Review: Is Personal Capital right for your finances?

Do you like the idea of a robo-advisor but want access to a real human being when a decision feels overwhelming? You might want to consider Personal Capital®.

Personal Capital is one of the larger robo-advisors on the market. It focuses on high-net-worth investors with a minimum investment of $100,000. They combine traditional index-based investing with tax-minimizing strategies and customized plans based on your age and unique needs.

Clients can get access to human financial professionals. These advisors can answer questions and help you refine your investment strategy. This is a nice perk, but it comes at a price. Personal Capital charges higher fees than other large robo-advisors.

If you have significant assets to invest and are looking for a robo-advisor who can provide advice, save you time, and keep your portfolio optimized, here’s what you need to know about Personal Capital.

If you’re a newer investor without $100,000 in assets, don’t leave yet. Personal Capital also offers free financial tools that are top-notch.

What is Personal Capital?

Personal Capital is a robo-advisor that also gives clients access to human financial advisors. Using financial technology, portfolio theory, algorithms, and investment professional oversight, Personal Capital matches investment selections to an individual’s financial goals and risk tolerance. The company was founded in 2009 under a different name, but publicly became the Personal Capital we know today in 2012. It manages $7.9 billion in assets (as of October 2018).

Personal Capital also offers a suite of excellent, free financial tools for anyone to use. These include a net worth tracker, retirement savings planner, budgeting tool, and investment fee analyzer.

How does Personal Capital make investing less hard?

Personal Capital’s free tools are where the company shines for most consumers. You can quickly get a complete picture of your financial situation and know if you are on track for retirement. You can even get an analysis of your current investment fees. All you need to do is create an account and connect your assets and debts. The app will even pull in current Zillow estimates on your home.

As an investment manager, Personal Capital focuses on higher-net-worth investors. The company differentiates itself by operating as a blend between a robo-advisor and traditional financial advisor. The investment minimum for Personal Capital is steep at $100,000, and fees are involved. But with that investment, you get access to a team of financial advisors along with an ETF-based investment portfolio tailored to your needs.

If your investments are over $200,000, you get access to two dedicated advisors who are available to talk to you about anything from investing to getting a mortgage. At this level, your investment portfolio also moves to a more customized option that invests in individual securities. Here, Personal Capital uses a system it calls “Smart Indexing”, an investment strategy designed to reduce exposure to volatility while diversifying, rebalancing and tax-optimizing your portfolio as appropriate. (They invest in individual securities to give clients an equal balance across industries. This is called smart beta at other firms and ETFs.)

At Personal Capital, you can get the hands-off benefits of a robo-advisor along with the benefits of having someone to talk to when you need to make big financial decisions. Or when market headlines leave you with questions. This resource could help you avoid costly mistakes.

Personal Capital management fees

From $100,000 to $1 million in assets, Personal Capital charges a flat fee of 0.89% and underlying ETF fees average 0.08%.

For investors with $1 million or more invested with the company, Personal Capital offers more services and lower fees. Fees drop to 0.79% with $1 million to $3 million in assets, 0.69% for under $5 million, 0.59% under $10 million, and 0.49% for balances over $10 million.

These fees are current as of January 2019.

When reviewing Personal Capital, note that the company has notably higher fees than other major robo-advisors, like Betterment and Wealthfront. This is partially because of the access to financial advisors, but note that Betterment’s plan with access to human financial advisors is still only 0.40%.

Personal Capital competitors

Personal Capital entered the market under its current name in 2012. It has grown but still remains smaller than its largest competitors, Betterment® and the slightly smaller Wealthfront®. Betterment manages $14 billion (as of December 2018) and Wealthfront manages $11.5 billion (as of October 2018), compared to Personal Capital’s $8 billion (as of January 2019).

Other robo-advisors include Wealthsimple®, Ellevest®, WiseBanyan®, and Stash®. Some traditional investment companies also offer robo-advisor services with significant assets under management. And there are also micro-investment services like Acorns®.

Why consider Personal Capital

Personal Capital’s free financial tools are truly top notch. I use their service to track my net worth and make sure I’m doing what I need to do to prepare for retirement. And their budgeting tool, while less robust than paid services like You Need a Budget, can help you get a handle on actual cash flow.

If you’re a high net worth individual, Personal Capital could be the right fit if you want the experience of a traditional financial advisor with a lower cost. With over $200,000 in invested assets, you get two dedicated advisors to help you make big financial decisions. You also benefit from Personal Capital’s Smart Indexing platform to potentially reduce volatility and lower investment taxes.

Who might benefit more from other options

If you’re new to investing without significant assets to get started, Betterment or Wealthfront may be a better fit. Betterment has no investment minimum to get started and Wealthfront’s minimum is only $500. And the fees are lower with both.

For investors who do have the assets to invest with Personal Capital, consider how often you plan to use their financial advising services. With $200,000 in investments, annual fees would ring up to $1,780 a year compared to $500 at Wealthfront or Betterment. Depending on your needs, it may be cheaper to consult a local investment professional when you need them. Consider reaching out to a fee-only financial planner.

Key takeaways on Personal Capital

If you’re looking for free financial tools to help you organize your finances and track your goals, Personal Capital might have what you need. But you’ll need a large amount of assets to invest, and there are likely ways to invest with lower fees.

Chelsea Brennan is the founder of Smart Money Mamas, a personal finance blog that focuses on family finance, investing, and reducing money stress. Chelsea is an ex-hedge fund investor whose work has appeared in a wide array of publications, including Forbes, Business Insider, and more.

Haven Life Insurance Agency (Haven Life) does not provide tax, legal or investment advice. This material has been prepared for informational/educational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or investment advice. You should consult your own tax, legal, and investment advisors before engaging in any transaction or strategy. Haven Life does not endorse the companies or offer the products, services and/or strategies discussed here.

Haven Term is a Term Life Insurance Policy (ICC17DTC) issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111 and offered exclusively through Haven Life Insurance Agency, LLC. Policy and rider form numbers and features may vary by state and may not be available in all states. In New York, Haven Term is DTC-NY 1017. Our Agency license number in California is OK71922 and in Arkansas, 100139527.

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