Personal Capital Review (2020): The Best Robo Advisor for HNWI?
In this Personal Capital review, we break down the popular hybrid robo advisor so you can see what all the buzz is about.
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Very recently, Personal Capital hit a personal milestone. To date, the robo advisor is now managing a jaw-dropping $12 billion in financial assets for investors across the globe.
We have to admit, $12 billion is a pretty big milestone, especially when it comes side by side with another fresh infusion of cash to the tune of $50 million.
It also says something that the platform recently surpassed the decade mark, lasting 10 years in an industry where new financial investment tools are often here today and gone tomorrow.
But ultimately, Personal Capital is simply just one of many robo advisor platforms you have to choose from – a big fish, perhaps, but swimming in a pool becoming increasingly crowded with similarly big fish.
With a minimum balance starting out at $100,000 and not insignificant management fees that go along with it, Personal Capital definitely will not be the right fit for every investor’s means, needs or goals.
Yet this hybrid robo advisor platform earns consistently high marks among those who can qualify to use it. The Personal Capital app also offers a number of free tools. But if that’s the case — how does Personal Capital make money?
Ultimately, is Personal Capital the right robo advisor for you? Let’s find out!
Investor Warning: Investing with Personal Capital involves risk. Past performance is not a guarantee or indicative of future returns. The value of your investment will fluctuate, and you may gain or lose money.
What Makes Personal Capital Unique Among Robo Advisor Platforms?
Personal Capital just recently underwent a complete surface re-branding.
The platform got a new logo, a new look and a new online interface. All of this was part of the robo advisor’s 10th anniversary celebration.
The new slogan, “It’s (Personal) Capital” perhaps says it best: the company intends to stick around for the long haul. This is a promising sign and one its well-heeled, long-time loyal customers seem to have already taken in well before the rebranding effort.
But perhaps Personal Capital is also sufficiently unique that its customers had already drunk the Kool-Aid long before the switch to electric blue colors and simple verbiage – after all, some say Personal Capital is quite literally the “Frankenstein” of RIAs (RIA stands for Registered Investment Advisor).
RIAs, of course, are fiduciary agents chartered to serve the best interests of their clients. (Fiduciary is a term that means the entity is legally required to act in its clients’ best interests.)
If “Frankenstein of RIAs” sounds somewhat frightening in its own right, it isn’t meant to.
Rather, it simply refers to Personal Capital’s reputation as an under-recognized potential major player with a unique upbringing – half Silicon Valley startup, half SEC-registered RIA (SEC stands for Securities and Exchange Commission). This unique business model has made Personal Capital something of an enigma regardless of your viewing angle.
But, as it turns out, Personal Capital’s Franken-finance beginnings may also ultimately prove to be its greatest strength and in-house asset.
Is Personal Capital Really a “Free” Robo Advisor Platform?
One of the major “selling points,” if you will, for using Personal Capital’s platform is its own touted benefit that using the tools is “free.” Yet if that’s the case, how does Personal Capital make money?
And yet it is more than a little difficult to comprehend how this robo advisor could be free to use when it has more than a decade of life and $21 billion in assets under its belt.
If using Personal Capital is free, then how does the corporation stay in business?
The first thing to know is that the tools being referred to are Personal Capital’s in-house algorithm-based calculators:
- Retirement planner
- Investing tools
- Savings planner
- Retirement fee analyzer
- Education savings planner
- Budgeting tracker
- Net worth calculator
- Bill reminder
- Transactions tracker
- Cash flow analyzer
- Financial overview
- The You Index
The You Index is one of the most popular with reviewers – it offers a near-complete big-picture look at your current financial portfolio performance (not including cash and certain securities such as bonds and money market account funds).
You will also see right off the bat that there is a definite Mint-like aspect to some of these tools.
But for budgeting purposes, most reviews say you will probably want to stick with Mint or something similar. However, for wealth management tools, you may not find better than what Personal Capital’s robo advisor has to offer.
To that point, no less than Forbes cites Personal Capital as a “great resource” for seasoned investors to use over the long-term.
As Forbes explains, the tools available from Personal Capital’s dashboard really are truly free to use. There is no catch.
However, if you want to have Personal Capital fully manage your investment portfolio for you, then an advisory fee applies.
Feeling overwhelmed with all of this financial terminology? Check out our beginner’s guide to stock brokers.
How Much Does Personal Capital Cost?
On that note, what are Personal Capital fees? And perhaps more importantly — is Personal Capital worth the fees? Let’s take a closer look at Personal Capital’s tiered fee structure.
As with most financial investment services, Personal Capital assesses higher fees for lower levels of investments. Here is the current Personal Capital fee structure:
– 0.89 percent of up to the first $1 million invested.
– 0.79 percent for the first $1 million up to $3 million invested.
– 0.69 percent for the first $3 million up to $5 million invested.
– 0.59 percent for the first $5 million up to $10 million invested.
– 0.49 percent for $10 million and higher invested.
If finding a robo advisor digital platform with the lowest fees is your thing, choosing to use Personal Capital may not initially present as an enticing proposition. But this fact might change your mind: these fees are all-inclusive. You will not get nickel and dimed with fees here and fees there. You pay one Personal Capital fee, period.
It is also worth mentioning that traditional brick-and-mortar financial advisory fees generally start in the one to two percent range, so Personal Capital is already coming in at well under the norm fee-wise here.
Plus, if you decide to use Personal Capital’s savings account feature, you can recoup some of that via an up to 2.3 percent APY – the exact rate varies, but it is reportedly consistently higher than the return any traditional savings account vehicle can offer.
However, it is important to remember you can still use their much-touted free investment tracking and retirement planning tools without having to pay these advisory fees. Fees only kick in if you want some real live human assistance with your investing activities.
Personal Capital is App-Based With a Desktop Option
While it may be challenging to believe, not all robo advisor platforms are app integrated. Personal Capital is one of them, thank goodness, and its app (available for watch, tablet, laptop and desktop) consistently receives rave reviews from users.
For those who prefer a desktop portal, such exists, but it feels relevant in the high stakes, big ticket investment markets Personal Capital operates in to have an award-winning app (4.8 stars out of 5 stars total on the Apple Store platform).
There is also an Android app available. Phone and email support are also available around the clock. For investors who want to schedule an appointment with a human financial advisor, this can also be done through the app.
With all of these perks, it’s easy to see how Personal Capital made our list of the best robo advisors on the market.
Pure Robo Advisor Versus Human Financial Advising: Which Is Best for You?
Earlier here we mentioned that Personal Capital is a true hybrid platform in more ways than one.
One of those ways is in how the platform brings together a digital algorithm-based robo advisor feature along with the option for human financial advising and support.
If you deposit the minimum of $100,000 to start using Personal Capital, you will automatically have access to one dedicated live human financial expert – if and only if you want this service and choose to avail yourself of it.
If you deposit at least $200,000 into your investment account, you will then have access to two dedicated live human finance experts – here again, if and only if you choose to make use of their input.
This is also where the account management fees start to kick in.
Personal Capital clearly understands that just because an investor has some means at the ready to invest with, this doesn’t necessarily translate to mean that investor feels comfortable relying solely on a digital algorithm for investment advice.
For whatever reason, if you are an investor who wants some expert guidance, the fees at Personal Capital are still lower than what you might pay at a traditional investment house. Plus, you will not be assessed commissions on trade transactions.
So Personal Capital always makes two options available to you:
- You can go completely automated with the robo advisor if you want to, using all the free tools and entrusting the financial investing decisions to Personal Capital’s digital algorithm.
- Or you can make use of one or two dedicated advisors or a team of financial advisors, depending on what is at stake and how nervous and/or confident you feel about it.
For some investors, it can be worth it to have an all-digital option, including a comprehensive app-based portal from which to manage their holdings, even if that comes with certain fees attached. If time is money, Personal Capital’s robo advisor model aims to save you, the busy investor, as much of both as possible.
For other investors the pure robo advisor experience along with the free tools may be more than sufficient. It is also worth noting that no fees at all are assessed against the balance in the user’s cash management core account.
There is no right or wrong way to use Personal Capital and, ultimately, reviewers agree it is convenient to have both options at the ready. However, having said that, all reviews agree that Personal Capital’s pure gold comes in the form of its free digital tools and the robo advisor algorithms that run those tools.
Personal Capital Offers Tax Optimization and Tax Loss Harvesting
It should absolutely be expected that a platform catering to this higher echelon of investors would offer tax optimization and tax loss harvesting services.
Here, Personal Capital does offer tax loss harvesting for EFTs (exchange traded funds) and individual stocks.
(Tax loss harvesting, just in case you are not familiar, is the practice of selling securities that are posting a loss before the end of the current calendar tax year and then replacing them with similar securities purchases. This helps to offset taxable income from high-performance securities at tax time.)
Personal Capital Investment Strategy Explained
All algorithms essentially work based on calculating that perfect balance between risk and reward. But how each algorithm gets there – and how well it gets there – is what sets one robo advisor platform apart from another.
Personal Capital’s digital algorithm begins by pulling in all of your accounts from across all of your financial holdings and taking a look at them all together in the same place.
Personal Capital calls this presenting the “360-degree view” of your personal financial picture.
For many users, having one app pull together and present such a complete and accurate financial picture is a real eye-opener and an advantageous one for making investment decisions long-term.
From here, the digital algorithm will factor in the personal data you provide to create a personalized investment strategy for your needs and goals. So long as you opt to use the digital algorithm alone to do this, the strategy is not customizable beyond altering the data you initially provided.
If you want to vary your personal asset allocations beyond what the digital robo advisor algorithm is set up to provide for, you will need to wrap in a consultation with your dedicated human financial advisor(s) and being paying the management fees as applicable for any reallocations you approve.
Two Key Takeaways: Is Personal Capital a Good Financial Advisor?
It says something about Personal Capital as a digital investment platform that the company knows who it is and what it offers and doesn’t try to be something it is not.
Personal Capital is not trying to attract the small fish investor who is cost-conscious in the extreme. Nor is the platform attempting to undercut its own long-term profitability needs just to stay in the game.
Overall, for those who have the means and the confidence, Personal Capital’s totally free digital algorithm-based robo advisor platform offers arguably unbeatable value for managing big ticket portfolios up into the multi-millions of dollars.
For investors with means who need some expert guidance, the fees are affordable and perhaps even economical in the greater scheme of financial advising fees, especially in that there is one (and only one) fee assessed and it comes in at less than one percent.
In this way, the overall high marks Personal Capital continues to earn, combined with its decade of longevity and recent rebranding speaks heavily in its favor as a platform worth considering.
Is Personal Capital Legitimate?
The short answer: yes. Yet that doesn’t mean it’s the platform for you. Many reviews mentioned stumbling across Personal Capital while seeking an app or platform that might be similar to the budgeting tool Mint.
What this highlights is how helpful it can be to identify your fundamental priorities when selecting a robo advisor tool.
Personal Capital is definitely a good financial advisor. If your preeminent needs are for an automated online robo advisor that can pull together your complete financial picture and work backwards from there to establish a solid savings, investing and retirement planning strategy, you are unlikely to find anything else quite like Personal Capital out there – at least for the moment.
In other words, as long as you use Personal Capital strictly as a digital robo advisor, relying on the in-house algorithm to help you manage your investment portfolio, it is truly free and that is truly unique.
One final note of caution: be aware that Personal Capital currently cannot sync with tools like Quicken, but some users report that they work similarly to where one can readily replace the other.
Ultimately, there is really only one way to find out whether Personal Capital will be able to meet your needs, and that is by giving it a try.