online service to monitor your portfolio. It does right with investing, whereas Mint does not. This is why Personal Capital is on our list of recommended investment tools.
In fact, I like Personal Capital so much that it has replaced Quicken for managing my finances.
The retirement planner is second to none; I found it very useful to perform a number of roleplaying situations. Their investment checkup tool is great for high-level recommendations.
For me, 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. Compared to traditional advisors they are cheaper than the standard 1%–2% advisors normally charge, though they are not cheap when compared to competing robo-advisors.
For those who don’t know how to allocate their investments appropriately, however, Personal Capital is a godsend. 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.