Personal Capital Review

Personal Capital Review

A few years ago, my friend Sam from financial samurai (who was retired) started a new consulting gig that he was excitedly telling me about. He was working for a company called personal capital, which sounded to me like an investors version of mint. I was still paying off debt at the time (and was hesitant to give out my financial information to someone else) so I kind of filed it away and promised to revisit  it later. After what I considered to be a lot of stagnation and lack of innovation from mint (after being acquired) I decided to give personal capital a try. After 6+ months of use, I figured I’d write about it and what I liked and did not like, and how it compares to mint.

Personal Capital Logo

Personal Capital History & Value Proposition

The software is (as mentioned) a more investors version of mint, focusing on people that have quite a bit of investable assets, but not enough for wall street to really care. According to Personal Capitals Crunchbase Page, It was started by Bill Harris, who has a pretty strong record as a former CEO of Paypal and Intuit (the tax prep software). As of this writing (Q1 2015) they have approximately 750,000 registered users, and track over 120 billion in assets and Personal Capital AUM (Assets Under Management) is 1 billion. Personal Capital is not the only one in the space (Commonly called “Roboadvisers”, Wealth Front and Betterment are 2 competitors) but they do differentiate themselves a bit differently from the aforementioned companies by not being 100% “roboadvisors”. They will assign you a real person (if you want it) to help with your investing.  They have closed 7 rounds of funding, from 10 different investors, and the first major investment was from Bill Harris, Personal Capital CEO (for 2 million). The rest of the executive team is made up of Jim Del Favero (Chief Product Officer) – formerly of Intuit, Fritz Robbins (Chief Technology Officer) – formerly of Robbins technology and RSA Security, and Eshan Lavassani (VP Of Engineering), formerly of RSA Security & Verisign. They have a pretty impressive backer list, which includes the bank USAA, VenRock and Blackrock

Since traditional advisers are after clients with a high net worth, that leaves a lot of people to fend for themselves, and all three of the companies mentioned above are looking to change that. Personal Capital has advisers that you can connect with personally and they will offer guidance, while wealth front and betterment are more algorithm based. Due to the large number of people that fall into this segment of the market (and the high fees in finance) I suspect this will continue into the future.

What Is Personal Capital?

Simply put, it’s an investment centric version of the website mint.com. You can add in all of your assets (savings, retirement accounts, credit cards and the like) and it will give you a complete financial picture. It will show you your cash flow, net worth, spending, savings and financial transactions, all in one place. It will also let you tag purchases that you can easily recall later when you need them. I’ve used this feature to tag things that are business expenses (such as my cell phone and internet service) as well as health related expenses to see if you’ll meet the threshold to write them off come tax time. When you log in, your dashboard will look like this:

personal capital finance

 

As you can see, you can easily see your cash flow over the last 30 days, the gains (or losses) of your holdings and individual positions, and your net worth. It also compares the performance of your assets to that of some of the broader market indexes, so you can see how you’re doing overall.

I also did a video walk through of the service, which you can watch below:

Unique Features

As many people know, getting into a market where you’re offering a service that’s similar to someone out there is typically not a good thing unless you can be 10x better at your offering or you’re meeting a need that someone similar is not. For Personal Capital, it’s both.

401k Fee analyzer

Since I dont have a 401k at the office, this isnt that useful to me at this time. I am well aware of the fact that while people worry about the return of the S&P 500 or the Dow, things like taxes and fees matter far more than market return in determining your assets at retirement. We cant control the market return, but we can control the amount of money we pay to the tax man, as well as the amount of money we pay someone to invest our money.I do know that once you run this, you’ll probably be shocked at how much you’re paying in fees alone for your investments – especially those of you closer to retirement with larger portfolios. If you’re not invested in index fund, you’re probably paying much more than you realize.

Asset Allocations (and targets)

This is given in an easy to read box diagram that you can see below. They take the market sectors and determine what percentage of each you’re currently holding, as well as what percentage of each major sector you should be holding according to the results of your investment check up. If your results from the investment check-up determine that you’re over allocated in one area (say, short term bonds) and over-allocated in another area (like large cap US stocks) it would let you know.

AssetAlloc

 

Investment Checkup

This is an algorithm that looks at your investment accounts and analyzes them to see how they are performing and how you can do better. They suggest a different asset allocation based on questions that you answer about your risk tolerance and what they know about your portfolio. This seems to have worked well for people (and does point out fees that you are currently paying, and what that will cost you over the long term) but since my wife & I have a large 529 for our daughter linked to personal capital, they cant give us recommendations because they cant “look into” the assets of that account. Since it’s about 20% of our portfolio, they dont feel like they can give us accurate guidance. The two images below were taken from the website.

TargetAlloc

This is showing your target asset allocation based on your risk profile and retirement status.

CheckupResults

This is a different view of your asset allocation and target profile, and it also shows how far over/under weight you are in certain sectors.

Fund Costs

This is something that I’d probably be a lot more interested in if I still had a 401k at my place of employment. Right now, I’ve got nothing at work, and use vanguard for all of my investing. Vanguard is known far and wide for the lowest fees and fund costs, so this is not all that useful to me.

Complete Cash Flow/Net Worth Pictures

This is something that I consider to be fairly simple, though was always an issue when using mint, because of account connection issues or other things, mint never painted a great picture of your cash flow or net worth. This feature is also great for FI purposes, as it allows us to easily determine if we are meeting our spending target for the month.

What’s it Cost?

This is one of the best features, in my opinion. The service is completely free, but does operate on a “freemium” model. The account balances, updating, Asset Allocations, Cashflow/Net Worth pictures are all free. They start charging when you want them to start managing your money. I’ve never visited a financial advisor, but I’ve heard a lot of stories about the outrageous fees that they charge. Fees for managing assets, fees for investing your assets (called a “load fee”) and on and on. While I understand the management fees, the load fees are ridiculous, and a terrible thing for investors. If have a fund with a fee load, you’ve got to make the load back and the commission before you can even start earning any money!

This service is different though, and they just charge you a percentage of your portfolio’s overall size, broken down as follows:

Total AssetsFee
Less than 1 Million.89%
1 Million - 3 Million.79%
3 Million - 5 Million.69%
5 Million - 10 Million.59%
10 Million +.49%

As stated earlier, it costs a bit of money for them to manage your assets (they can manage a portion of them or all of them) but if you opt out of that, it’s free.

Sign Up for Personal Capital free

Personal Capital Wealth Management Review

In addition to the suite of tracking tools that they use, you can also meet with a financial planner from personal capital and have them go over your asset allocation and fund strategies and make suggestions. The reason that they offer this service is because they are trying to help the average investor achieve greater returns than traditional index funds, such as the S&P 500 or Dow Jones.

To start the process, you’ll meet with a Personal Capital Advisor, and they’ll do their best to learn about you and your financial situation. They’ll talk with you about what you’re doing well, where you could use some work in terms of your strategy. An advisor will also tell you how all of what you’ve talked about can effect your retirement. This initial conversation is 100% free. I scheduled a call for myself so I could complete my personal capital advisor review and let you all know how this went down. Here’s what happened.

I went to the website and scheduled a time to meet. The representative from the Denver office of the company called me, and pointed out something that I already knew – I didnt have a high enough balance for them to manage my money (You need 100k+ in non-active retirement accounts). Even though they couldn’t take me on as a client, my rep still answered a few questions over the phone and here’s what he had to say.

The first thing they do is talk about your risk profile, and they take control of your assets. They construct a portfolio for you made up of US stocks, international ETFs (Exchange Traded Funds) bonds and alternatives (mainly commercial real estate, commodities like gold and other precious metals) to give you a well balanced profile for your tolerance level. I was told that they aim to create a profile that returns more net of fees than a traditional index tracker (such as an S&P 500 tracker like SPYand has less volatility. I mentioned that no one could predict the future, and the rep said that since they have been offering advice (they started in 2011), the have beat the indexes net of fees. The rep also mentioned that they took their typical “basket” of US Stocks & International ETFs back 24 years (I didnt ask exactly when, but Im guessing 1990) and ran those through their model and again, their suggestions beat out the traditional indexes. This is kind of impressive, considering the early 90s started in a recession, then were fairly good up until the dot com bust of 2000s, then started another major run up until the housing bubble crashed in 2008 or so. All of this sounded pretty good to me (though I’d like to see more specifics), but was not applicable to me because of my low balances. He said to call them back when I reach the threshold, and I will consider that when the time comes.

While I had the rep on the phone, I asked a few other questions – just to gauge his interest in the conversation and to see if he would be looking out for my best interests or trying to sell me something that would earn him more money (Like I think a lot of people fear out of their financial advisor). Thankfully, this didnt seem to be the case. The rep suggested that while I was building wealth, to focus right now on lowering taxes and fees, which he noted I was doing quite well at. Since that is something that not many people choose to focus on, (but is good advice), I am impressed with how their wealth advisers work. At the very least, I’ll consider calling them when the time comes.

Personal Capital Security

Security of websites that I sign up for is becoming a major issue for me, and even more so with the ones that handle sensitive information like my financial data. I’ve got information of mine with my personal bank (bank of the west), with 4 different banks for credit cards (Chase, Barclays, Citi & American Express) as well as my investment institution (vanguard). Each of these is holding crucial information that would cause me huge problems if it got out (Social Security number, full name, address, etc) and would make it terribly easy for someone to steal my identity if they were to get compromised. All that considered, I was not eager to hand over more sensitive financial data to another company without being certain that my data was secured properly. After looking over their security protocols, I was satisfied with their offerings and how they protected my data, so I went ahead and signed up. Here’s what they do to keep information safe

  • Device Authentication: When you sign up, they recognize the device (computer) that you’re using by its unique hardware signature (most likely a MAC Address). If you are looking to sign in from a new device (a phone or office computer) then you’ll get a phone call or an email with a special code that you will be required to enter on that machine so you can access your account.
  • Bank Level Security: They have a security team that’s top notch (CEO used to work for paypal, and the CTO worked for numerous web security firms) and implement bank level security standards on their website.
  • Read Only Access: While using the service, you can view balances and transactions from the accounts that you add to your dashboard. You can not transfer money between accounts, authorize spending or move money around at all – and neither can anyone else. That needs to be done at your bank or brokerage.

If you’re interested, go ahead and give the desktop version of a try and

Sign Up for Personal Capital Here

Personal Capital App

In 2015, it’s not enough to have a solid web platform or service. You need a mobile phone/tablet app as well, and not many people have done a personal capital app review, so I’ll include my thoughts on it here. I’ve used a few financial apps, and found this to be one of the smoothest working and most secure. When you log in, you’re first asked to enter your 6 digit pin number, and you’re presented with a complete financial picture, and it will look something like this (I have an android phone, so these images are all from the android app). As you scroll down on the app, you’ll notice that the graph at the top changes. The graph starts out as an overall picture of your net worth, and when you scroll down it will show your cash position (checking & savings accounts), your investment accounts, your credit cards, and your liabilities (student loans or mortgage). Below the graph, you’ll see all your accounts, as well as the current balances.

apps for financial planning

One of my favorite features of the service (and this extends to the financial planning app as well) is the cash flow tracking. There are not a lot of cash flow apps out there, and this will give you a complete picture of your cash flow for a defined period of time (personally, I find it helpful to look at the previous 30 days, or month to date to ensure we are hitting our spending target). This is a great looking version, and is very clean as well. Note: This is not my spending – I think there has been 1 month (march 2012) where I’ve even come close to this number, and that was when we moved the down payment for our house out of our savings and into our checking account. Check out what it looks like on the phone version below:

free finance app

If you want a more detailed picture of what’s going on in your accounts, you can open up an individual account for performance from that day. This provides a complete link to all accounts you’re able to input in to the program (I have not been able to get a provider that we both have retirement accounts with (Great West) into the program, but everything else has gone in easily. apps for financial management

Overall with the app, it’s a great compliment to the web software and is probably one of the best personal finance apps on the market, if not the best. This gives you the most complete picture of all your assets and debts in one place, and is also great for helping you plan and set future goals. While I dont access the app that often (I check the web version more – probably because I’m old) it’s solid and a great finance app when I need to use one. 

There’s also a tablet app, but I don’t have a tablet PC. All reports that I’ve read on this though is that it’s a solid program, and works exactly like the phone app, but is meant for a bigger screen.

Track your finances with your mobile phone

Mint or Personal Capital?

This is something that I really was curious about for quite some time. When I first heard about personal capital, I had been using mint for about 5 years, and had a significant amount of data built up into the platform and I was hesitant to let that go – I’m absolutely a data fiend. In the end though, I found that mint had gone stale and was not releasing new features or fixing issues identified in previous versions. The software was good in 2008/2009, but had not changed a significant amount from 2010 to 2014. Things around them kept changing, and new services kept filling in holes they left open. Ultimately, I decided after using personal capital for about 4 months that I wouldnt be going back to mint. I did miss the budgeting feature of mint, but everything else on personal capital just worked better or suited my needs better. All that said, I encourage you to sign up for both and see what one fits you better. I feel mint is a bit more centered on people who are getting their feet under them financially speaking, and may still have debt and could benefit greatly from things that mint does – like low balance notifications via text and budgeting. Personal Capital is built for people with a bit more assets, investors or people with low debt and higher assets. If I had to put an age bracket on it, I’d say mint would be good for someone in early to mid twenties that still has a fair amount of student debt or other debt and is working on getting that situation taken care of and learning what’s what. Personal capital is great for people in their 30s or higher, who have been contributing to retirement accounts, have money saved and have excess cashflow every month.

Bottom Line

I have really enjoyed using the service and would recommend giving it a try. I really like all of the automated tools (401k fee adviser, Investment checkup and Asset allocation) and even though I cant use some of them it looks like provide a pretty solid amount of value to the user. While they are not the greatest on budgeting that doesnt really matter for someone like me. I’m set in my habits and follow my budget month in and month out (though I didnt always used to be that way). Personal Capital gives you a great birds eye view of your investments, easily allowing you to see what you owe and where. I also really like the cash flow features, and they are totally worth it.

I know some are leery of the service because they are assuming that they’ll get a hard sell on the adviser services, but I havent heard that from anyone that I know that has used the service. Im assuming that I’m not getting hard sold because my balances are too low for their threshold at the moment.

The service is 100% free (and will only cost you money if you have more than $100k in assets and you decide you want to bring on one of their advisers).Put in a few of your accounts and start taking charge of your finances and investments. The fee eliminators will be worth the price of $0 that you pay to sign up for sure.

Sign Up for Personal Capital Here

 

The links to personal capital above are affiliate links, and that means I get a few bucks to help keep the lights on here at SLB if you sign up. Thank you!

 

2 Responses to Personal Capital Review

  1. Nice review Jeff! Glad the free software has been helping you keep track of your finances. I’ve been using the software since 2012, and it’s great to see the software evolve with more value-added features.

    Best, Sam

    • Sam –
      I have been really enjoying it. There’s a lot of reviews out there already, but many of them are very outdated, so I figured I’d chime in.