One thing that I have craved for investors is a tool that allows you to sync all your investment accounts in one place, but one that also gives you more investment related analysis.
I took out an account to do a full Personal Capital review of the financial aggregator, which means you can link all of your financial accounts – your investment portfolio, your checking and savings accounts, credit cards and other loan accounts – all into the same platform.
That means that the site will provide you with a place where you can view your entire financial life in one place.
Mint does a fantastic job of giving you numbers, but falls short on giving you a greater insight into your overall investment portfolio.
For my clients, I subscribe to Blueleaf – which is fantastic. The only downside is that you have to be my client (or another advisor that uses it) to get access to it. I realize that everyone will not be my client so the hunt continued for another option. I then discovered Personal Capital.
I was so excited to learn more about it that I immediately signed up. I synced all my investment accounts to give Personal Capital a try. In the meantime, I had Kevin write a review about them so you can better understand how this awesome (and often free) program works.
Financial advisors that focus primarily on wealth management can be costly to keep around. Sometimes they charge you as a percentage of assets managed and other times it is a flat hourly rate that can run as high several hundred dollars per hour – that in addition to trading commissions and administrative fees. What’s more, these wealth advisors aren’t really there to teach you how to put together a budget, they strictly manage your money.
You’re handing them a large chunk of your retirement and investment assets, and they manage it to get you top results. Sadly, these advisors — as excellent as they can be — are unreachable unless you have millions of dollars to invest.
But for the rest of us there is now a great option to consider: Personal Capital. This amazing service is like combining financial advisor extraordinaire Jeff Rose and budget management tool Mint.com into one handy website and smartphone app.
What is Personal Capital?
Personal Capital is an online tool that will help you:
- Monitor all of your financial accounts in real-time whether checking account, certificate of deposit, or retirement account
- Get objective investment advice designed to make you, not the advisor, money
- Provide investment options that are tailored to your goals
All while letting you manage this from a browser or on a slick smartphone app. I know what you’re thinking. “Okay, great, but why should I trust these new guys?” I’ve got to be honest with you. There were two words I saw on Personal Capital’s website that made my heart skip a beat.
Those two words. Are you ready?
Here’s a straight copy from their website on what they offer:
Objective Advice The sorry truth is that bankers and brokers are motivated to help themselves, not you. They are salespeople paid to push products, earning commissions and kickbacks when they do. In stark contrast, Personal Capital is an investment advisor. We accept a fiduciary obligation to act in your best interest, and our advice must be aimed at making money for you, not for us.
This is absolutely key with any financial advisor you talk to whether in person or a company online. Fiduciary duty means the party has a legal obligation to put your interests above their own. Whereas normal brokers get paid commissions by getting you to churn your investments over and over (which costs you thousands of dollars in lost percentages here and there) Personal Capital is putting a requirement on themselves to put your interests above theirs.
This is huge.
And exactly what you should look for in an advisor of any kind. Major points for Personal Capital from me on this one.
How Personal Capital Works
Personal Capital offers a free version and a premium version that features direct investment management. Whichever version you use, your account is actually held by Pershing Advisor Solutions, who acts as trustee for your account.
The Free Version. With the free version you get full use of the Personal Capital dashboard as well as a free consultation from a financial advisor. That advisor will give you a personalized analysis of your investments, as well as recommendations as to what you can do with your portfolio.
In fact, you will have access to a financial advisor at any time, whether you use the free version for the premium version. Your financial advisor can be contacted by phone, email, or by online chat.
The free version includes many of the features and benefits that are available on the platform, including the 401(k) analyzer and access via the mobile app. For the most part however the free version will mostly enable you to aggregate all of your financial accounts, including your investments, on a platform.
The Premium Version. Also known as Personal Capital’s Wealth Management program, this is the version in which Personal Capital actively manages your investment portfolio. Similar to many managed investment platforms, they first determine your risk tolerance, personal preferences, and investment goals. Based on that evaluation, they create a portfolio that will fit within those parameters.
Investment Strategy. Personal Capital uses Modern Portfolio Theory (MPT), to manage your portfolio. MPT focuses less on individual security selection, and more on diversification across broad asset classes. Those asset classes include:
- US stocks (which can include individual stocks)
- US bonds
- International stocks
- International bonds
- Alternative investments (including ETFs and commodities)
Though Personal Capital makes use of funds in constructing your portfolio, they may also include up to 100 individual securities in order to avoid being too heavily concentrated in a small number of companies.
Another factor that I found in my Personal Capital review that make them almost unique is that they use an integrated investment approach to managing your investments. That means that they consider all of your investment holdings, including those not managed by Personal Capital, in managing your portfolio. For example, though they do not manage your 401(k) plan, your allocations within the plan will be considered in managing your investments that are actually managed by Personal Capital.
Did I Mention It Is Free – at Least Sometimes?
All but one of the services from Personal Capital is absolutely free. Here’s what you get for zero dollars:
- Real-time financial dashboard
- Mobile device apps
- Objective investment advice
- Investment check-ups
The only thing that will cost you a fee is their personalized portfolio management. The fee structure looks like this:
- 0.89% of the first $1 million
- 0.79% of the first $3 million
- 0.69% of the next $2 million
- 0.59% of the next $5 million
- 0.49% on balances over $10 million
These fees are quite reasonable when compared with fees of 1% to 2% that are customarily charged by active investment management services. The fees apply only to the assets you have under management at Personal Capital, and not to other investments that may be aggregated on the site, such as your 401(k) plan.
In addition, there are no additional fees. Personal Capital does not charge fees for trading or commissions, administrative fees, or other types of investment fees. The fee that applies to your portfolio level is the actual fee you will pay.
Review of Personal Capital Tools and Benefits
There is a long list of tools and benefits in using Personal Capital. Some of the more interesting ones include:
The Investment Checkup. This tool analyzes your investment portfolio, and gives a risk assessment of of it, to make sure that your level of risk is consistent with your goals. This will help you to create an asset allocation that will get you where you need to go with your investments.
401(k) Fund Allocation. This tool can be used to analyze your employer-sponsored 401(k) plan, even though it is not under the direct management of Personal Capital. It can be used to help you with your asset allocation, at least based on the investment options that your plan includes. This is an excellent tool since most 401(k) plans don’t, any kind of investment management advice.
Retirement Planner. You can often find retirement planners or retirement calculators on various sites throughout the Internet. But what better place than to have it available where you also have all of your investment accounts listed? Personal Capital’s Retirement Planner allows you to run numbers on your retirement to make sure that you will be prepared when the time comes. It allows you to incorporate major changes in your life into your retirement planning, such as the birth of a child or saving for college.
Net Worth Calculator. Since Personal Capital aggregates all of your financial accounts on the same platform, they can also provide you with ongoing monitoring of your net worth. This will enable you to get the most comprehensive view of your financial situation, since it not only takes into account your assets, but also your debts. Net worth is the best single indicator of your overall financial strength, and this will give you an opportunity to track it.
Cash Flow Analyzer. Though our focus in this article has been primarily on the investment side of Personal Capital, it’s important to recognize that it also includes a budgeting capability. The Cash Flow Analyzer tracks your income and expenses from all sources, letting you know where you’re spending money (or spending too much of it), which will help you to make adjustments that will improve your overall budget.
Mobile App. Personal Capital’s mobile app is a free feature that can be downloaded on Apple iPhone, iPad, Apple Watch and Android. The mobile version has everything that is available on the desktop platform. It will enable you to track your investment portfolio, as well as your banking and credit card activity while you’re on the go.
Tax Optimization. Personal Capital uses tax optimization in the management of your portfolio. This feature is available to premium Wealth Management clients, and not if you are using the free version.
They use several tactics as part of tax optimization. For example, they include income producing investments in tax-deferred accounts, while growth oriented investments – that have the benefit of lower capital gains taxes – are held in taxable accounts.
In addition, they don’t use mutual funds, but instead use exchange traded funds with a mix of individual stocks, since stocks can be easily bought and sold for tax loss harvesting. And speaking of tax loss harvesting, they use this strategy to sell losing stocks, which offsets the gains on the sale of winning stocks. This strategy minimizes the negative impact on your investment portfolio from income taxes.
Site Security. Personal Capital uses bank level, military grade encryption on the platform. They also perform ongoing third-party security audits to test their systems. They also use device authentication so that each device you link your account must first be authenticated in order to be used
Crash Test Your Portfolio
Investing expenses and taxes are the two things you can absolutely count on within the investing world. You can’t rely on gains every year, but you can guarantee you will be taxed and you will pay expenses. That makes reducing those expenses as one of two ways you can control your investing destiny.
Thankfully, Personal Capital realizes this and offers you a really great tool to analyze the cost of your investments. Where this gets interesting is you can do an analysis on your employer’s 401 (k) plan (as discussed above) to discover whether your plan is amazing, just okay, or terrible as it comes to costs. You might be the person to go to HR to reveal just how expensive your plan is, lay out a new plan that would cut costs for everyone, and end up getting a promotion just for running a cost analysis.
Even if you don’t get promoted to head investment advisor for your employer, at the very least you’ll save your own retirement from exorbitant fees. And that’s a huge win we can all settle for.
Want to try out the 401 k analyzer? Click the crash test dummy above.
Is Personal Capital for Me?
The idea of wealth management means you need to have wealth to manage. If you’re struggling to get out of debt, that’s okay, but Personal Capital probably isn’t the best fit for you. In that case Mint might be a better option and you can see a full comparison in how to better meet your needs in my complete personal capital vs mint review.
However, if you are building up your retirement assets and want to be able to maximize your nest egg without gambling on penny stocks then you should definitely sign up for the service. You can use all of the features aside from the personalized portfolio management for absolutely free. There is no reason to not take a look at what they are offering.
Get the Money Dominating Toolkit
- 6 Tools to Get Your Money Back on Track
- The Ultimate Goal Achiever Workbook
- 2 Free Chapters to my Best Selling Book
- 21 Days to Destroy Your Bad Habits Worksheet