Personal Capital Review: Wealth Management

Getting Started with Personal Capital

Signing up with Personal Capital was super easy. I was asked for my email address (which serves as the User ID), a password, and a phone number (for identity verification). Next, the site asks some questions to help tailor their advice to my situation. This includes name, age, planned retirement age, and how much I’ve already saved and/or invested (excluding property value).

Next, I was asked about my goals – how I manage my investments (on my own), how I’d change how my money is managed (I wouldn’t, but that’s not an available option, so I picked “invest in lower-cost funds”), and how a financial advisor and Personal Capital’s tools are most valuable to me (I'm not sure yet, but am open to see what's available; some things that might be useful include a Monte Carlo simulator that allows me to personalize the inputs and assumptions).

Next, I’m told, “Level Up.

You've earned a free session with a Personal Capital advisor. Whatever you're saving for, we can help you achieve your goals. A financial advisor will call you to take in your situation and then present a comprehensive recommendation. Everything is yours to keep and completely free.” I’m offered several dates and times, and once I choose one, I’m asked to confirm my email and phone number and send any notes I wish to the advisor.

Conveniently, I can click to add the call appointment to my calendar (Google, Apple, or Outlook). I’d already entered it in my calendar, so I skip this. Personal Capital makes it convenient to set up automated downloads by providing all your financial accounts’ credentials to add my assets and liabilities. Color me cautious, as I’m reluctant to provide that sort of access to anyone.

This, even though Personal Capital is well regarded and appears not to keep this sort of information on their own servers, using a third party instead. After looking in vain for a way to enter the information manually (without providing account numbers, IDs, and/or passwords), I email Brett, the rep who’s scheduled to talk with me in a few days.

He quickly replies and says there is indeed a way to do so. It turns out it’s hidden until you start typing something (anything) into the “Link Your Account” search field. I type in “aaa,” which brings up several potential matches. Since that’s not really the start of any of my financial institutions’ names, I concentrate on this at the bottom of the form: “Can't find your account? Link it manually or submit a request to get support for your financial institution.” and more importantly, the “Add Manual Account” button below. This is a laborious method, but it does let me enter whatever I want without disclosing any credentials. Next, I start with the retirement planner.

This is a bit less intuitive, though the question prompts from the system help. Some defaults are offered, for example, what you should expect from Social Security. However, it’s better to get those numbers directly from the Social Security Administration (and adjust downward by 23% in case changes to Social Security lead to benefit cuts rather than payroll tax increases). For some reason, Personal Capital underestimated my projected benefits, so I corrected those.

Since I don’t want to let Personal Capital link to my actual accounts, and since entering each transaction manually would be impractical, I can’t take advantage of tools such as Cashflow, Bills, Budgeting, and their Retirement Fee Analyzer (ominously, this claims that 53% of earnings are lost to fees!).

They offer a nifty portfolio allocation visualizer, which breaks down my investments by asset class. Personal Capital offers to let me open a savings account with a 1.55% Annual Percentage Yield (APY). This is much better than typical bank accounts. Bank of America, for example, currently offers 0.03%!

Personal Capital also offers to build for me a tailored portfolio of ETFs and a security basket in place of the (low-cost) mutual funds I’m currently invested in. They estimate that by retirement, this could save me $130,000! Considering that my average fund charges about 0.8% per year, this sounds plausible at first blush.

The only problems are:

(a) the ETFs they recommend would need to outperform my current mutual funds

(b) I’d face a hefty tax bill when selling my current taxable holdings to move the money into their recommended mix, and most importantly

(d) Personal Capital charges their own advisory fee of 0.89% for Investment Services & Wealth Management Clients or for Private Clients 0.79% for the first $3M, 0.69% for the next $2M, 0.59% for the next $5M, and 0.49% after that.

Given all that, I’m entirely unconvinced. I plan to ask Brett. They also estimate a tax savings of $3500-$8200 a year. I’m skeptical of this last, too, since I didn’t see anyplace identifying my retirement accounts as being tax-advantaged (possibly because I entered them manually). At this point, I’ll reserve further judgment until after my free 30-minute phone call with Brett.

Speaking With a Personal Capital Financial Advisor

After my first conversation with Brett, I have more information.

First, I asked about the expected reduction in fees. I mentioned that my current investments cost less per year than Personal Capital’s 0.89% fee for Investment Services & Wealth Management Client (if you let Personal Capital manage assets under $1M), and just about the same as their first-tier for Private Clients with between $1M and $3M. Brett agreed that in my case, fee reduction would not be significant until my portfolio grows above $3M.

However, he did point out that my current investment in mutual funds suffers from the fact that funds must hold some cash on hand to enable them to pay investors who redeem shares. This makes mutual funds a less efficient investment than 100% invested (in ETFs and stocks). Additionally, mutual funds are required by law to annually distribute to their investors any interest, dividends, and capital gains. If the funds are held in a taxable portfolio, you have to pay taxes each year on these distributions.

Personal Capital, by comparison, would have my money invested in ETFs and a basket of selected individual stocks. Until and unless I sell an investment, the only taxable events would be getting dividend payments from stocks or stock ETFs and/or interest payments from bond ETFs. If the ETF and/or stocks increase in value, that would not be taxable until I sell those positions, making this direction more tax efficient.

Another benefit Brett mentions is that Personal Capital rebalances advisory clients’ portfolios in a tax-efficient manner, harvesting losses to offset gains. This should make the portfolio less risky over time, with lower taxes owed than being invested in mutual funds. Here are a couple of interesting resources on how Personal Capital works and how well they’ve done for their clients:

  • Overview of retirement planner (interestingly, for my state of MD, they assume a 5% state income tax, which is correct but incomplete, since it ignores the county portion of income tax, which adds another ~3%)
  • Personal Capital’s investment performance since 2012 over a range of aggressive/conservative portfolios; looking at one of my larger holdings, T. Rowe Price Capital Appreciation Fund, I see that even with the drag of a few percent of assets in cash, it returned an annualized 12.4% from 2012 to date, comparing favorably with the S&P 500’s 11.8% in that period. Capital Appreciation fund’s performance exceeds all of Personal Capital’s portfolios’ performances in that period, that range from 5.2% for the conservative portfolio, through 6.2% for the balanced portfolio – the one likely closest to Capital Appreciation fund’s balanced investment strategy, to 10.8% for their most aggressive portfolio; this being the case, I again wonder if hiring Personal Capital would improve on the performance I’d be able to get on my own.

After my follow-up call with Brett, I’m more impressed but still not planning to move my portfolio to their management. On the positive side, a lot of what they do for their clients makes abundant sense. They suggest equal-weighting among the different stock sectors, rather than following the S&P 500, which is currently over-weighted in, e.g., tech stocks.

Their research shows that following this strategy since 1990 (when sector performance data became widely available), it would have outperformed the S&P 500 by a significant margin. Their method of managing clients’ investments by rebalancing from stocks that have outperformed into ones that have lagged also makes a lot of sense, especially when done with an eye on tax implications.

Still, the bottom line for me personally is that I currently pay a composite fee that’s not much different from what they would have changed and that my personal rate of return is better than what they’ve accomplished for their clients since 2012. That’s why, for now, at least, I’m going to keep managing my own investments.

However, I will probably revisit some of my own asset allocations to ensure I’m not taking on more risk than is justified by the returns.

What I Liked Most About Personal Capital

There are many free, powerful tools, including simulated retirement planning results. This lets you figure out how much you need to save each year vs. how much you can expect to withdraw safely from your retirement portfolio once you retire. If you’re less wary than me (which may be fine according to, you’ll be able to use Personal Capital as your single financial gateway. In fact, it could be argued that only ever using your Personal Capital credentials to check on your accounts may be safer than routinely accessing each of your financial institutions’ websites.

Also, having a human being to discuss things with is a good way of at least getting feedback on my investment ideas; and getting better advice than what I can think of or research on my own, seeing that I’m not an investment professional.

Overall, I’d rate Personal Capital’s ease of use at 4.5 stars. I don’t give it 5 stars because their website has a lot of tools and information, and finding all of it takes time and diligence. If you work with one of their advisors, things become much easier since he or she can point you to whatever you’re looking for.

Also, if you’re willing to give them access to all your financial accounts, it makes it very easy to see and control your finances from a single portal.

What I Liked Least About Personal Capital

Clearly, Personal Capital is in this for the money (and no shame in that). For me personally, given that I’ve been doing fine managing our money on my own, I’m not convinced that I need to hire them for the job.

This is especially so given that their fees are not much better than what I can do on my own, and as much as triple their competitors’ fees. Having said that, those competitors do not provide the depth and breadth of services provided by Personal Capital, which makes that comparison somewhat unfair if you would use all of Personal Capital’s services to a good advantage.

Personal Capital Is Best for People Who:

  1. Have amassed more than $100,000;
  2. Want some (or a lot of) hand-holding; and
  3. Are willing to pay higher fees than competing services (albeit with the far more limited breadth and depth of services).

Regarding fees and minimum investment, Nerdwallet gives Personal Capital 4 stars, ranking both Betterment and Wealthfront at 5 stars, due to fees (0.25% each vs. 0.49% to 0.89% for Personal Capital), as well as much lower minimum balances ($0 and $500 respectively, vs. $100,000 for Personal Capital).

Personal Capital May Not Be Best for People Who:

  1. Haven’t amassed $100,000 and who want more than the free tools;
  2. Want to manage their own investments and don’t need financial advice;
  3. Don’t want to pay more than triple competing services’ fees and would not benefit from the extra services and analyses offered by Personal Capital; and/or
  4. Don’t trust their financial account credentials to third-party services.

Final Thoughts on Personal Capital

On our initial call, I told Brett that because I like to be transparent and honest with people I deal with, I have to tell him that he’s facing an uphill slog in convincing me to sign on for Personal Capital’s advisory service. I haven’t decided definitively that I won’t work with them. However, he’ll need to convince me that my results with them are likely to be better after accounting for their fees than if I went with a lower-fee competitor or if I continued managing my own investments.

On our second call, I became even more impressed with Personal Capital, to the point that if I weren’t doing better on my own, I would likely give them a shot. I liked his response that he appreciates the transparency, and if I’m up for it, we can continue the conversation so we set up another call for next week. On our second call, as mentioned above, I became even more impressed with Personal Capital, to the point that if

I wasn’t doing better on my own; I would likely give them a shot. Overall, I’d rate Personal Capital as 4.5 stars. If their long-term results were better than what I’ve achieved on my own, I’d give them the 5th star.

Click here to learn more about Personal Capital.