Personal Capital financial and wealth management review May 2018 | finder.com

Personal Capital financial and wealth management review

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Analyze your finances for free. At a small cost, it can grow your money for you too.

Maybe you want a new car, or you’re saving for retirement. Maybe you’ve just had your first child and you’re saving up to send them to college someday. Regardless, the earlier you begin, the more time your money has to grow.

Many asset management companies will invest your money so that you don’t have to worry about it. Personal Capital is one such firm — and it’s become a major player in the market.

  • Minimum: $100,000
  • Annual fee: 0.89%
  • Trading fees: Only pay a fee if their advisors and wealth management services are used
  • Pros

    • Merges technology and advisors for holistic wealth management
    • Good fit for high net worth individuals
    • Get a snapshot of your overall financial wealth

    Cons

    • Minimum deposit is $100,000
    • Management fees are higher than the competition
    • Personalized wealth management starts at $200,000

    What is Personal Capital?

    Founded in 2009, Personal Capital is a wealth management company based in San Carlos, California. It boasts more than 1.6 million users and $6.5 billion in assets under management.

    Personal Capital is often compared to robo-advisors like Betterment and Wealthfront, which rely on software instead of humans to invest clients’ money.

    But it’s actually not a true robo-advisor. Instead, Personal Capital combines investing algorithms with the expertise of human wealth managers.

    What does Personal Capital do?

    Personal Capital offers two main services. One is financial software that lets you analyze your finances. The other is wealth management that helps you grow your money in the stock market.

    Who is it for?

    Personal Capital’s financial software is free, so it could be useful even if you don’t want to hire somebody to manage your money.

    The company’s wealth management service is for high-net-worth clients, as you’ll need to invest at least $100,000 to qualify. Personal Capital also charges a higher management fee than Betterment and Wealthfront, though it offers a more personalized service through its human financial advisers.

    Personal Capital’s software helps you analyze your finances

    Personal Capital’s software will slice and dice your financial data to give you a clear picture of your spending and path to retirement.

    Know your net worth

    You can put all of your financial accounts in one place: your checking, savings, investment and IRA accounts, as well as your credit cards, mortgage and home equity loans. From that information, Personal Capital calculates your net worth and keeps it up to date.

    What is net worth?

    Basically, net worth is the cash you’d have if you were to sell everything you have, as in your assets, and pay whatever you owe, as in your debts and liabilities.

    Examples of assets include cash, 401(k)s and investments. Liabilities include your mortgage, car loan, credit card debt and so on.

    Examine hidden fees

    Personal Capital’s Fee Analyzer gives you insight into fees you’re paying for your mutual funds and retirement accounts. These might include:

    • Custodial fees. Fees charged for safekeeping of your securities.
    • Inactivity fees. Fees charged if you haven’t had buy or sell activity in your account for a period of time.
    • 12b-1 fees. Fees collected by a mutual fund for marketing and distribution costs.
    • Expense ratios. Annual fees charged by funds and exchange-traded funds (ETFs) for general expenses.

    Get recommendations for investment improvements

    The Investment Checkup tool combs through your portfolio and recommends improvements based on your financial goals. Specifically, it assembles a portfolio that fits your risk tolerance while maximizing your returns.

    Stay on the right path to retirement

    Your retirement may be many years in the future. However, your current spending and saving strategies will affect your ability to retire.

    Personal Capital helps you analyze how your current financial habits affect your path to retirement — and then recommend changes you can make to improve it.

    Personal Capital helps you grow your money

    Personal Capital chooses investments for you based on a passive investing approach. Instead of constantly moving your money in and out of the stock market, it puts your funds in a variety of investments and waits for the market to grow as a whole. This is the hallmark of a diversified portfolio.

    The company offers features and levels of service that depend on how much you invest.

    Investment Service: If you have under $200,000

    Personal Capital creates a portfolio of exchange-traded funds (ETFs) for you based on your financial goals and risk tolerance. It regularly adjusts the mix of investments in your portfolio to keep it in line with your goals.

    You can call the company’s financial advisory team 24/7 for support.

    What are exchange-traded funds?

    An exchange-traded fund (ETF) is a collection of securities, such as stocks and bonds, that you can buy and sell on a stock exchange.

    Typically, an ETF is an index fund — it buys all of the stocks and bonds in an index, or a curated list of investments. For example, the Dow Jones Industrial Average is an index comprising 30 major companies.

    Why buy an ETF? One reason is because it lets you diversify your portfolio, and thereby decreases your risk. You can wait while the market grows, as opposed to buying and selling securities all the time. Because you’re not making many transactions, you’ll pay fewer fees..

    Wealth Management: If you have $200,000 to $1 million

    The Wealth Management plan offers everything in the Investment Service plan, with some additions.

    • More personalized service. Instead of access to only the financial advisory team, you’ll have two financial advisers dedicated to your account.
    • Smart Indexing. Personal Capital creates a customized portfolio for you that will give your money balanced exposure to the market. (Other firms call this smart beta or tactical weighting.) According to Personal Capital, this strategy reduces your risk while increasing your returns.
    • Long-term goals. Personal Capital create a financials and retirement plan for you.
    • College savings. Open a 529 college savings account, which helps you save for higher-education expenses like books, tuition and room and board.
    • Tax-loss harvesting. Personal Capital strategically sells specific securities at a loss, so that you can save on your taxes.

    Private Client: If you have $1 million or more

    The Private Client plan offers everything in the previous plans, with yet more benefits.

    • Priority service. Get first dibs on Personal Capital’s Certified Financial Planner (CFP) advisers, investment committee and support staff.
    • More expansive portfolio. Invest in individual stocks, ETFs and individual bonds, in some cases.
    • Personalized financial services. Access private banking and donor-advised funds, which lets you make charitable contributions. Personal Capital helps you create special investment accounts, such as a legacy portfolio that you can pass on to your heirs.

    Socially responsible investing

    Personal Capital lets you invest in socially responsible companies that are positively affecting the environment, society and workplace governance. Request a socially responsible portfolio at no additional cost.

    How much does it cost?

    Personal Capital’s financial analysis software is free. For wealth management, the company charges an annual management fee that depends on how much you’ve invested.

    Personal Capital doesn’t charge trailing fees or trading commissions.

    Minimum deposit

    Personal Capital’s minimum deposit is $100,000.

    Here’s the company’s minimum deposit compared to top competitors.

    Personal CapitalBettermentSwellWealthfrontFutureAdvisor
    Minimum investment$100,000$0$50$500$10,000

    Fee for accounts of under $1 million

    First $1 million0.89%

    Fees for accounts of $1 million or more

    First $3 million0.79%
    Next $2 million0.69%
    Next $5 million0.59%
    Next $10 million0.49%

    Investment expense ratios

    Personal Capital’s weighted average expense ratio is 0.08%. The expense ratio is the percentage of a fund that’s used for administrative expenses.

    This is in addition to the management fee. So if you have an account holding under $1 million, you’ll pay the management fee of 0.89% plus an average of 0.08% for the expense ratio.

    How do fees stack up to the competition?

    Personal Capital’s management fees are 0.89%. By comparison, robo- advisors like Betterment and Wealthfront charge 0.25% annually.

    However, Wealthfront doesn’t offer access to a human financial adviser. Betterment does, but only through the chat function on its app.

    Personal Capital’s expense ratios hold up pretty well at a weighted average of 0.08%. Wealthfront’s average is 0.08%, and Betterment’s is 0.12%.

    For more direct access to financial professionals, Betterment charges a 0.40% annual management fee and requires a $100,000 minimum balance. With this plan, you can call Betterment advisers anytime.

    How’s the app?

    As of this writing, the Personal Capital app earns a rating of 4 out of 5 stars in Google Play and 4.8 out of 5 stars in the App Store.

    Users say the app makes it easy to consolidate financial accounts and see a clear picture of your finances. However, some users report bugs when inputting bank info. Others say they were contacted incessantly for financial services after signing up for the app.

    Bottom line

    If you want a comprehensive picture of your finances, Personal Capital’s software can be a good option. Though you may be contacted about additional services, it’s free to sign up for the software.

    Personal Capital’s wealth management services are for high-net-worth individuals, requiring a deposit of at least $100,000 to start. You’ll also pay higher management fees than with other firms like Betterment and Wealthfront. However, you’ll get more personalized service and anytime access to Personal Capital’s advisers.

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