If you’re looking for a tool that will give you Wall Street-like returns (without requiring you to live in New York), consider using Personal Capital.
Created in 2009, Personal Capital is a digital investment manager that seeks to give users the tools they need to properly go about retirement planning, portfolio management, and personal budgeting. It’s different from straight personal finance budgeting apps like Mint, but also not quite like the mutual funds that manage billions of dollars.
This Personal Capital review will cover exactly what Personal Capital is, some Personal Capital features, and some Personal Capital pros and cons.
Personal Capital Overview
Personal Capital has two parts to its offerings. The first is a suite of free financial tools to help elevate your finances, and the second is a full-featured robo-advisor platform.
The first part includes a budgeting application that lets you keep tabs on all of your spending and earnings, and lets you easily view where you stand financially. Personal Capital lets you link all of your accounts to the service, meaning that you don’t need to spend the time to manually input updates of your finances.
If you’re interested in getting a holistic view of your net worth, investment accounts, and credit cards, you’ll benefit from this free tool. Personal Capital comes with a mobile app that has earned it many rankings in “top budgeting apps” lists and offers users a true all-in-one solution to their personal finance struggles.
The second part of Personal Capital’s offering is Personal Capital Advisors. Differing from the free personal finance tools of the first part, Personal Capital Advisors is only available to you if you have a minimum balance of $100,000 saved up and are willing to put that towards investments. Personal Capital Advisors offers both a unique robo-advisor service and also provides you with access to live professional help, should you so choose.
Of course, not everybody can afford such a premium service, and even for those that do, they may not be willing to pay the relatively high fees of Personal Capital (0.89% in fees). That being said, if you’re someone who loves to have professional input on your investments but also like the idea of having an algorithm manage most of your money, Personal Capital Advisors could be a good choice.
How to Setup With Personal Capital
If you think that Personal Capital is for you, you’ll want to know how to go through the setup process as smoothly as possible.
The first thing you’ll want to do is assemble a list of your basic information and also mentally prepare for an encounter with a Personal Capital employee to talk about your financial situation. Unlike other personal finance apps, Personal Capital requires you to schedule a call with a financial advisor to talk about your finances regardless of whether you’re just using their free financial tools or signing up with Personal Capital Advisors.
The purpose of the call is twofold: to help the financial advisor get to know more about you and for them to give you a quick bio and potentially become your future financial advisor.
After signing up, you’ll be required to link your accounts to Personal Capital. Personal Capital lets you add most financial accounts, including:
- Bank accounts
- Investment accounts
- And debt accounts you might have
- Credit card accounts
- Home mortgage accounts
- Any additional categories of finances you may have (additional loans or investment accounts)
Once you sync up your accounts, you’ll officially have access to their free suite of tools and be in their system. Regardless of how much money you have, you can access their free offerings, but you need to have a minimum of $100,000 to sign up with their premium investment advisor service Personal Capital Advisors.
If you DO have $100,000 and would like to utilize their advisory service, you’ll need to answer a few intake questions regarding your financial situation, risk appetite, and overall goals. Your Personal Capital advisor will then review your current investments and give you an idea of what investment strategy they are thinking of implementing. Finally, you’ll open a Personal Capital account with them and fund it with your cash (or transfer in your securities).
Personal Capital Features
Before you go ahead and schedule that call with a Personal Capital financial advisor, make sure you know what you’re getting yourself into. Here are some of the features that Personal Capital is most known for.
Personal Capital offers a comprehensive portfolio analysis tool that is both highly accurate and visually appealing. In the allocation tool, you can clearly see how much of your portfolio is allocated to cash, international stocks and bonds, US stocks, and alternatives.
The best part about the portfolio analysis tool is that personal capital lets you view your portfolio regardless of where you hold your money. You could be using TD Ameritrade, Fidelity, or investing through your 401k and still be able to view your portfolio.
This is useful because it can allow you to visually see how some investable assets are affected in a market rally or recession and help you make informed decisions about allocation in the market.
Retirement Fee Tracker
In Personal Capital’s fee analyzer, you can clearly see how your retirement accounts are affected by the fees you pay (both to the account itself and to mutual fund companies, if you so hold mutual funds with larger financial institutions). It will show you exactly what percentage of your final portfolio is lost to fees and how many years of retirement you could save if you cut down on fees.
This tool is useful to help inform whether or not you should switch retirement accounts or switch investments altogether.
Personal Finance Manager
Personal Capital includes a full-suite personal finance manager that clearly shows how your cash flow is looking on a month-to-month basis.
Because the app is automatically connected to your bank accounts, it aggregates all of your income and expenses without you having to do anything and displays your money intake (or output) in easy-to-read charts. This feature is similar to those offered by Mint and can be very helpful for budgeting purposes.
No good personal finance software is complete without a budgeting tool. With Personal Capital, you can set a monthly spending target for yourself and also easily track your spending. You can see all of your spending and saving by date, category, or merchant (who you bought from and sold to).
Net Worth Tracking
Personal Capital dynamically shows your investments, cash holdings, and all balances at all points in time to create a clear picture of your net worth and financial situation for you.
Not only that, but it also connects with Zillow to show you exactly how much your real estate is worth.
Personal Capital Pros and Cons
Before going ahead and signing up with any service that will have an impact on your financial decisions, be sure to do all the research you can beforehand. That includes determining all of the advantages and disadvantages of a service and weighing them accordingly. This section will provide an overview of all the pros and cons of Personal Capital.
Pros of Personal Capital
Starting off with the pros of Personal Capital, the main one is how easy-to-navigate all of their tools and resources are. As listed above, there are a ton of features that clients of Personal Capital have access to that could significantly help with their personal finances. The best part is that most of these features are completely free and available to anybody (regardless of net worth).
Additionally, Personal Capital links with all of your accounts and can dynamically show you how prepared you are for retirement. Personal Capital takes into account a whole bunch of different factors including what you might get from Social Security, how aggressively you’re investing, and how much you have saved up already. All of these come together to inform Personal Capital of just how ready you are to retire. Bonus: you don’t need to do a single bit of quantitative analysis as all the info is pulled directly from your account and the calculating is done behind the scenes.
Furthermore, Personal Capital is extremely well known and backed by many industry professionals. Personal Capital promises to use its advanced resources to deliver to you better returns than general stock market indexes, while lowering your tax burdens at the same time. If you’re looking for a way to get an edge on your Boglehead investing friends, Personal Capital might be exactly what you’re looking for.
Finally, Personal Capital has a dedicated team of certified financial planners ready to assist you at all points in time. You can talk about anything, from how well you’re moving towards your goals, to what your next steps should be, to what you’re going to do when certain life circumstances change. They are your dedicated support team and there to help you through any financial conundrum you may have.
Cons of Personal Capital
One of the biggest downsides to Personal Capital is cost. If you choose to sign up with Personal Capital Advisors, you will be eating a 0.89% fee. This fee is much higher than what you might be paying to other robo-advising services, like Wealthfront or Betterment.
Some people might feel like even though Personal Capital does have a few neat personal touches here and there, it is still a robo-advisor at the end of the day. All you do is sign up, link your financial accounts, and answer a few questions. Your money is then allocated according to risk, and not much more happens. If you’re of this view, you’ll find that Personal Capital is probably not for you.
Additionally, the $100,000 minimum investment is definitely a high barrier to entry for lots of people. Unless you’re high net worth individual, you probably won’t get a shot at using some of Personal Capital Advisors’ cool features. Plus, if you’re someone who likes to consistently trade stocks, you’ll be disappointed to learn that Personal Capital doesn’t allow you to trade stocks until your account reaches $200,00 in total value.
Some people might feel that, at the end of the day, there’s nothing really special about Personal Capital and you’re really just paying to periodically talk to a financial advisor about your situation. Personal Capital uses really just boils down to a higher degree of personalization in the form of a chat with a financial advisor. If you don’t feel like this periodic talk is worth the thousands of extra dollars you’ll be paying in fees, Personal Capital is probably not a good choice for you.
Who is Personal Capital Right For
When all said and done, Personal Capital is really right for a certain type of individual. Let’s take a look at whether this investment service is right for you.
Personal Capital is right for:
- Somebody who wants to see all of their financial data in one place. One of the best parts of Personal Capital is that you can view everything from one dashboard. Instead of having to login to various bank accounts, budgeting tools, and investment accounts, you can see all of your data in Personal Capital (as it effectively links to all your different accounts).
- Somebody who wants useful portfolio analysis. Regardless of whether you pay for their Robo wealth management services, you’re still getting relatively personalized financial advice that can help inform some of the investing decisions you’ll make.
- Somebody who has some money and wants to start planning for retirement. If you have $100,000 in the bank, you can take advantage of their investment tool, but if you don’t you can still gain access to a simple retirement tool that lets you know how much you should be putting away each month to stay on track for retirement.
Personal Capital Advisors is for:
- Somebody who has lots of money and doesn’t have a single clue what to do with it. In this instance, the annual fees of the advisory service could be worth it (as you’ll definitely gain some useful financial advice from Personal Capital).
- Somebody who wants comprehensive personal financial management. If you don’t want to deal with your own money and would instead prefer somebody else to do it for you, consider signing up for Personal Capital.
Personal Capital is not for:
- People who are looking for a true checking account. It’s true that you can “keep” all your finances in one place with Personal Capital (and there is a neat Personal Capital Cash account that can serve as a replacement for savings accounts), but it doesn’t function as an actual checking account (meaning you can’t write physical checks and there is no debit card to use).
- Somebody looking for investment advice on their smaller portfolio. Unfortunately, you can’t access any highly personalized financial advice with Personal Capital unless you have $100,000.
- Somebody looking for a simple budgeting service. If you’re just looking for a simple budgeting program and nothing else, you’ll probably be better off with something like Mint, YNAB, or Quicken. These can provide services like credit score monitoring, transaction reconciliation, and bill payment (all things that you can’t do with Personal Capital).
Recap: Personal Capital Review
When it comes to personal finance applications, there are so many on the market today that it can be overwhelming trying to choose the right one for yourself. This post has provided you with a review of one of them: Personal Capital.
If you’re looking for dedicated financial advisors who will take advantage of modern portfolio theory and help you with your asset allocation and treat you like the private client you are, Personal Capital could be a great option for you. Personal Capital also offers many free investment tools that you can easily take advantage of without having to do anything (other than have a quick chat with one of their financial advisors).
As far as robo advisors go though, Personal Capital does have pretty high management fees (at 0.89%). Take into account that your money likely won’t even be managed by human advisors (in large part), and it can become a real debate whether Personal Capital is worth it.
At the end of the day, Personal Capital is for somebody who really wants to outsource their personal finances (or just wants to have a comprehensive place to view everything). If this sounds like you, give Personal Capital a shot and see how you like it. Who knows, it may very well become your go-to solution for all things finance-related.