Personal Capital Review: A Free Wealth Management Tool
Personal Capital is a free financial dashboard that can track every aspect of your finances. We’ll look at how this personal finance software works in our Personal Capital review.
- Free financial dashboard
- Tax optimization
- Financial Advisors
Personal Capital is used by nearly two million people, who primarily use the free version. But the wealth management service takes in more than 18,000 clients, who have more than $8 billion in assets under management. The company was founded in 2009, and is headquartered in San Carlos, California.
Most users start out with the free version, then upgrade to the wealth management service if they want direct investment management of their investment portfolios. But even if you don’t upgrade, the free version offers so many investment tools it’s worth having for those alone.
As noted at the beginning, Personal Capital offers two versions, the Personal Capital free Financial Dashboard, and Personal Capital Wealth Management. While they’re related services, they provide very distinct functions. Let’s take a look at each individually.
Personal Capital Free Financial Dashboard
Though this version is often seen primarily as a budgeting app, it’s actually fairly limited in that regard. However, the investment tools are extensive. Even if you have no intention of using Personal Capital for budgeting, the free version will provide valuable investment support.
The dashboard serves primarily as a financial aggregator, where you can include all your accounts. That includes investments, savings, checking, loan accounts and credit cards. It allows you to assemble your entire financial life on a single platform. You can even include any employer-sponsored retirement plans you have–in fact, this is the free version’s specialty.
The free Financial Dashboard offers the following capabilities:
Budgeting. You can use the free version to track your cash flow and spending patterns. You can also analyze your spending categories and individual transactions. You’ll get monthly summaries, helping you to know exactly where your money is going. However, if you’re looking primarily for budgeting software, you probably won’t use Personal Capital. For example, while the platform provides alerts of upcoming bills, it does not provide a bill payment function. You will have to continue to pay your bills directly from your bank accounts.
Cash Flow Analyzer. This tool creates a budget for you. Once setup, it tracks your income and expenses from the different financial accounts you’ve linked to the platform. You can then set financial goals, like preparing for retirement, or paying off debt. The analyzer will help you develop strategies to reach your goals.
Despite the Personal Capital Financial Dashboard’s limits on the budgeting side, it’s an excellent service when it comes to investment management. It offers the following investment tools:
401(k) Analyzer. Millions of people participate in employer sponsored retirement plans. But few are aware of the investment fees that are hidden in those plans. The analyzer will show you exactly what each fund in your plan is costing you. It will then suggest alternative allocations into lower cost funds.
Retirement Planner. The planner uses a series of “what if” scenarios, to help you determine if you’re on track with your retirement goals. You can adjustment for changes in your situation, such as a job or career change, the birth of a child, or even saving for college. It takes into account outside factors that can have an impact on retirement.
Investment Checkup. This might be the most important investment tool of all. Once you aggregate your investment accounts on the platform, this tool will help you to optimize those accounts. It can recommend adjusting your portfolio mix to improve your overall investment performance.
Net Worth Calculator. By tracking your assets and liabilities, you can quickly determine your net worth. That’s important, because net worth is the most significant number in determining your overall financial strength.
Personal advisor. Even though the Financial Dashboard is free to use, you’ll still have the ability to contact a personal advisor. The advisor won’t be able to provide investment advice, but they can help you with questions regarding the service, as well as provide additional information on any recommendations made by Personal Capital.
Try it out: Personal Capital’s free financial dashboard
Personal Capital Wealth Management
Personal Capital Wealth Management is sometimes grouped with robo advisors, which isn’t entirely true. While they do use significant automated investment tools, there’s also a very strong element of active human management. That really puts the service somewhere between traditional human investment advisors and robo advisors.
Similar to robo advisors, Personal Capital starts by determining your risk tolerance, investment goals, and time horizon. But they also consider your personal preferences in constructing your portfolio. Your portfolio is managed according to Modern Portfolio Theory (MPT), by investing across multiple asset classes for proper diversification. They also rebalance your portfolio periodically to maintain target asset allocations.
Your portfolio is invested in six asset classes:
- U.S. stocks
- U.S. bonds
- International stocks
- International bonds
- Alternative investments, including real estate investment trusts, energy and gold
The specific percentage of your portfolio in each asset class will depend on your investor profile, as determined by your risk tolerance, investment goals, time horizon and personal preferences.
Each asset class is invested in a low-cost index-based exchange traded fund (ETF), to provide broad market exposure at a low expense ratio. However, the U.S. equities portion will be held in a well-diversified sample of at least 70 individual stocks. This allows Personal Capital to provide tactical weighing and tax optimization (read on for an explanation of both services).
Investment performance. Wealth Management publishes its investment performance on the website. The performance through 2018 is as follows:
Wealth Management’s Investment Strategies in Greater Detail
Tactical Weighing. This is an investment approach that improves on traditional indexing by maintaining more evenly weighted exposure to each sector and style. Back tests have indicated the strategy outperforms the S&P 500 by 1.5% per year, and with lower volatility.
Tax optimization. This is an investment strategy designed to lower the income tax liability resulting from your investing activities. It’s a strategy using several techniques:
- Using ETFs rather than mutual funds, since they generate far less in terms of capital gains.
- Using individual stocks, since they can be easily bought and sold to generate tax-loss harvesting.
- Tax allocation is employed in which income producing assets are held in retirement accounts, while capital gains generating assets are held in taxable accounts to take advantage of lower long-term capital gains tax rates.
Socially Responsible Investing (SRI). If you choose to incorporate SRI into your investing activities, specific investments are chosen based on their compliance with what is known as environmental, social and governance, or ESG.
This means investments are chosen in companies based on their environmental impact, social impact (diversity and labor relations), and management. Management, or governance, is determined by management structure, board independence, and executive compensation levels. This will give you an opportunity to invest in what you believe in, while avoiding what you don’t.
Personal Capital Wealth Management Features
Minimum initial investment: $100,000 ($200,000 for regular access to financial advisors)
Accounts available. Joint and taxable investment accounts; traditional, Roth, SEP and rollover IRAs; trusts; advice only on 401(k) and 529 plans
Account custodian. Your Wealth Management portfolio will be held with Pershing Advisor Solutions, one of the largest investment custodians and clearing agencies in the world. The company acts as custodian for more than $1 trillion in assets worldwide.
Account protection. All accounts are protected by SIPC, for up to $500,000 in securities and cash, including up to $250,000 in cash. This coverage protects you against broker failure, and not against monetary losses due to market fluctuations.
Financial advisors. This is a major part of the Wealth Management service. Financial advisors are available by phone, email, live chat, or web conference on a 24/7 basis. As a client of the Wealth Management service, you’ll have two dedicated financial advisors. They’ll provide you with full financial and retirement planning, as well as college savings, and financial decision support on such topics as insurance, home financing, stock options, and even compensation.
Personal Capital Wealth Management Fees. Fees for Personal Capital Wealth Management are as follows:
|Asset under management||Annual advisory fee|
|Up to $1 million||0.89%|
|First $3 million*||0.79%|
|Next $2 million*||0.69%|
|Next $5 million*||0.59%|
|Over $10 million*||0.49%|
*Applies to clients who invest $1 million or more.
Personal Capital Wealth Management Private Client Service
As you’ll see in the screenshot below, Personal Capital’s services have four levels:
- Free – the Financial Dashboard
- Investment Service – the basic investment tools and services provided as part of the Financial Dashboard (meaning the Free and Investment Service are both part of the same service level)
- Wealth Management – for investors with at least $200,000 to invest
- Private Client – for investors with over $1 million to invest
Private Client provides a higher level of service for higher asset clients. In addition to offering lower annual advisory fees, you also get priority access to a certified financial planner and other financial professionals, private banking services, estate services, and collaboration with an estate attorney and CPA.
Personal Capital Options
Customer service. You can reach Personal Capital by either phone or email, 24 hours a day, 7 days a week. This applies to both the free version and the Wealth Management service, but the Wealth Management service also comes with access to two live financial advisors.
Mobile App. The mobile app is available for iOS and Android devices, as well as Apple Watch, and can be downloaded at the App Store or on Google Play.
Data export features. There is currently no capability to print reports from the Personal Capital application. They promise the capability is in the pipeline, but cannot provide an estimated time of arrival.
However, you can export transactions, but the capability is limited only to the web application. To do so, you need to log into the website using either Chrome or Firefox. You then navigate to Transactions/All Transactions, then click on CSV to export the transactions.
Security. Personal Capital uses the following security measures:
- The platform is read-only, so no withdrawals or transfers can be made
- Two-factor authentication
- Requires you to register any devices you use to access the platform
- Military-grade encryption (256-bit AES) to keep your data secure
- Firewalls and perimeter security
- Continuous monitoring
- Fingerprint scanning is available for iOS devices (but not Android)
Like many companies offering robo advisor services, Personal Capital is getting into the banking game. They’re offering a 2.3% APY on a savings account (FDIC insured, of course).
The account has no minimum balance, unlimited withdrawals, and sleek access through your phone.
You can sign up for Personal Capital through the website. You start by providing your email and phone number, then creating a password.
You’ll then be asked general information, including your name, age, age at which you plan to retire, and the amount of money you have saved toward retirement. (As indicated throughout this review, Personal Capital has a strong orientation toward retirement.)
Once you’ve completed that information, you’ll begin linking your accounts. Personal Capital syncs with more than 12,000 financial institutions, or you can simply enter your institution’s name and web address. Personal Capital will analyze your financial accounts going back from one to three months. Based on the analysis, you’ll have access to all the tools on the Free Dashboard, as well as Personal Capitals recommendations for your investment accounts.
If you want to sign up for the Wealth Management service, you can contact a financial advisor to get the process going (or wait a short while, and one will contact you). You’ll be required to provide additional information, including documentation verifying your identity. You will then need to link one or more financial accounts to transfer funds into your Pershing account, which will hold your investments. Personal Capital also allows you to transfer securities from other investment platforms.
You’ll complete a questionnaire that will determine your risk tolerance, investment goals and time horizon. But you’ll also have a web conference with a financial advisor, where more specific information will be gathered. Your portfolio will be created based on your answers to the questionnaire, as well as the information provided to the financial advisor.
Personal Capital Pros and Cons
- Budgeting and investment management on one platform: Personal Capital offers both personal financial management/budgeting, plus investment management on the same platform.
- Free financial dashboard: The Financial Dashboard includes a large number of investment tools as well as budgeting capabilities, and is free to use. It will also provide investment advice for accounts beyond your Personal Capital Wealth Management account.
- Tax optimization: The Wealth Management service uses extensive tax optimization strategies to minimize the income taxes generated by your investments.
- Financial Advisors: The Wealth Management service provides two financial advisors for each client, who can help you manage your entire financial life.
- Socially responsible investing: If you consider yourself socially responsible and you want to make sure your investment align with your values, you can do that with Personal Capital.
- High minimum for Wealth Management: The minimum initial investment required for the Wealth Management service is $100,000, which will eliminate small and most medium size investors.
- Solicitation: If you sign up for the free version you will be solicited to upgrade to the Wealth Management service. Some users and readers have described this as “annoying”.
- High fees: The fee of 0.89% most investors will pay for the Wealth Management service is much higher than robo-advisors, like Betterment and Wealthfront, who charge from 0.25% to 0.40%. But it does need to be pointed out that Personal Capital provides investment management services closer to traditional human investment managers, rather than robo advisors.
- Limited budgeting capabilities: The budgeting capabilities of the platform are much more limited than fully dedicated budgeting apps, like Mint, Quicken and YNAB.
One of the factors that makes Personal Capital unique as a financial platform is that it operates as both a financial management service and an investment management service. We’ve provided the table below comparing Personal Capital with popular budgeting and robo advisor apps to give you a side-by-side view of what each offers:
|Credit score monitoring||No||No||Yes||Yes||N/A||N/A|
|Fee for budgeting||$0||$6.99 per month||$34.99 to $99.99 per year||$0||N/A||N/A|
|Advisory fees||0.89% up to $1 million (lower on higher balances)||N/A||N/A||N/A||0.25% up to $100,000, then 0.40%||0.25% on all balances|
|Accounts available||Joint and taxable investment accounts; traditional, Roth, SEP and rollover IRAs; trusts||N/A||N/A||N/A||Joint and taxable investment accounts; traditional, Roth, SEP and rollover IRAs; trusts||Joint and taxable investment accounts; traditional, Roth, SEP and rollover IRAs; trusts|
|Mobile app||Android & iOS devices||Android & iOS devices||Android & iOS devices||Android & iOS devices||Android & iOS devices||Android & iOS devices|
|Invest in individual stocks||Yes||N/A||N/A||N/A||No||Yes|
- Personal Capital vs. Quicken
- Personal Capital vs. Wealthfront
- Personal Capital vs. Mint
- Personal Capital vs. YNAB
- Personal Capital vs. Betterment
Personal Capital works for high net worth investors, who are looking for comprehensive personal financial management. They offer investment services comparable to robo advisors, but also provide direct big picture advice.
If you’re looking only for a budgeting service, Personal Capital will not be the best choice. You’ll be better served by YNAB, Quicken or Mint. Mint is also a free service, but it includes credit score monitoring. And while YNAB and Quicken are paid services, both reconcile transactions, while Quicken provides bill payment and credit score monitoring.
Related: YNAB vs. Quicken
If you don’t have at least $100,000 to invest, you won’t be able to use the Personal Capital Wealth Management service. But if you do meet the minimum investment requirement, but just want automated investment management, and not overall financial advice, you may be better off working with a true robo advisor.
Wealthfront can manage your portfolio for an annual fee of just 0.25%, while Betterment charges just 0.40% on portfolios over $100,000. The difference in the annual fee can have a substantial impact on your long-term investment performance.
Personal Capital has a real advantage over traditional human investment advisors, who charge anywhere from 1% to 1.5% to manage your portfolio. If you’re looking for a similar service level, but you don’t want to pay those high fees, Personal Capital is definitely the way to go.
Considering all that Personal Capital has to offer, this is an investment platform that is well worth checking out.