Personal Capital Review: Free Tools and Paid Wealth Management
Personal Capital is an online wealth management concept that started in 2009.
Today, Personal Capital offers two sets of tools depending on whether you pay for their services or not.
First, they offer everyone access to free personal finance management tools you can use to gain insight into your money.
Personal Capital provides a paid wealth management service for those with $100,000 or more in investable assets. This isn’t a traditional robo advisor service, as real financial advisors interact with you.
This Personal Capital review shares the good and bad of both aspects of Personal Capital’s offerings.
How Do Personal Capital’s Free Tools Work?
After you sign up for a free account with Personal Capital, you get access to their free tools.
For their free tools to work, it makes the most sense to link your financial accounts and credit cards to Personal Capital. This is done securely.
After entering credentials, Personal Capital will import the transactions and balances from your accounts.
This allows Personal Capital’s free tools to provide you with insights into your money.
What Free Personal Finance Management Tools Are Available?
Currently, Personal Capital offers the following tools.
Personal finance dashboard
The personal finance dashboard gives you a big picture view of your finances.
Based on the information pulled in from your accounts, it generates several visuals.
The dashboard displays the following:
- A net worth history graph
- A current month budgeting progress pie chart
- A current month cash flow bar chart
- A portfolio balance history graph
- Your progress on your retirement savings for the year
- Emergency fund historical balance chart
- Debt paydown chart
- Market performance data
This feature shows you all of the transactions across all of your accounts in one place.
You can select certain categories of accounts to see particular transactions. Another option is setting custom date ranges.
From this list, you can edit the description, add tags or change the category for each transaction.
Cash flow graph
The cash flow graphs and pie charts give you insight into how much money is going in and out of your accounts.
The line chart shows when money has come in or out based on the selected accounts.
There are also income and expense pie charts. These show you the breakdown by category for income and expenses separately.
The income and expense tabs have line charts, as well. These show the timing of the income or expenses over the time frame you selected.
Budgeting in Personal Capital is a bit lackluster.
The app shows you where you are in relation to your monthly expense goal. It also displays how your current month’s spending compares to last month.
A bar chart helps you visualize your spending by day, too.
Unfortunately, this is the extent of their budgeting software. There are no custom reports or other unique features.
For someone looking for an easy way to see if they’re on track overall, this is fine. For others that want to set budget category spending amounts, this won’t work.
Personal Capital can help you stay on top of your bills with their bill tracking feature. For linked accounts, it displays the following:
- Due date
- Account name
- Last payment date
- Statement balance
- Minimum due
- Current balance
Bill tracking can be helpful to keep track of your bill due dates in one place.
Any accounts that don’t stay synced may not have up to date information.
Unsynced accounts could result in missed bill payments if you only rely on the software.
Optional Personal Capital Cash Account
Personal Capital offers users a cash account. The cash account is an FDIC insured financial account, but the APYs are rock bottom.
There isn’t much reason to open one of these accounts at this time. If rates improve in the future, that may change.
Investment tracking data
Personal Capital offers reports to track your portfolio holdings, balances and performance.
You can view your investments’ performance compared to standard benchmarks on a historical basis. You can see how your account balances have grown over time, too.
Portfolio Asset Allocation and Sector Analysis
What’s even more useful is the portfolio allocation and U.S. sectors reports. Since you may have investment accounts across multiple institutions, it’s hard to know how your portfolio is truly allocated.
Personal Capital analyzes your investments in each account.
Then, it displays your overall portfolio allocation and sector allocation in an easy to understand visual.
This data can help you see where you’re overexposed or underexposed. Then, you can make adjustments to get your portfolio in line with what you want.
The retirement planner tool is where Personal Capital shines. It applies the information from your investments to a retirement scenario.
The software already has your current balances. You’ll have to add in the following to see your chances of your retirement plan working out:
- Your yearly savings
- A percentage increase in savings each year above inflation
- Estimated Social Security income
- Annuity income
- Pension income
- Rental income
- Sale of a property or downsizing
- Working during retirement
- Other income
- Your yearly retirement spending
- An annual increase or decrease in retirement spending
- Spending events or goals in retirement such as
- Charity or gifts
- Dependent support
- Health care
- Home purchase or upgrade
- Other expenses
You can also customize the assumption in the calculator to get more accurate results based on your expectations. These assumptions include:
- State of residence
- Effective tax rate
- Inflation rate
- Life expectancy
The wide variety of income events, expense events and assumptions you can simulate make this a great way to model your retirement plan.
You can see the likelihood your portfolio will support your goals. Then, you can make adjustments to bump up the likelihood percentage.
Alternatively, those already in good shape can see how retiring earlier or making other changes could allow them to live better lives.
You can even simulate a past recession when you reach a certain age. Recession simulation allows you to see how your investments would react to a downturn at the period you select.
The savings planner helps you in three areas.
First, it suggests how much you need to save each year for retirement. This is based on a 70% chance of success.
Next, it shows your current emergency fund compared to the emergency fund size they suggest.
Finally, the savings planner shows you your debt paydown over the year.
These tools are only useful if you don’t already have a firm grasp on these concepts.
Retirement fee analyzer
The retirement fee analyzer compares your annual fees to a benchmark of 0.50%.
The real value in this tool is it shows how much of your investment earnings are lost to fees by the time you plan to retire.
The lower your fees are, the less you lose to fees. This analyzer inspires you to keep more of your investment earnings for yourself.
Investment checkup tool
The investment checkup tool analyzes three areas of your investments. First, it checks to make sure your allocation is reasonably within your target allocation.
The tool looks at your individual stock positions and your accounts’ costs to look for areas for improvement, too.
Are There Any Hidden Costs to the Free Tools?
The free tools really are free. The catch is Personal Capital uses these tools as a way to get you into their ecosystem.
Once your investable assets reach $100,000, Personal Capital’s minimum for wealth management services, expect to get regular calls to try to set up a free consultation.
The consultation can be useful, but you will be heavily sold on signing up for their paid wealth management services.
For many, these free tools are worth the occasional annoying phone call.
Who Are the Free Tools a Good Fit For?
The free tools Personal Capital provides may be a great fit for some. In particular, those that don’t want to pay for personal finance management software may like it.
If you don’t need fancy budgeting reports and don’t mind occasional account syncing errors, the software might work for you.
If you want polished software that works consistently with all accounts, consider other options. Paid software is usually more in-depth and offers better support.
Personal Capital Free Tools Pros & Cons
Here are some of the benefits of using Personal Capital’s free tools.
- No cost
- Offer insights into your money in an easy to digest way
- Helps you plan your future retirement needs
- Provides insight on if you’ll reach your goals
These tools do have some drawbacks.
- Personal Capital will start calling you after you reach $100,000 in investable assets.
- Accounts don’t always sync correctly.
- Support options aren’t as robust since the tools are free.
- Certain aspects, such as budgeting, aren’t as detailed as paid options.
How Does Personal Capital’s Wealth Management Work?
Personal Capital’s paid advisory service helps people get professional advice to manage their finances and investment accounts.
You must transfer your money to Personal Capital’s custodian to have it managed by the firm.
They currently have three tiers of services. Each level is segmented by the amount of assets you invest with Personal Capital.
- Investment services: $100,000 to $200,000
- Wealth management: $200,000 to $1 million
- Private client: More than $1 million
The more assets you have, the more services you have access to.
You’ll meet with financial advisors virtually as needed to set up your portfolio and goals. Whenever you have questions, you can also reach out to an advisor for help.
Personal Capital Wealth Management Pros & Cons
What Wealth Management Services Are Available?
Personal Capital has three tiers of services depending on your amount of investments.
Investment Services - $100,000 to $200,000
Investment Services is Personal Capital’s base tier. You must have at least $100,000 to invest with Personal Capital to access these services.
You get the following features in the Investment Services tier.
Financial Planning Tools
While you get access to financial planning tools with a free Personal Capital account, the Investment Services tier adds one essential tool.
Within the retirement planner, there is a Smart Withdrawal tool. This tool, which only paid clients get access to, helps you develop a personalized and tax-efficient withdrawal strategy for your retirement plan.
Financial Advisory Team
As a Personal Capital Investment Services client, you get unlimited advice from a team of financial planners.
In particular, advisors help with financial and retirement planning.
In this tier, you don’t have dedicated financial advisors that know your situation well. That said, these advisors can look at your information and still help you answer any questions you may have.
Investments are made in exchange-traded funds (ETFs) instead of individual stocks. Your ETF portfolio starts getting generated based on a selection algorithm.
Personal Capital looks at your financial goals, risk tolerance and your particular situation. You can request a review of the selected ETF portfolio if you wish.
Unfortunately, ETFs usually come with expense ratios while investing in individual stocks doesn’t have this expense. That means using ETFs will be slightly more expensive for you as the customer.
Smart Weighting is Personal Capital’s proprietary indexing methodology. Rather than focusing on market cap weighting, Smart Weighting focuses on more equally weighting three factors.
By more equally weighting the economic sector, style and size of your investments, Personal Capital aims to get a better risk-adjusted return.
Personal Capital pays special attention to make sure your investments are tax optimized. Tax optimization can add extra returns versus not paying attention to these impacts at all.
In particular, the company uses three main tax optimization strategies.
First, they make sure your investments are in the most efficient tax-advantaged retirement account. For instance, putting your highest growth assets in a Roth account could lower your overall tax burden.
Next, they perform tax-loss harvesting. This sells investments at a loss to claim the loss against other gains or your ordinary income. Don’t worry, your money still gets reinvested in another investment that makes sense for your goals so you stay invested.
Finally, Personal Capital pays attention to tax efficiency. They use stocks and tax-efficient ETFs over less tax-efficient investments. This strategy allows you to have a lower overall tax burden which results in higher overall returns.
Portfolio Monitoring and Rebalancing
Your investments will be continuously monitored to watch for any deviations from your targeted allocations. When it makes sense, both from a portfolio and tax perspective, Personal Capital will rebalance your investments to align with your goals.
According to Personal Capital, this enhances risk-adjusted returns by allowing you to buy low and sell high in a systematized manner.
As an investor, you can expect rebalancing activities in most months. The company aims to keep the turnover of investment portfolios under 15% in most years.
For this to happen, investments must exceed a certain threshold before rebalancing. Otherwise, you’d frequently rebalance as asset prices change daily.
Wealth Management - $200,000 to $1,000,000
The Wealth Management tier offers everything in the Investment Services tier plus additional features.
The one exception is you get two dedicated financial advisors rather than a financial advisory team. The dedicated staff gives you more consistent advice when you need help.
Extra features include:
- Access to specialists
- Support with financial decisions, such as insurance, home, finance, stock options and compensation
- Portfolio customization
Rather than using ETFs, this tier uses individual stocks to invest. This allows for more sophisticated investment strategies.
For instance, tax-loss harvesting can be performed on an individual stock basis rather than an ETF basis.
Private Client - $1,000,000+
The Private Client tier offers the most services. It includes everything in the Wealth Management tier plus:
- Access to the investment committee
- Wealth planning in the form of estate, tax and legacy planning
- Private equity and hedge fund review
- Access to private banking services
- Estate, tax and legacy portfolio construction
Above and beyond investing in individual stocks, you may also invest in individual bonds in certain situations as a Private Client.
Private equity investments may be available to those with $5,000,000 in more invested with Personal Capital, assuming you meet the suitability requirements.
How Much Does Personal Capital’s Wealth Management Cost?
Fees for Personal Capital’s wealth management offerings are different for the Private Client tier and the Investment Services or Wealth Management clients.
Fees are based on an assets under management model. This method means you pay the fee percentage multiplied by the assets you hold with Personal Capital yearly.
The current fee structure for Investment Services and Wealth Management accounts is 0.89% on the first $1,000,000 of assets.
Once you exceed $1,000,000 in assets, you graduate to the Private Client service level. Fees for this level are as follows:
- 0.79% on the first $3,000,000
- 0.69% on the next $2,000,000
- 0.59% on the next $5,000,000
- 0.49% on amounts over $10,000,000
The company focuses on combining technology with financial planners to provide comprehensive wealth management at a lower cost.
Traditional financial advisors commonly charge a 1% assets under management fee. With Personal Capital, you could save a bit of money on fees depending on your asset balance.
Who Is Wealth Management a Good Fit For?
You must have at least $100,000 in investable assets to use Personal Capital’s services.
Personal Capital’s wealth management options may be a good fit if you don’t mind meeting with financial advisors digitally. Those that prefer to meet face to face won’t be able to do so.
These services could be a good fit for those looking for unbiased advice.
All of Personal Capital’s financial advisors are fiduciaries. These advisors must keep your best interests in mind above anything else.
Using a fiduciary advisor is vital. It means you’ll receive advice that isn’t conflicted by potential commissions other advisors may earn for selling certain products.
Though Personal Capital may be a good fit for many, it isn’t a good fit for everyone. If you’re well educated about personal financial planning, you could save the advisory fee by managing your money yourself.
Even so, you aren’t aware of your blind spots. Using a financial advisor can help avoid costly mistakes you aren’t aware you’re making.
Personal Capital provides free personal finance tools to get you in their ecosystem. These tools can be handy to help you track and manage your money.
They aren’t perfect, though.
Some people may be better off with another personal finance management tool that better suits their needs.
Once you amass $100,000 of investable assets, expect phone calls to get you to sign up for their Investment Services, Wealth Management services or Private Client services.
If you’d prefer to let someone else manage your investments, this could be worth considering.
Those that have educated themselves and prefer to manage their investments on their own to avoid fees may decide to pass on Personal Capital’s paid services.