First of all, we must note that Personal Capital does not want to be classified as a robo-advisory and would prefer to be considered a digital asset management service that also includes personalized advice from financial planners. That said, the company is one of the first to put tools in investor’s hands and automate elements of portfolio management.
There are two ways to interact with Personal Capital. The first is a free planning tool that collects data from all of your financial accounts and makes some recommendations to improve returns. It’s well worth checking out, no matter where you bank or invest. The second way to interact with Personal Capital is an asset management service with a minimum account size of $100,000 to start. Clearly, this is not a service for the newcomer to saving and investing.
Clients are matched with a financial planner who can be contacted without limit
The tax optimization strategies keep the tax burden to a minimum
High net worth clients can use the Private Client services
Terrific retirement planning
Investing account customers require a very high minimum of $100,000
The mobile app is missing some key features available only on the desktop webpage
No easy way to opt-out of receiving phone calls during the sign-up process
Fees are high for a robo-advisory
Personal Capital gets personal quickly. The very first screen you see when setting up an investing account asks you for your email address and phone number. Two screens later, you are asked for your date of birth. The setup process requires you to schedule a call with an advisor even if all you want to do is use the dashboard to run an investment checkup. You can cancel the scheduled call, but you can’t get past the screen unless you pick a date and time. A brief biography of your assigned advisor is displayed, although there isn’t a way to choose a different one.
Once you have set your appointment with a Personal Capital advisor, you are then prompted to import your financial accounts, including banking, investment and credit cards, to generate a picture of your finances and to analyze your current asset allocation.
Personal Capital has 12 different portfolio allocations and nearly unlimited strategic variations on those allocations based on personalization for each individual client, taking each investor’s financial life and specific goals into consideration. However, you will not be able to see the portfolio recommendation until after you have talked with your assigned advisor.
The primary goal that Personal Capital helps clients plan for is the big one—your retirement. You’ll be asked a variety of questions about current income and what you expect to spend after you’re retired.
Retirement planning includes Personal Capital’s proprietary Smart Withdrawal tool, designed to maximize retirement income by breaking out taxable, tax-deferred and tax-free income. In addition, Personal Capital can advise clients on investing selections in their 401(k) accounts.
You can add non-retirement goals to the platform, although there is little assistance deciding on the size of the goal. Personal Capital can also advise on charitable gifts, which is a rare offering for the digital asset management and robo-advisory services we reviewed, but fits well with their target market of high-net-worth clients.
You can set up automatic deposits to fund your Personal Capital account, and you are encouraged to do so. There is no margin available through Personal Capital, but they launched Personal Capital Cash in June 2019. Personal Capital Cash is a high-yield account with aggregated FDIC insurance covering balances up to $1.25 million. There is no minimum balance to open a Personal Capital Cash account, so this offering isn’t tied to the investment management side. Currently there are no debit cards or other banking services available beyond the high-yield account.
Personal Capital’s analyzer tools should also be considered an account service, and one you don’t need to pay for. The fee analyzer looks at your allocations and fees to suggest alternatives that can save you fees or improve your diversification—and sometimes both. The Investment Checkup can be even more valuable as it pulls in all your accounts, analyzes them, and makes recommendations on your overall portfolio mix. If this review were based solely on the free service and the value it provides, Personal Capital would score above all the other robo-advisories on this count.
Personal Capital creates portfolios out of stocks, bonds, funds, alternative investments, and cash. As you would expect from a wealth management service, Personal Capital can also add private equity investments to the portfolios of qualified investors. The advisor relationship also means you can customize your portfolio beyond the match made through your profile. Your portfolio can include socially responsible investments, either in individual stocks or socially responsible ETFs, and your advisor can make transactions for individual stocks or ETFs at your request.
It is an understatement to say that Personal Capital leans heavily on Modern Portfolio Theory (MPT) to manage your cash. Harry “the Father of Modern Portfolio Theory” Markowitz is listed as the company’s portfolio strategy expert. Portfolios are monitored daily and rebalanced when they move outside the asset allocation boundaries. Moreover, Personal Capital uses what it calls “Smart Weighting” to ensure true diversification by monitoring and reducing concentrated exposures to a given sector or investment style, something that isn’t possible when investing solely in ETFs with capitalization weighting. The overall goal for turnover in a Personal Capital portfolio is 15% or less, which is intended to minimize the tax consequences.
Personal Capital’s investment management philosophy goes a step beyond tax-loss harvesting, instead seeking to optimize your tax burden rather than depending solely on tax-loss harvesting. Portfolios are designed to be tax efficient, and Personal Capital uses individual stocks and bonds along with the different tax status of accounts to better protect returns. Investments with higher yields are placed in tax-deferred accounts, such as IRAs, to keep today’s tax bill lower. Mutual funds can be inefficient from a tax perspective and are not used in any of Personal Capital’s managed portfolios. Instead, ETFs stand in for mutual funds in the portfolio mix.
The mobile app is very well designed and this is reflected in the glowing reviews of the app on both the Apple and Google platforms. There are some features that are not available on mobile apps, including the Investment Checkup and performance statistics. The dashboard showing your current financial situation is built into the mobile apps, and this is the one you will probably check the most.
All of the features offered by Personal Capital are on the website. Adding financial accounts is considerably easier on the desktop rather than on a mobile app. The website does use some financial language and descriptions that might be beyond what an entry-level investor may know.
Everything is handled through the advisor assigned to your account. There is no generic customer service line to call once your account is established because you can contact your advisor directly. Prior to establishing an account, if you need to call the company to ask questions, our researcher found that Personal Capital answered the phones quickly and that questions were answered by helpful, knowledgeable people.
Education & Security
Personal Capital’s website contains articles and guides for goal planning. The articles tend to be comprehensive and can be complex, but they are also excellent in terms of the quality of the content. You may feel as though you’ve earned an MBA after reading a dozen of them. Personal Capital also has a nearly daily blog that is updated with market news and developments.
Personal Capital takes security very seriously, even engaging in a bug bounty program to ensure there are no gaps in its protections. The firm encrypts all the data with AES-256 multi-layer key management and has strict internal controls on client data. Of all the robo-advisories reviewed, Personal Capital has one of the most comprehensive security and data protection regimes.
Commissions & Fees
The fees for Personal Capital are dictated by the dollar value of the assets you hold with them. There are three levels of asset management. The lowest tier, Investment Service, is for those with $100,000 to $200,000 in assets; portfolios consist of ETFs and you are given access to priority support services. The middle tier, called Wealth Management, is for those with between $200,000 to $1,000,000. These clients get two dedicated financial advisors and a much more flexible portfolio design that includes individual stocks and tax-loss harvesting, along with other perks.
To qualify for the highest tier of service, Private Client, you’ll need to start with $1,000,000 or more in assets. The Private Client portfolio can contain individual bonds and private equity investments. The Private Client tier directly competes with established wealth management firms, with fees that start at 0.79% and range down to 0.49% (for assets over $10 million) per year for assets under management. These are much lower than the fees high-net-worth clients would usually be facing with a traditional wealth management firm.
Is Personal Capital a Good Fit for You?
Personal Capital has the robust methodology, security, and service that you would expect as a high-net-worth client. The unfortunate part is that you have to be quite wealthy to access that level of service. However, it is worth using the wealth management app and dashboard just to see where you stand. You may even find that the Personal Capital Cash account is a great place to park an emergency fund or simple savings account. An initial discussion with a financial planner is also free, but the unlimited access only comes if you have the large account minimums to invest. That, sadly, is the big knock on Personal Capital as an investment robo-advisory (again, not their preferred term). The platform is excellent, but most people can’t meet the threshold to use it.
High-net-worth individuals, or those rolling a large sum out of an employer 401(k), might want to take advantage of the managed accounts at Personal Capital. The fees are high compared to others robo-advisors, but they’re lower than most financial advisors, who charge 1% to 2% per year for their services. More importantly, Personal Capital has a legitimately better methodology that doesn’t just lean on MPT, but embraces it and offers true asset diversification beyond a simple ETF mix based on a risk profile. Maybe money can’t buy happiness, but it can certainly get you a superior robo-advisor.
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