Personal Capital

Josh Patoka
December 1, 2020

Personal Capital requires $100,000 to invest, which is one of the highest account minimums for a robo-advisor. Investments with a balance between $100,000 and $200,000 have access to a financial advisor team. Accounts with at least $200,000 have two dedicated advisors, and you can speak with investment specialists to create a customized portfolio.

The annual account fees start at 0.89% for Personal Capital investment services. The fees begin decreasing with an account balance above $1 million. This advisory fee is higher than most robo-advisors but cheaper than hiring a human advisor.

Anyone can use Personal Capital’s free financial tools. Some of the tools track your net worth, offer basic budgeting, plan for retirement, and analyze your current portfolio fees. Other investment services only offer these advanced tools to their members.

Personal Capital offers a cash management account with no account minimum or service fees. Your account is FDIC-insured up to $1.5 million and doesn’t require an investment account.

How Does Personal Capital Manage Your Money?

The entry-level Personal Capital Investment Services tier uses the Modern Portfolio Theory to invest your funds in stock and bond index ETFs. This investment methodology is similar to most robo-advisors.

Your Personal Capital portfolio invests in these asset classes:

• US equities
• International equities
• US bonds
• Developed and emerging markets bonds
• Alternative assets (i.e., real estate and precious metals)

Personal Capital recommends an asset allocation depending on your risk tolerance.  You can adjust the suggested portfolio allocation by having the Personal Capital financial advisory team review your goals.

You can only invest in index ETFs with an account balance between $100,000 and $200,000.

Personal Strategy

Accounts with at least $200,000 qualify for the Personal Capital Wealth Management service. In addition to having two dedicated advisors, you can invest US individual stocks.

The Tactical Weighting features invests in at least 70 US equities. Buying stocks lets Personal Capital practice tax-loss harvesting and diversify your portfolio at a minimal cost.

Private Client

With at least $1 million to invest, Personal Capital lets specialists help you invest in individual bonds and private equities. This top membership tier also allows Personal Capital to help you with wealth planning and review your private equity and hedge fund assets.

Tax-Optimized Investing

All investment accounts use a tax-optimized investment strategy. Personal Capital seeks to invest in tax-sensitive assets in your taxable accounts. Assets like REITs with potential higher tax liabilities go into your retirement accounts first.

You won’t see Personal Capital investing in mutual funds as they are tax-inefficient.

Personal Capital uses tax-loss harvesting when your portfolio holds individual stocks. Only harvesting individual stocks makes it easier to offset taxable gains and maintain diversity.

Dynamic Rebalancing

As your investing goals change, Personal Capital automatically reallocates in assets that are a better fit. Scaling into positions instead of selling overallocated holdings reduces your potential taxable gains. Personal Capital can rebalance your portfolio daily if you invest frequently.

Socially Responsible Investing

Like some robo-advisors, you can choose a socially responsible investment portfolio. While other advisors only invest in social-conscious ETFs, Personal Capital invests in individual US stocks. You will still hold eligible ETFs to invest in foreign developed and emerging markets.

You avoid investing in these business types:

• Adult entertainment
• Energy sector
• Gambling
• Tobacco
• Small arms

It’s possible to talk with a Personal Capital financial advisor to determine your portfolio before investing.

Personal Capital Cash

Several robo-advisors offers a cash management account to keep your uninvested cash. Personal Capital Cash is open to every person even if you don’t invest with Personal Capital. However, you qualify for a higher rate if you’re an Investment Services, Wealth Management, or Private Client.

There isn’t a minimum account balance or account service fees. Your deposits can earn some interest and are FDIC-insured up to $1.5 million.

Unlike other cash management accounts, you won’t get a debit card or online bill pay.

Financial Tools

Some people only use Personal Capital for their financial tools and invest using another brokerage. For example, Personal Capital can track your external investment accounts’ performance to create a You Index. This score makes it easy to see if your current portfolio is achieving your investment performance goals.

These tools are free for every Personal Capital member:

• Net worth: Track your liquid net worth with daily updates
• Budgeting: Create simple spending and savings goals
• Cash flow: Monitor purchases and deposits for the last 30 days
• Retirement planner: Calculate your projected retirement income and retirement date
• Fee analyzer: Search your mutual fund and investment accounts for hidden fees
• Education planner: Make a savings plan for future education costs

You can link your external bank and investment accounts to get accurate projections. The fee analyzer tool is also a free way to get an investment portfolio review and basic tips to improve your portfolio performance.

However, Personal Capital only provides personal advice if you open an investment account and speak with their advisory team.

Advantages of Personal Capital

Free finance tools: Personal Capital doesn’t require you to open an investment account to use their free financial planning tools to plan for future financial goals. These tools make it easy to track your current net worth and investment performance for your existing accounts.

Financial advisor access: You get access to the Personal Capital financial advisory team with an investment account. Having at least $200,000 to invest gives you two dedicated advisors and access to investment specialists that can customize your portfolio.

Socially responsible investing: All investors can open a socially responsible investing portfolio that avoids controversial companies. These funds may have higher expense ratios, but your annual advisory fee remains the same.

Can invest in individual stocks: Accounts larger than $200,000 can invest in at least 70 US stock. Individual stocks can improve your portfolio performance and add diversification. A Personal Capital advisor will use your goals to create a custom investment plan.

Tax optimization: Personal Capital invests in tax-efficient ETFs and also tries to invest in tax-sensitive assets for your taxable accounts. Tax-loss harvesting is available on individual stocks within your portfolio.

Free cash management account: Personal Capital Cash is a free cash management account with no minimum account balance. Your first $1.5 million in deposits are FDIC-insured.

Disadvantages of Personal Capital

Need $100,000 to invest: Personal Capital investment accounts are only for high net worth investors. Yet anyone can use their free financial planning tools that can improve your financial readiness and investment performance.

High annual account fee: Personal Capital is one of the most expensive robo-advisors. The annual advisory fee is 0.89% on the first $1 million and only decreases to 0.49%. Other robo-advisors may only charge 0.40% and offer financial advisor access. Despite the higher fee, you may appreciate the customized investment plans and access to investment specialists.

Investment Services plan only invests in ETFs: You need at least $200,000 to start investing in individual stocks. However, all Personal Capital investment accounts include financial advisors.

Is Personal Capital Safe?

The ETFs and individual stocks that Personal Capital invests in are subject to regular market losses and volatility. Your investment account has the standard SIPC coverage of up to $500,000, of which $250,000 can be cash waiting to invest.

The Personal Capital Cash account is FDIC-insured up to $1.5 million. Your funds in this account are separate from the cash assets in your investment account.

Is Personal Capital Right For You?

You should consider investing with Personal Capital if you have at least $100,000 and want financial advisor access. If you don’t have $100,000 to invest yet, the free financial tools can improve your investment strategy, track your net worth, and make basic money goals.