After paying off my debt, I needed a better solution to keep all of my accounts in place, but also focus on my new founded investments. While Mint.com was an OK and free solution, I found a better one in Personal Capital. I signed up for their free service and this Personal Capital review is showing you what it can do. I have been happy with this Mint.com alternative and highly recommend signing up for a free Personal Capital account!
Personal Capital is an investment management web platform that also incorporates virtually all of your financial accounts, including bank accounts, credit card accounts, mortgages, as well as your investments. It connects all those accounts in the platform to help you with one-stop financial management all for free.
The site also provides professional investment advice to help you manage and grow your portfolio. And they do it with a single flat fee – no add-ons. The site now claims more than 700,000 clients and over $1 billion in funds under management.
How Personal Capital Works
Personal Capital is actually a dual-purpose service. You can sign up for an account for free with no strings attached. This is what I use and enjoy. Think of Personal Capital as a Mint.com alternative, but focusing more on investments. Once I paid off my debt, I wanted to focus on investing and getting all of those in order. Since I have accounts with Scottrade, Betterment, Motif Investing, and my 401(k) provider, I needed a way to get a big picture of everything. That’s where Personal Capital shines, well above Mint.com.
Related: Mint.com vs. Personal Capital
If you want to aggregate all of your finances in one place, this service can easily do it. You hook into your accounts and they will automatically pull everything in, just like Mint.com. You can view your net worth, your cash flow, spending, and much more. As I stated, they focus more on the investing side of things, but still provide you with excellent tools for your budgeting process. They can show you where you’re doing well, how to reduce your fees, and if you’re holding too much of one thing. I love it and that’s why is one of my top personal recommended resources.
In order to determine the proper investment strategy for you, Personal Capital first determines your life’s goals, personal preferences, and of course your risk tolerance. Based on your overall financial situation, they make a determination as to how much growth needs to be incorporated into your portfolio in order for you to reach your goals. They can customize a portfolio to match your goals and circumstances, in just about any way that you need for it to be set up.
One area where Personal Capital is different from other investment management platforms is that they tend to avoid the use of index funds. Their position is that index funds decrease portfolio performance because they have high annual fees.
Prior to November 2015, Personal Capital only provided investment services to those with $100,000 or more in investable assets. They have since changed that and now those with at least $25,000 of investable assets can receive investment services from Personal Capital. Here is basically those with at least $25,000 will receive:
- Portfolios composed of ETFs that are designed to take advantage of asset location, tax loss harvesting and disciplined rebalancing
- Access to Personal Capital’s full suite of financial planning services
- A licensed Advisory Service Team to answer questions and advise clients on college planning, estate planning, home purchases, 401k allocation, and more
Instead, they invest your money in a mix of baskets of individual securities and exchange traded funds (ETF’s). Individual securities are considered to be more tax efficient, since tax harvesting can easily be employed with them to minimize your income taxes.
Personal Capital creates and manages your portfolio, so like other investment management services, it’s not a platform for the do-it-yourself investor.
Like most other web based investment management services, Personal Capital does not function as a trustee for your investments, and they do not have direct custody over them. Instead, your investments are held by Pershing Advisor Solutions, which is one of the largest investment custodians, holding over a trillion dollars in global client assets.
UPDATE: Personal Capital used to call every person who had a certain number of “investable” assets to become a part of the investment management portfolio. You can now opt-out of that by doing so during the sign up process. You can just tell them you’d rather be contacted through email. That really makes this platform so much better!
What You Get When Invest Your Money With Personal Capital
Personal Capital provides an abundance of tools and features that will help you to improve your investment performance, as well as your household budget. These tools come with every account, but some do focus more on you becoming an investment client. These tools have changed my view into my finances and I highly recommend using them!
The list is a long one…
401(k) Fee Analyzer
This would be an excellent tool to have, even if you never invest in any money with Personal Capital at all. The tool shows you how much you are paying in fees on your employer-sponsored 401(k) plan. A lot of people are completely in the dark on this very important aspect of their plan. The analyzer can also make recommendations on how to rearrange your plan in a way that will minimize your fees. The tool actually links directly to your 401(k) plans to provide you with the most accurate picture of exactly what is going on.
Mutual Fund Analyzer
The vast majority of mutual funds are actively managed funds, (by contrast, index funds are primarily exchange traded funds). But actively managed means that there is greater turnover in the fund portfolio, and that means greater potential for capital gains. This analyzer will show you the tax cost ratio of your mutual funds. The ratio shows you how much of the fund’s annual return is likely to be taxable. This will give you an opportunity to shift your money into more tax efficient funds.
Cash Flow tool
This feature works as a budget tool, that tracks your income from all sources. You can also track your expenses by category, merchant and date, and have the ability to view, track, and pay your bills (on time) each month. This is also an important tool for debt management. If you want to get out of debt, it’s important to see where you’re spending money, and where you can make cuts that will free up money that will enable you to payoff your debts. The cash flow tool will help you do all of that.
The Investment Checkup
This tool produces a customized financial plan that analyzes your current holdings and goals. It provides a risk assessment of your portfolio, a retirement plan review, and it helps you to establish goals for your overall portfolio. This will help you to establish a workable asset allocation based on your own personal profile. This tool is very helpful if you are new to investing and if you just started out in the workforce. I would recommend every Personal Capital customer to take advantage of this tool. It has been quite eye opening for me and what I need to do in order to reach retirement at a comfortable level.
Monitor Your Net Worth
Net worth is arguably the most important number in the entire realm of personal finance because it shows what you have after debts and all other liabilities have been subtracted out. You can think of it as your personal scorecard in your march toward financial independence. Personal Capital gives you the ability to track this all important number on a continuous basis, as well as to make adjustments that will improve your net worth over time. Plus, you can see your net worth at any time you like with the Net Worth calculator.
Weekly Financial Snapshots
One of the really useful tools of Personal Capital are their weekly snapshot emails sent directly to you. If find these emails incredibly useful. Not only do they show graphs on how your spending is trending, but they also compare it to last months. On top of that, you can get a quick view of how well your investments are trending compared to the S&P 500. I love getting these emails. I automatically know whether my net worth is tracking up or down, whether my investments are up or down, and how well my spending is. These are invaluable tools, which comes free with every Personal Capital account. I don’t even have to log in to see how I’m going financially. I love it!
Most online investment management platforms are incorporating some form of tax optimization, and Personal Capital is doing so as well. They have a multi-layered strategy in place that will enable you to minimize your annual income tax bite.
For starters, as mentioned earlier, Personal Capital avoids mutual funds entirely, as they tend to be tax inefficient.
Tax allocation is another primary strategy. They place interest bearning investments, as well as high-yield stocks and real estate investment trusts (REITs) in tax-deferred accounts. Since these investments generate predictable income, they can grow without tax considerations in a tax-sheltered account.
Investments such as stocks and ETF’s, that are likely to generate capital gains, ar held in taxable accounts, where tax loss harvesting can be used to offset gains and minimize taxes. Once again, the use of individual stocks makes this strategy easier to accomplish.
A Dedicated Investment Advisor
As a client with Personal Capital, you will have a dedicated investment adviser appointed to you, for you to contact and get advice. Best of all, you have the advisor even if you don’t use their paid wealth management service.
The “You Index”
Personal Capital has a custom feature called “The You Index“, that specifically monitors the performance of your equity investments, which includes both ETF’s and individual stocks held in your portfolio. It is only for equity investments, and therefore excludes monitoring of cash type accounts, including individual bonds, options, or alternative investments.
Personal Capital Isn’t Just a Portfolio of Funds
We already discussed that a Personal Capital portfolio includes individual stocks. But that’s almost a unique feature among online investment management platforms. Most create a portfolio that’s comprised of between six and 10 different ETF’s, while Personal Capital adds the flexibility that Individual stocks bring to your portfolio.
This is a big picture view of your entire financial life. It not only includes all of your financial accounts, but also considers the impact that each has in the bigger picture of your financial life.
Personal Capital mobile apps can be downloaded on Apple iPhone, iPad, and Android. The mobile version will include virtually everything that is available on the desktop platform. It’s super clean and easy to use. You can view your how your spending is right from your phone whenever you want. It’s the convenience of their platform in the palm of your hand. Nothing wrong with this mobile setup. I often use it on my phone to view how I’m doing in the financial sector. I don’t check on my investments everyday as I’m not a day trader. I trade for the long haul!
Integrate Investment Portfolio
Personal Capital imports all of your investment accounts into your portfolio so that you can take a truly comprehensive look at your entire asset allocation. Since many investors have their investments held in various accounts, this provides you with a snapshot view of everything that you have. This is yet another feature many online investment management platforms don’t provide.
Personal Capital Security
Personal Capital security features are top-of-the-line. The site uses bank level, military grade encryption to protect your account. They also perform regular third-party security audits to make sure that the system can’t be compromised. Personal Capital uses Verisign and other security systems in the protection of the site. They also employ device authentication, which requires that you must first authenticate each device you link to your account.
Personal Capital Fees
For starters, Personal Capital is actually free to use. Fees apply only when you use their fee-based services, in which they will also provide a higher level of service (Wealth Management).
And even when you do use the fee-based services, it’s an all-inclusive fee. That means that, unlike many other investment platforms, there are no additional costs for investment fees, commissions, or account administration. In addition, though the platform monitors 401(k) plan allocations, these accounts are not included in the fee calculations.
At the beginning of 2016, Personal Capital’s fee structure looks like this:
- 0.89% of the first $1 million, OR
- 0.79% of the first $3 million
- 0.69% of the next $2 million (up to $5 million)
- 0.59% of the next $5 million (up to $10 million)
- 0.49% on balances over $10 million
Though that fee structure is higher than it is for many of their competitors, including Betterment and Wealthfront, you will not be paying the additional fees that are also charged by those competitors. You can invest your money with Personal Capital, and know exactly what your investment expenses are going to be.
Personal Capital Is One of the Very Best Investment Management Platforms Available
When you consider the cost of personal wealth management firms, and the limited investment options available with most online investment management services, Personal Capital comes up as one of the best investment management options available.
The combination of a wider range of investment options, along with a low, single rate fee allows you to invest with confidence. And since Personal Capital handles the actual management of your investments, you will not have to worry about the day-to-day responsibilities of investment selection, asset allocation, portfolio rebalancing, or tax loss harvesting.
That’s a lot of investment value in a single investment management platform.
We’ll give Personal Capital 4.5 stars out of 5.0 – but only because nobody’s perfect.
Not Sure How to Start Investing?
I opened up my first investment account back in 2012 after paying off a lot of debt. That account was with Betterment. Since then, I haven’t looked back. I love the simplicity and ease of use they provide. I think their system is good for any type of investor. If you want to get into investing, check out Betterment.