Personal Capital is a free online and mobile personal finance and investment management app that’s been garnering a lot of fans both here on Money Under 30 and from Silicon Valley investors. I first found Personal Capital when we went looking for alternatives to Mint, the most widely-known personal finance and budgeting app.
After using Personal Capital for a few months myself, here’s a review of what it offers and who should consider it. Before we go any further, let me point out that since creating a Persona Capital account myself, Money Under 30 has become an affiliate of the company, meaning we may receive a commission for referring new users. If you decide to check it out, you’re helping support our free content at no cost to you, so thanks!
Personal Capital is first and foremost an investing app. Personal Capital aggregates checking accounts and credit cards, too, but it’s clear that their development priority is investing, which isn’t a bad thing. Unlike most personal finance management programs that make money by advertising or recommending products, Personal Capital’s business model is based upon selling investment advisory services to a small percentage of users.
So what can you see with Personal Capital?
Once you link accounts – from your bank accounts, brokerages, IRAs, and your 401(k), Personal Capital provides cool graphical tools that let you explore your entire investment portfolio – regardless of where you hold the assets. I’ve found this valuable for managing my overall asset allocation.
For example, in the recent stock market rally, the percentage of stocks I own compared to bonds has ballooned. Personal Capital lets me see just how much and identify the accounts in which I should sell some stocks and pick up alternative assets. Of course, that’s a basic example – Personal Capital can break down your portfolio by industry, market cap, and a host of other variables.
For the most part, the Personal Capital user experience is good. I’ve done most of my exploring on my laptop because the richness of their graphical reports lends itself to a bigger than 4-inch screen. As a result, their iPad app is also slick.
Like any app that has access to sensitive financial information, security is important. Personal Capital has two-factor authentication, meaning that whenever you login from an unknown device (or clear your cookies), you’ll be required to get a text message or phone call with a PIN that you must enter along with your password. That can be an inconvenient extra step at times but provides peace of mind that somebody who happens to swipe your login can’t view your entire financial picture.
The Personal Capital business model
Using the Personal Capital apps are free because the company hopes to sell a small percentage of users financial advisory services. If you have enough assets, you’ll likely get a call from a Personal Capital financial advisor offering some friendly advice … but make no mistake, it’s a sales pitch.
As far as financial advice goes, Personal Capital is taking the right approach. Their financial planning services are fee-only, meaning they won’t try to sell you expensive investments hidden with commissions and fees. Rather, you pay an annual fee based on the size of your investment portfolio to have access to a Personal Capital financial advisor who will provide investment management and other financial planning services.
Personal Capital’s fee schedule is in line with industry norms, if a little less. Investors pay 0.95 percent a year on their $250,000 of assets under management (AOM) with Personal Capital. Then it slides down. Here’s the full schedule:
- 0.95 percent on the first $250,000
- 0.90 percent on the next $250,000
- 0.85 percent on the first $500,000
- 0.80 on the next $4,000,000
- 0.75 percent On anything over $5,000,000
So if you have $100,000 invested, you’ll pay $950 a year. If you have $500,000 invested, you’ll pay $4,625.
Investment management services are only available to investors willing to commit at least $100,000 to Personal Capital. Perhaps that’s not likely to attract many readers of this blog – yet! – but they’re banking on being the next generation’s financial advisor. Indeed, it makes sense that perhaps we’ll turn to the company with the best technology to manage our money rather than your “father’s guy” he knows from the country club.
Create a free Personal Capital account and see for yourself
Have you tried Personal Capital? What do you think? Would you ever turn to an online advisory firm for investment management?
About David E. Weliver
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