Personal Capital Review: My Experience Using Personal Capital
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- Large investments
- Managed investments
- Tax optimization
Personal Capital is a hybrid digital wealth management company. They offer a free online and mobile personal finance and investment management app. I first found Personal Capital when we went looking for alternatives to Mint, the most widely-known personal finance and budgeting app.
After testing Personal Capital for a few months, here’s a review of my experience.
Before we go any further, let me point out that since creating a Personal 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!
How Personal Capital works
Personal Capital = Analysis for your spending and your investments.
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.
Personal Capital utilizes a linked bank account!
To take advantage of Personal Capital, you’ll need to “link” one or more of your bank and investment accounts (for example, your checking account, IRA, and 401(k) accounts). This process takes 10 minutes or so, and you’ll need to have the logins to those accounts handy.
Once you link accounts Personal Capital can begin to go to work. Here are some of the tools Personal Capital offers.
Tools Personal Capital offers
In the allocation tool, the colored rectangles show the percentage of your portfolio in each asset class: Cash, international stocks and bonds, US individual stocks or bonds, and alternatives.
Personal Capital lets you explore your entire investment portfolio visually, regardless of where you hold the investment assets (Fidelity, TD Ameritrade, your 401k, etc.). I’ve found this valuable for managing my own 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.
With Personal Capital’s retirement planner tool, the fee analyzer, you can see how your retirement account fees are impacting your retirement date. They’ll also show you any hidden fees in your mutual funds.
Personal Capital includes a full-featured “personal finance manager” (similar to Mint) that automatically aggregates your income and expenses, then displays your cash flow data in easy-to-read charts.
The Personal Capital net worth report puts your balances, cash flow, and investment holdings in one place. It also integrates with the real estate website Zillow to provide daily updates on your property values.
Personal Capital includes a budgeting tool, so you can have all your personal finance tools in one app. With the budgeting app you can:
- Set a monthly spending target and track your spending
- See your spending and savings by date, category or merchant
Personal Capital’s investment strategy
Personal Capital really wants you to believe that they have your best interest in mind, so they’re very open about their investment strategy.
Their strategy is based on years of research, and their goal is to “establish and maintain a strategic investment account portfolio which gives every client the best chance to achieve their financial goals.”
Personalized asset allocation
In Personal Capital’s investment strategy they state:
We consider current interest rates and equity valuations, and their likely impact on future returns, but uses historical risk and return data as an objective starting point for determining an optimal asset class mix.
What all this means is they evaluate the market both now and how it’s performed in the past to make sure your portfolio is made up of the best possible mix of assets.
To get a better picture, here’s a graph to represent their methodology.
Increasing diversification for better returns
While asset allocation (see above) is important, it’s also important to pick the right securities within the assets.
While it may seem counterintuitive, sometimes picking the hottest stocks isn’t a great idea in the long run. As you can see from Personal Capital’s graph, having a portfolio based mostly in one asset class – let’s stick with stocks – can hurt if the stock market crashes. That’s what Personal Capital helps you avoid.
Tax optimization is a big part of Personal Capital’s investment strategy. It involves utilizing credits or deductions that can be used to reduce taxes. Personal Capital’s “tax optimization process focuses on three key areas: tax allocation, tax-loss harvesting, and tax efficiency.”
- Tax allocation: According to Personal Capital, “a general rule is to place higher-yield investments in tax-deferred or exempt accounts and low-yield investments in taxable accounts.”
- Tax-loss harvesting: This allows you to potentially pay fewer taxes and increase long-term returns by selling off losing investments.
- Tax efficiency: When it comes to investing, there are a lot of investment vehicles to choose from. Each choice can have different tax implications, so understanding which are the most efficient for you can help reduce your taxes.
Personal Capital’s pricing
The app is free
Using the Personal Capital app is free because the company hopes to sell a small percentage of users’ financial advisory services. If you have over $100,000 in assets, you’ll likely get a call from a Personal Capital advisor offering some friendly advice, but make no mistake, it’s a sales pitch.
Wealth management services come with fees, but they’re worth it
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.
Investors pay 0.89% a year on their $1 million of assets under management (AOM) with Personal Capital. Then it slides down. Here’s the full schedule:
- 0.89% on the first $1 million.
For investors who invest $1 million or more:
- 0.79% on the first $3 million.
- 0.69% on the next $2 million.
- 0.59% on the next $5 million.
- 0.49% over $10 million.
Personal Capital’s fee schedule is in line with industry norms, if a little less. To take advantage of the low-fees Personal Capital has to offer, schedule a free consultation today!
Additional services offered by Personal Capital
Personal Capital offers more than the above services. You can also ask to have Personal Capital evaluate the following
With Personal Capital’s retirement tools you can see when you’ll be able to retire, how any big expenses or income increases will affect your retirement date.
Personal Capital can help you make decisions regarding your estate. They’ll help make sure your legal documents are in order and help you establish a trust if you need one.
Home purchases and re-financing
Buying a home is a complicated process. If you’re thinking about buying a home for the first time, or want to re-finance your loan, Personal Capital also has advice that can help you.
They’ll help you figure out how much house you can afford, and even help you get the actual mortgage through their partners Pershing and Bank of New York Mellon. Don’t worry, Personal Capital doesn’t receive any referral fees, discounts, or other incentives for this referral.
Read more: First-Time Home Buying Guide
Saving for college requires a lot of planning – Personal Capital can help!
They’re available to discuss the methods you can use to fund education expenses. Their goal is to help make sure you’re saving and paying for college in the most tax-efficient way.
My experience using Personal Capital
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 four-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 log in 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.
Pros & cons
- Easy-to-use app — No matter what device you use, Personal Capital is easy to use.
- Great security — Personal Capital has two-factor authentication. So whenever you log in from an unknown device, you’ll get a text message or phone call with a PIN that you must enter along with your password.
- The app is free — While you do have to pay some fees if you have Personal Capital manage your money, the app itself is completely free to use.
- Wealth Management Fees — Personal Capital requires some hefty fees for its wealth management services. But in our opinion, they're worth it. Plus, their regular budgeting tools are completely free.
- Solicitation after reaching $100,000 benchmark — Personal Capital may reach out to its users to try and sell their wealth management service. This is more common after users reach $100,000 in their account. This can be an annoyance for some users.
Personal Capital vs. Wealthfront
Personal Capital Wealthfront
Fees 0.89% 0.25% annual advisory fee
Minimum investment $100,000+ $500
Accounts offered Roth, traditional, rollover and SEP IRAs; trusts Individual and joint accounts; IRAs; trusts; 529 plans
If you want an alternative to compare to Personal Capital, I recommend checking out Wealthfront. Like Personal Capital, Wealthfront is a web-based investment service with an all-in-one money app. However, because Wealthfront is entirely technology-based it comes with lower fees (0.25% for an annual advisory fee).
While Personal Capital can be a great choice for anyone, it tends to target those individuals looking for more of a human touch. On the other hand, Wealthfront is all about the technology – and these days, there are many people that prefer this strategy.
If you are in the process of trying to choose a money management and investing app, it’s definitely worth comparing a few different options. Wealthfront offers a number of really helpful services including its automation services. Wealthfront offers something called Self-Driving Money™. Basically, Wealthfront will monitor your cash flow into your Wealthfront Cash Account and ensure your bills are paid and can even direct your savings to the right investment accounts based on your pre-set goals.
When it comes to investing, you can use Wealthfront to build an individualized portfolio from scratch. You can choose from a collection of ETFs that were selected and vetted by the Wealthfront research team. Or, to keep it simple, you can use one of Wealthfront’s existing portfolios and then add and delete ETFs based on your preference. The bottom line is that Wealthfront is another amazing money app that you can check out if you’re interested in taking control of your money.
Personal Capital’s free portfolio analysis tool is a must-try for anyone looking to better understand your holdings, especially if you have more than one at more than one broker.
Over the years, I’ve used and tested dozens of different personal finance apps, but most lose their novelty after a while. I keep coming back to Personal Capital because it’s the one program I’ve found that gives me insight into my entire investing portfolio, which is spread across several different brokers. The net worth dashboard is also a great way to see an approximation of my net worth without manually updating a spreadsheet.
Paired with the many other features offers, they truly are the for many young and experienced investors alike.
Featured image: NicoElNino/Shutterstock.com
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