Imagine a company that allows you to track your money and expenses for free. Now imagine that same company can use all the data collected from their free personal finance app to improve their management of your investments. That company is called Personal Capital.
Personal Capital was launched in 2011 in Redwood, California, manages over $500 million in assets, and is run by Bill Harris, the former CEO of Intuit and PayPal. It also might be the best personal finance and wealth management combo around.
What Does Personal Capital Do?
Personal Capital provides two main services: financial planning website/app and wealth management platform. As a financial planning website and app it is as good, if not better, than the best personal finance apps available. Think Mint and BillGuard but with a special focus on tracking your investments.
Personal Capital will allow you to track your monthly living expenses and your investment portfolio from one place. You can check your credit card statement and calculate your mutual funds fees over time, as well as compare their performance against the main market indices.
Personal Capital: The App
Personal Capital’s money management app has four main features:
1. Net worth calculator
The net worth calculator uses the data from all your accounts to determine your true, up-to-date net worth by deducting your debts and liabilities, such as mortgages, loans and credit card debt, from all the assets you own, such as property, vehicles, IRAs, bonds, stocks or even jewelry.
2. Fee analyzer
The fee analyzer takes a look at your investment and retirement accounts and tracks all the custodial fees, inactivity fees, and 12b-1 fees you are being charged on funds and other assets. Once you have a clear look at what you’re paying for the privilege of investing, you are empowered to find ways to reduce the cost. The fee analyzer will even calculate how much unnecessary fees are costing you over time.
3. Investment checkup
The investment checkup feature compares the performance of your investments and retirement accounts with the ideal portfolio for your circumstances and goals, as calculated by Personal Capital’s personalized plan. This provides a useful benchmark for your portfolio’s performance.
4. Retirement planner
The retirement planner uses live financial data to determine how prepared you are for retirement. This a flexible planner that allows for additional investments, such as paying for college, buying a home or even getting married.
The fact that this app is just a freebie, designed to attract paying customers to the premium section of the website, doesn’t change the fact this is, on it’s own, a beautifully designed and sophisticated personal finance analysis program.
Personal Capital’s Investment Platform
Personal Capital is first and foremost an investment platform that provides all the bells and whistles you expect from professional financial advisors at a fraction of the price. For a flat fee of 0.89%, you get your very own financial advisor you can email, chat, call or even have a video conference with. Because your financial advisor has a full view of your financial situation, she is better prepared to provide targeted investment advice.
Their investment strategy is based around a “special mix” of index funds, which keeps expenses down and provides efficient diversification. The financial advisor also provides personal tax advice to help you keep as much of your hard-earned cash as possible.
The catch is you need to invest a minimum of $100,000 to even open an account with Personal Capital, and their real target audience are those with $250,000 to $2 million to invest.
Who is Personal Capital for?
Personal Capital is for people who already have a good understanding of how to budget, have substantial savings, and want prime financial tools to help them improve their financial management skills and the performance of their investments.
Anybody can benefit from Personal Capital’s sophisticated (and free) money management tools but its people who already have a substantial portfolio and want to save on hidden investment fees that will get the most out of it.
Personal Capital’s portfolio management platform is only an option for people who have $100,000 in savings. If you don’t have $100,000 to deposit, download and enjoy their personal finance tracker app. It might help you manage your finances better and qualify for their investment management service one day.
How is Personal Capital Better Than Other Wealth Management Companies?
Personal Capital undercuts the large fees of big banks and bloated financial advice firms, but still manages to provide a highly personalized service. However, it still offers the top-end services that are usually only enjoyed by the ultra-wealthy.
- Monitors asset allocation and track portfolio performance against major indices
- Identifies potential portfolio risks
- Calculates their mutual fund fees over time
- Explains how 401(k) fees may affect their retirement goals
- Checks a mutual fund fee calculator, which tells them how much fees could eat into investment gains over time
- Uses award-winning mobile and iPad apps to manage their money from anywhere
- Tax-Loss Harvesting
The personal touch of dealing with a human financial advisor is the big difference between Personal Capital and wholesale investment managers, such as SigFig and Betterment. Providing the option of talking face to face with an expert is a huge deal for wealthy individuals who don’t want to pay the exorbitant fees of big-time investment companies, but also don’t want to rely their life savings entirely on a predetermined equation either.
Personal Capital has only been around for three years, so it’s still unclear if the use of personal financial advisers and their souped-up indexing investment strategy will do any better than the cheaper index funds offered directly by investment companies like Fidelity and Vanguard, but the initial figures look promising.
Simply having someone to walk you through your portfolio’s strategy, and being able to tell your buddies about the latest tip your financial adviser shared with you, gives clients a psychological benefit that doesn’t have to translate in a higher interest rate to be valuable.
Something else, Personal Capital is not partnered with any particular broker or financial product, so there’s no conflict of interest when they recommend investment options.
What’s not to love about Personal Capital?
The 0.89% management fee may be lower than the average cost of a mutual fund, as Personal Capital representatives constantly point out, but it’s also in addition to any investment costs incurred in investing your money. Except for the personal contact with a financial adviser you can get most, if not all, of the services provided by Personal Capital for free elsewhere.
Again, Personal Capital excludes customers who don’t have $100,000 in assets to invest. If your portfolio is still not at that level, there are several other companies, such as Vanguard, Betterment and Wealthfront that offer similar services with either much lower or no minimum investment.
Although we see the added value a face-to-face financial adviser provides many people, you could argue it is a bit of a gimmick. As Personal Capital itself points out in its infomercial on its investment strategy, the main factor in investment is how well you diversify the assets you invest in. This means that once you provide accurate data, a computer should be in most cases as good as or even better than a human at choosing which assets to invest in.
Having said that, the peace of mind of really understanding how your life savings are being invested and being able to call a professional adviser for information is well worth 0.89% for many investors.
Andrew is the managing editor for SuperMoney and a certified personal finance counselor. He loves to geek out on financial data and translate it into actionable insights everyone can understand. His work is often cited by major publications and institutions, such as Forbes, U.S. News, Fox Business, SFGate, Realtor, Deloitte, and Business Insider.