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Updated on Thursday, August 27, 2020
Personal Capital offers robo-advisory services as well as comprehensive financial planning and the ability to buy individual stocks. Describing itself as a “digital wealth manager,” Personal Capital requires a minimum investment of $100,000 to access its professional investment management services, although anyone can access its online portfolio tracker.
|Investment minimum||$100,000 (basic online services accessible for $0)|
|Management fee||0.49% to 0.89%, depending on account balance|
|Accounts offered||Individual, joint, traditional IRA, Roth IRA, rollover IRA|
|Access to human advisors||Yes|
- What is Personal Capital and how does it work?
- Personal Capital investment approach
- Personal Capital fees
- Personal Capital features and tools
- Personal Capital user experience
- Personal Capital safety and security
- Alternatives to Personal Capital
What is Personal Capital and how does it work?
As a digital wealth manager, Personal Capital uses a combination of technology and hands-on advice from human financial advisors to construct portfolios for clients primarily in the “mass affluent” range.
Those holding portfolios of $100,000 to $200,000 are offered investment options that are essentially robo-advised collections of exchange-traded funds (ETFs), overseen by a financial advisory team. Investors with between $200,000 and $1 million have access to dedicated advice and specialist support as well as individual stocks. And people with over $1 million in investable assets enjoy one-on-one, comprehensive financial planning and access to individual bonds, while those with $5 million or more gain access to private equity investments.
- Free online financial planning tools: For investors who don’t have the $100,000 or more to invest with Personal Capital’s financial advisors, a host of helpful online personal financial management tools are available for free. Personal Capital offers a free online portfolio tracker and a recession simulator in addition to proprietary tools like the firm’s Retirement Readiness Score and Fee Analyzer.
- Access to human advisors: Even at Personal Capital’s lowest investment management tier, a financial advisory team is assigned to oversee accounts. At higher tiers, investors have access to two dedicated financial advisors.
- One-on-one, comprehensive financial planning at lower fees: For investors who qualify for Personal Capital’s higher tiers, holistic financial planning incorporating a client’s entire financial picture is available, and the annual fees are lower than what most would pay at full-service brokerage houses. For example, brokerage powerhouse UBS charges as much as 2.50% in its various advisory programs, while the highest rate that Personal Capital charges is 0.89%.
- Tax-optimization and access to private equity: Personal Capital harvests tax losses for clients across all investment tiers, and those with $5 million or more can access private equity investments.
- No advanced services for accounts with less than $100,000: Clients need at least six figures in their accounts.
- Fees higher compared to those at other robo-advisors: Although Personal Capital fees are generally below those charged by some full-service brokerage houses, they generally are higher than fees at other robo-advisors. While Personal Capital accounts of $100,000 to $200,000 cost 0.89% annually, competitors like Wealthfront and Vanguard charge just 0.25% and 0.15% a year, respectively.
- No individual stocks offered at lowest tier: Personal Capital only offers exchange-traded fund (ETF) investing for accounts with balances between $100,000 and $200,000. While many robo-advisors only offer ETF investing at any price level, full-service and online brokerages typically allow stock investing from dollar one.
Personal Capital investment approach
Personal Capital’s investment approach is a step up from those by traditional robo-advisors because it acts as a fiduciary. This means the company is required by law to act in a customer’s best interest, unlike other robo-advisors that are required only to make suitable investment recommendations.
|Investment options||ETFs, individual stocks and bonds, private equity|
|Tax loss harvesting|
|Socially responsible investing|
Personal Capital’s investment methodology has six components:
- Personal strategy: Customized portfolios are based on individual client needs and preferences.
- Asset allocation: Six asset classes are integrated to structure long-term portfolios.
- Smart weighting: Economic sector, style and size are more equally weighted than in traditional market cap-weighted indexes.
- Security selection: Liquidity, cost and the role of a security in the overall portfolio are among the factors considered when choosing securities.
- Tax optimization: Various strategies, from asset location and tax loss harvesting to the tax efficiency of individual securities, are incorporated to reduce client tax burdens.
- Disciplined rebalancing: Portfolios are reviewed daily for rebalancing opportunities.
Like at many robo-advisors, Personal Capital’s overall investment strategy is modeled on Modern Portfolio Theory, which aims to squeeze out the highest possible returns for a given amount of risk. However, Personal Capital also utilizes mean-variance optimization and the efficient frontier in constructing portfolios — in other words, it digs even further into the statistical wormhole to find more data-based correlations to improve risk-adjusted return.
Personal Capital integrates information from a client’s investor profile and real-time financial account data to both create an investment strategy and determine when to make changes to client accounts. Monte Carlo simulations are also used, in which a wide range of future possible investment outcomes are modeled and then evaluated statistically.
Assets are allocated across six broad investment categories:
- U.S. stocks
- International stocks
- U.S. bonds
- International bonds
- Alternatives, such as real estate and commodities
Personal Capital’s Smart Weighting strategy aims to provide better risk-adjusted return by incorporating three key factors: economic sector, style and size. Each of these factors are weighted equally to provide better portfolio diversification, avoiding the overweighting that is common in market-cap indexes.
When selecting securities, Personal Capital takes a top-down approach, meaning it focuses on macroeconomic factors — such as Global GDP, interest rates and monetary and fiscal policies — before it chooses individual securities. Portfolios are broken into 12 style box categories and 10 economic sectors, which includes dividing the traditional large-cap style box category into large- and mega-cap stocks. Individual stock selection involves using additional screens, along with an analysis of the optimal number of stocks.
Personal Capital takes a three-pronged approach to optimizing taxes for clients:
- Tax-sensitive asset location: Generally speaking, asset location entails allocating higher-yielding investments into tax-deferred accounts, and keeping lower-yielding investments in taxable accounts.
- Tax loss harvesting: Personal Capitals’ tax loss harvesting strategy is tied to each investor’s personal tax return, with losses strategically taken in accounts as necessary.
- Tax efficiency: Tax efficiency primarily focuses on buying individual stocks and ETFs versus mutual funds, which are often less tax-efficient.
Personal Capital fees
- Annual management fee: 0.49% to 0.89% depending on account size
- Investment expense ratios: Variable
Personal Capital has a tiered structure when it comes to its annual management fees. Accounts with at least $10 million have the lowest annual fee at 0.49%, while accounts between $100,000 and $1 million carry the highest fee, at 0.89% annually.
|Personal Capital Annual Management Fee Schedule|
Investment Services & Wealth Management Clients
|Account size||Annual fee|
|$100,000 to $1 million||0.89%|
|First $3 million||0.79%|
|Next $2 million||0.69%|
|Next $5 million||0.59%|
|Over $10 million||0.49%|
There are no additional commissions charged on top of Personal Capital’s annual fee. However, you’ll still face annual fees, in the form of the expense ratio, from any ETFs you may invest in.
Personal Capital doesn’t charge any commissions for rebalancing transactions.
Personal Capital features and tools
Cash management account
Personal Capital offers a simple cash management account that has no fees or minimum balance requirement. As of August 11, 2020, the rate offered by the Personal Capital Cash account was 0.05% APY, or 0.10% APY for advisory clients. The account allows wire transfers of up to $1 million with no fees and withdrawals of up to $100,000 daily. The account is FDIC-insured up to $1.5 million through Personal Capital’s partner banks.
Personal Capital uses software that analyzes portfolios daily for rebalancing opportunities. As a general rule, asset classes are rebalanced when they become a few percentage points out of whack, whereas individual securities might be rebalanced after moving more than 0.50% from their intended target.
Socially responsible investing
Personal Capital has a robust socially responsible investing platform. It has partnered with Sustainalytics, a firm with more than 25 years of experience in researching and rating Environmental, Social and Governance (ESG) and corporate governance. Personal Capital uses this data to construct portfolios in accordance with its overall asset allocation strategies, including Smart Weighting, tax loss harvesting and rebalancing.
401(k) fee analyzer and fund cost tool
Personal Capital allows you to link your 401(k) plan to your account so that you can access the firm’s proprietary Retirement Fee Analyzer. Once you see the cost of your funds, the tool allows you to research mutual fund or ETF alternatives to lower your costs. You can also link other portfolio accounts to run the same analysis, as the Fee Analyzer works with several different types of portfolios, not just retirement accounts.
Personal Capital offers an Investment Checkup tool to see how well your investments are performing and how you can improve it. The tool allows you to compare your existing asset allocation to an ideal target portfolio allocation to identify where you can make improvements.
Personal Capital user experience
Personal Capital is invested in the client experience, and it shows in the firm’s user interface. On a computer, the Personal Capital site provides extensive, feature-rich information without being cluttered. The experience also translates well to the firm’s mobile apps, available on both Google Play and Apple’s App Store. The easy-to-use apps offer some of Personal Capital’s key features, including the Investment Checkup and Fee Analyzer features.
You can reach Personal Capital’s customer service line at 855-855-8005, available Monday through Friday from 6 a.m. to 6 p.m. PT. You can also submit an online form or email [email protected] for assistance.
Personal Capital safety and security
- FDIC insurance
- SIPC insurance
- Two-factor authentication
Your funds in Personal Capital’s cash management account are insured by the Federal Deposit Insurance Corp. (FDIC) for up to $1.5 million, thanks to the partnerships it has with various banks.
FDIC insurance applies to cash in banking accounts. As Personal Capital is also a securities dealer, it is required to carry SIPC insurance as well. According to the terms of the Securities Investor Protection Corporation (SIPC), investment account assets are insured for up to $500,000, while the coverage for cash in those accounts is limited to $250,000. Both FDIC and SIPC insurance protect account holders against firm insolvency, but not against market loss.
If you choose to activate multi-factor authentication with Personal Capital, you’ll receive a code via phone call or text message every time you log in to your account. You’ll need to enter this code to gain access to your account.
Alternatives to Personal Capital
Personal Capital offers a great free interface for non-clients looking to keep tabs on their portfolios. Investors looking to put at least $100,000 to work will benefit from access to real financial advisors and a professionally managed portfolio, while those with at least $1 million to invest gain access to two dedicated advisors and a host of advanced financial planning services.
That being said, fees are higher compared to those charged by other robo-advisors. If you’re interested in exploring what other options are out there, one of the firm’s main direct competitors is Betterment, while SigFig might be more appealing to those with less cash on hand to invest.
|Company||Account minimum||Annual fee||Accounts offered|
|Personal Capital||$100,000||0.49% to 0.89%||Taxable, retirement|
|Betterment||$0 to $100,000||0.25% to 0.40%||Taxable, retirement and trusts|
|SigFig||$2,000||0.25% (first $10,000 free)||Taxable, retirement|
Personal Capital vs. Betterment
Betterment is a strong competitor for Personal Capital because it charges a lower fee for similar services. Betterment’s basic tier, Digital, has no account minimum and charges 0.25% annually, compared to the 0.89% annual fee charged by Personal Capital at the $100,000 tier.
While the $100,000 tier at Personal Capital is the minimum investment required for robo-advisory services, the same $100,000 at Betterment gets you unlimited access to certified financial planner (CFP) professionals for guidance on life events and outside accounts, all for an annual rate of 0.40%.
Personal Capital still maintains advantages over Betterment at its upper tiers, notably in the access it offers to two dedicated financial advisors and the ability to buy individual stocks and/or private equity investments.
Personal Capital vs. SigFig
SigFig caters to smaller investors. SigFig’s investment minimum is just $2,000, versus $100,000 for Personal Capital, and its fees top out at just 0.25%. SigFig will also manage the first $10,000 of an investor’s portfolio for free.
Whether or not you pay for SigFig’s investment management services, you can link your existing portfolios at other brokerage firms and receive free portfolio tracking. SigFig also offers free, in-depth portfolio analysis and can suggest investment strategies tailored to your personal financial needs. Paying customers also have unlimited access to SigFig’s team of investment advisors.
All information included in this profile is accurate as of August 27, 2020. For more information, please consult Personal Capital’s website.