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Personal Capital
8.2 out of 10
A free money management tool that also offers digital wealth management for a fee.
Fees: 0.89% on the first million invested. Decreases down to 0.49% for accounts over $10 million.
Net Worth Tracking
9 out of 10
Ease of Use
9 out of 10
Security
8 out of 10
Fees
7 out of 10
Portfolio Management
8 out of 10
Customer Service
8 out of 10
Pros
Easy to use.
Free to use for money management tools.
Pioneer in financial technology.
Dedicated financial advisors.
Tax optimization strategies for investments.
Great resources to navigate the platform
Cons
$100,000 minimum for wealth management.
High fees compared to robo-advisors for DIYers.
What is Personal Capital?
Founded by former Intuit CEO Bill Harris in 2009, Personal Capital is one of the pioneers in personal financial apps and currently has 3 main offerings:
Free personal finance software: Ability to track net worth, budget, and plan for retirement.
Digital wealth management service: Available for those with investable assets of more than $100,000 at a fee.
Personal Capital Cash: Essentially a high-yield savings account with no fees and no minimum balance.
As of August 2020, Personal Capital is a wholly-owned subsidiary of Empower Retirement, the second-largest retirement services company in the United States.
How Personal Capital Works
Whether you’re a personal finance DIY’er or someone that needs professional help, Personal Capital has the tools for you to plan and succeed financially. In this Personal Capital review, we’ll explore the three main offerings of Personal Capital: FREE Personal Finance Software, Wealth Management, and Cash Management.
1. Free Personal Finance Software
Net worth tracking
Your net worth is what you have minus what you owe. Tracking your net worth is important to know where you stand financially and how to strategize moving forward.
With Personal Capital, you can link your bank, credit card, loans, and investment accounts to track your net worth in real-time. For assets or liabilities that you cannot link (eg. a house), you can manually add the account to the platform as well.
Once your accounts are linked, you can view and track your net worth under the net worth tab. You can also track the changes over time in cash, investment, credit, loans, and mortgages there.
With your accounts linked, Personal Capital is also a very effective budgeting tool as it’ll track all your account’s transactions to help you visualize your budget in real-time.
The picture above is a screenshot of how your budgeting tab looks like. The first thing you should do is set your monthly budget by clicking on the pencil icon in the circle chart. Once that is set, you can then track how much you’ve spent this month against your budget.
One caveat is that Personal Capital does not have the capability to set budgets for individual categories. This means that you’ll have to manually determine the amounts for food, utilities, rent, shopping, etc., and then sum it all up to get your monthly budget.
As your budget is unique to your situation, you’ll have to make sure that the transactions are categorized correctly so that you can track them effectively. You can categorize your transactions by clicking on the transaction that you want to edit and then selecting the relevant category as seen below. If you want to add your own customized category, you can do so by clicking the “Manage Categories” button.
Cash Flow Tracking
Another free tool that you can utilize is the cash flow tracking feature. This tool allows you to track how much cash is coming in and going out each month and also compare it with last month’s cash flow. This way, you can visualize when and how money is moving in your accounts and get to the bottom of any issues if there are irregularities in cash flow.
Investments Overview
Holdings Analysis
When you link your investment accounts, Personal Capital can pull in your investments and run an investment analysis for you.
Holdings Analysis: Personal Capital has a proprietary YouIndex that compares the performance of your portfolio holdings against a benchmark like the S&P 500.
Performance Analysis: You can also toggle to the performance tab to compare your portfolio’s actual performance against a benchmark.
Asset Allocation Tree Map: With the asset allocation treemap, you can visualize how your portfolio is broken down easily and see where you’re over or underweight.
Asset Allocation Tree Map
Sectors: You can also view the breakdown of what sectors you are invested in in the Sectors tab. For example, Healthcare, Financials, Technology, Consumer Staples, Consumer Discretionary, etc.
Retirement Planning and Forecasting
Monte Carlo simulation
Personal Capital’s retirement planning tool is probably one of my favorite features of the platform.
First, you’ll need to enter your expected annual savings, projected retirement income, and expenses.
The Personal Capital software will then run a Monte Carlo simulation to project how much money you’ll have at retirement and whether you’ll have enough money to withdraw or not.
A Monte Carlo simulation basically runs thousands of simulations to stress-test your portfolio. The “probability of success” is then calculated based on how many times your portfolio does not run out of money in the various simulations. For example, if your portfolio does not run out of money 4000 out of 5000 times, your “success” rate is 80%.
Recession Simulator: On the “Planning” page, you can also simulate previous recessions on your portfolio to see how it will perform if it happens in the future.
Compare Plans: You can also create new scenarios with different inputs to compare how your portfolios will perform.
Retirement Fee Analyzer: Portfolio fees can add up over time and eat into your investments’ compounding gains. Personal Capital’s retirement fee analyzer can show you how much fees you’re paying and make appropriate adjustments to ensure you’re not overpaying in fees.
Retirement Fee Analyzer
Portfolio Analysis
Your portfolio’s asset allocation will impact the risks and returns of your portfolio over time. Personal Capital’s Investment Checkup tool can analyze your portfolio and recommend a target allocation based on the profile questions that you answered.
For example, if your profile shows that you have a higher risk tolerance but your portfolio is heavy in cash, the software will present you with a target allocation that is more aggressive and recommends you to invest that cash in stocks and other assets.
Target Allocation
As a big proponent of the Modern Portfolio Theory, Personal Capital will also show you what your current portfolio looks like on the efficient frontier and compare it with their recommendation. You’ll be able to see your risks and returns visually to determine if you want to move up or down the efficient frontier to maximize return for a given risk.
Efficient Frontier
Personal Capital will also show you the historical performance and future projections of your current portfolio vs. the target allocation to illustrate the risks and returns of both.
Historical Performance of Portfolio
To learn more about how to invest for retirement, check out this series I wrote that goes into more detail on building your retirement portfolio.
2. Digital Wealth Management
Overview
Personal Capital also offers wealth management for those that prefer to engage with a professional and create a personalized financial plan. What separates Personal Capital from other robo-advisors like Betterment or Wealthfront is that you’ll be able to speak with a professional live and receive personalized financial and retirement planning guidance from licensed advisors.
Do note that the wealth management service is only available for those with more than $100,000 in investable assets and fees will vary depending on your investment assets.
Wealth Management Tiers
Personal Capital offers 3 different tiers of wealth management depending on your income level.
Investment Services
Investable assets: $100-$200k
Fees: 0.89%
Unlimited access to financial professionals that can guide you in investing and retirement planning.
Professionally managed ETF-only portfolio with reviews upon request.
Access to the company’s state-of-the-art investing tools.
Wealth Management:
Investable assets: Over $200k-$1M investment assets
Fees: 0.89%
2 dedicated financial advisors at your service.
Get advice from specialists on stocks, options, real estate, etc.
Financial decision support on insurance, home, stock options, and compensation.
Customized portfolio with other investment options other than ETFs.
Tax optimization strategies for your portfolio to reduce taxes.
Private Client
Investable assets: Over $1M in investment assets
Fees
First $3M – 0.79%
Next $2M – 0.69%
Next $5M – 0.59%
Over $10M – 0.49%
2 dedicated financial advisors at your service.
Access to investment committee.
Financial decision support on insurance, home, stock options, and compensation.
Personal specialist support for retirement and wealth planning that includes estate, tax, and legacy planning.
Ability to invest in private equity and hedge funds.
The fees that Personal Capital charge is pretty competitive to a typical wealth management firm. However, the fees are much higher than its’ robo-advisor counterparts (Betterment and Wealthfront only charge 0.25%) as you have direct access to a licensed advisor.
One thing to note is that unless you have more than $1M in investable assets, you will not have access to some wealth management services like estate, tax, and legacy planning that are typically offered by wealth management firms.
The Personal Strategy®
Personal Capital’ Personal Strategy® is a globally diversified portfolio built with stocks and ETFs that will be designed and managed for you based on your goals and objectives.
Here are some key points about the Personal Strategy:
Smart-weighted: The portfolio created for you will be “smart-weighted”, which basically means that your portfolio will have more equal weightings in style, size, and sector as compared to just investing in a traditional market-cap weighted index (the S&P 500 is almost 30% in technology!)
Personalized: Your Personal Strategy is created based on your goals and objectives and risk tolerance.
Minimal fees: Made of stocks and ETFs, which minimizes fees from actively managed funds.
Tax optimized:
Asset location: Places income-generating assets in tax-deferred accounts.
Tax-loss harvesting: Sells some investments at a loss to offset other investments’ gains.
Tax-efficient assets: Stocks and ETFs are generally more tax efficient compared to mutual funds.
Rebalanced efficiently: Portfolio is reviewed daily by the software for rebalancing opportunities to buy low and sell high.
Socially Responsible Personal Strategy
If you want your portfolio to invest in socially responsible companies, Personal Capital’s Socially Responsible Personal Strategy allows you to do that.
Personal Capital partners with Sustainalytics to evaluate and filter companies that are proactively managing environmental, social, and governance issues to ensure that your investments align with your beliefs and principles. You get all the benefits of Personal Strategy but in a socially responsible way.
3. Cash Management
Personal Capital Cash is a cash management account that allows one to park cash securely without fees or minimum balance required. It offers a simple solution and alternative to traditional banking but lacks overall utility. Personally, I am not the biggest fan of it unless you have a lot of cash that you want to diversify across different savings accounts and make sure your dollars are FDIC insured.
No physical locations for cash withdrawals or deposits.
Low APY of 0.05% as of 3/23/2020
No checks.
How Much Does Personal Capital Cost?
Personal Capital’s personal financial management dashboard is 100% free to use.
If you qualify for digital wealth management and want to utilize its services, the fees are broken down below based on your investable assets:
Investable Assets
Fees
First $1M
0.89%
$1M-$3M
0.79%
Next $2M
0.69%
Next $5M
0.59%
Over $10M
0.49%
Is Personal Capital Safe?
Yes! Personal Capital takes security very seriously and goes to extreme measures to ensure it remains safe. All data is encrypted with AES-256, which is what the U.S. military uses. It also operates a crowdsourced security bounty program to encourage people to find loopholes in the security so that they can fix it asap.
In terms of login access, you’ll need to perform multi-factor authentication to log in to a new device.
Personal Capital Alternatives
Personal Capital is unique as it offers a very comprehensive financial planning tool as well as a digital wealth management platform. Mint and Betterment are great alternatives to Personal Capital’s services.
For budgeting, the best free alternative to Personal Capital is Mint. One thing that I do like about Mint is the ability to set a budget for each individual category. This allows you to be more precise in tracking your budget.
For wealth management/robo-advisor, the best alternative is Betterment. Betterment is great as it doesn’t have an account minimum to use their service. Its fees are cheaper as well from 0..25% annually, and 0.40% annually to have unlimited access to a CFP.
Summary
Personal Capital is one of the best, if not the best free personal financial management tool out there. The robust planning features that can help you track your budget, net worth, investments, and retirement planning tool are great resources if you are wanting to get your financial life in order.
If you need professional help to manage your investments, the digital wealth management service does provide a personal touch to mapping out your investment goals and creating a portfolio to achieve them. However, you may need to have a large balance of more than $1M to access the full suite of wealth management services.
This post may contain affiliate links. We may receive compensation when you click on links to those products at no additional cost to you. Read our full disclosure here.
