Personal Capital vs Betterment

Personal Capital vs Betterment

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To hear the likes of the Forbes tell it, Personal Capital is personally elevating digital investing from a dry one-size-fits-all science to a carefully curated art.

Forbes included Personal Capital in its coveted 2019 “FinTech 50” short list. In fact, the platform also made the top six, which Forbes called “the six most innovative investing companies” in fintech.

Personal Capital is “the one to beat,” says the New York Times.

What has taken this once staid and stoic RIA (registered investment advisor) originally named SafeCorp Financial Corp. (yawn) and transformed it into a hybrid robo advisor pushing the envelope forward for every platform that has come before and after?

We will take a much closer look at the answer to this question in this comparison review.

But in the meantime, let’s not forget that Betterment is “the one” – the digital online investing robo advisor that started it all.

And in fact, Betterment is actually credited with what one online investment news source terms “lighting a fire” under Personal Capital, among others, to start moving into the modern investing age.

All of this is very interesting. While Personal Capital was otherwise occupied raking in the awards this past year, Betterment was embroiled in regulatory woes as it moved its always-progressive investment platform in a surprisingly traditional direction with the introduction of new checking and savings account products.

As it is in the market, so it is in the world of robo advisor platforms, it would seem – sometimes you’re up and sometimes you’re down. But what we want to emphasize up front here is that both of these robo advisor platforms are ultimately on their way up. Both have a wealth of features and personalized perks to offer. Both are multi-award winners that are fundamentally built to last.

The only question is, which one best serves your digital investing needs and goals – Personal Capital or Betterment? Let’s find out!

The Big Picture: Personal Capital vs Betterment

If you keep reading, you will learn about what each of these robo advisor investing platforms has to offer in much more depth, pros and cons, apps and mobile, trading and investments and much more.

But if you are keen to make a decision asap, here is a quick and dirty overview of Personal Capital vs Betterment and a snapshot of each platform’s “ideal investor.”

Personal Capital Overview

Personal Capital is better for:

  • Investors who have at least $100,000 (and ideally $200,000) to invest – this is where the real value Personal Capital has to offer as a platform starts to show itself.
  • Investors who want the convenience of a digital platform with the comprehensive financial planning and customer service a human team offers – and are willing to pay the hefty 0.49 to 0.89 percent fee for it, depending on account balance.
  • Investors with robust investment holdings seeking fine-tuned tax-minimizing allocation and asset rebalancing strategies, including tax-loss harvesting via individual stocks.
  • Investors who want the option to include alternative investments like real estate, commodities, gold and precious metals, et al, in their portfolios.

Betterment Overview

Betterment is better for:

  • Investors who want support from a time-tested robo advisor algorithm that works based on risk tolerance but are also interested in maintaining some hands-on control over investment allocations.
  • Investors seeking a hybrid robo advisor with the option for human involvement for a “reasonable” account fee (fees range from 0.15 to 0.40 percent depending on account balance).
  • Investors with a young portfolio of some means but who do not yet require the more complex tax-minimizing attention of a truly human-managed portfolio.
  • Investors who are seeking more mainstream and simplified portfolio diversification options in the form of ETFs (exchange traded funds).

Robo Advisor Experience: Personal Capital vs Betterment

It has to be said up front: neither Personal Capital nor Betterment is a pure robo advisor investing platform.

Both use a hybrid robo advisor model weighted heavily towards some degree of human financial planner involvement.

Personal Capital

Personal Capital users receive human financial planning assistance from the get-go. The digital algorithm is most readily present and visible at the free level when users are accessing the platform’s popular suite of money management, portfolio analysis, budgeting and investing tools.

In a way, this could be interpreted to mean that Personal Capital isn’t truly a robo advisor at all. And in many ways it really isn’t.

Personal Capital Investment Strategy

With a hands-on, human-driven approach starting the moment you fund your account with the required minimum of $100,000, the robo advisor element fades into the background and remains there on a more or less permanent basis.

And with account management fees coming in at the high-high end for any financial planning service, digital or otherwise, Personal Capital actually sticks surprisingly close to its tried and true, hands-on, traditional banking roots in this regard.

In fact, there are many brick-and-mortar financial planning services that don’t charge as much as Personal Capital does for what it provides. But for those who need a laser-focused level of portfolio and tax management service that is accessible online, you won’t find better.

Betterment

Of the two, there is no doubt Betterment offers a more traditional or mainstream robo advisor experience, with its highly regarded digital algorithm doing the majority of the heavy lifting on the front end. Then there is always the option to wrap in human guidance as needed, especially once you have funded your account to a minimum of $100,000.

From the start, Betterment shows off why it was the first and is still arguably the best at what robo advisor digital platforms are designed to do. For starters, Betterment’s investment minimum is $0, meaning anyone can jump on and start learning and investing.

Betterment Investing PageYou, the user, input a series of data (age, estimated retirement date, risk tolerance, et al) and Betterment’s robo advisor algorithm goes to work to craft a diversified portfolio that meets you where you are and grows with you as you grow. From there, you can choose to reach out to the financial planning experts if or when you feel some extra guidance might be advisable. But it is always your call.

Trading Experience: Personal Capital vs Betterment

The most important fact to remember about Personal Capital and Betterment is that each is a registered fiduciary agent. This means each is chartered and legally required to act in the best interests of its customers at all times.

Many people who are brand new to investing do not realize that not all financial brokerages or financial planning services have elected to become fiduciary agents. This means they could, can and do make financial choices that are actually not in their clients’ best interests.

If this sounds shocking, it unfortunately is still nothing new.

But since both Personal Capital and Betterment have taken the steps required to become registered fiduciary agents, the tools and personal assistance you may receive with either is legally bound to place your interests first, which includes ensuring that any recommended securities or investment opportunities provide the best value to you at the lowest cost.

Personal Capital: A Short History

As we briefly touched on in the introduction here, Personal Capital started out as SafeCorp Financial Corp. when it opened its digital doors in 2009. Thankfully, a rebranding quickly followed in 2011, after which Forbes nicknamed the platform “Mint for rich people.”

Screenshot of Personal Capital HomepageBy 2014, the online investing platform was dubbed an “industry disruptor” and has remained so to date.

With a team of co-founders including the former CEO of Intuit and Paypal, the company has stated more than once that its goal is to put traditional investment brokerages out of business.

As they might say in the old Wild West, “them’s fightin’ words.” But it seems Personal Capital isn’t the slightest bit worried.

In October 2019, the platform celebrated its 10th anniversary. As of year-end, the company had attracted more than two million users and reportedly managed $1 trillion in assets.

All of which means that, whatever is yet to come for Personal Capital, if we were a traditional investment brokerage, we would likely be quaking in our boots right about now.

Betterment: A Short History

Betterment launched in 2008 and changed the face of fintech forever. By initiating (if not inventing) robo advising, a digital algorithm-based approach to hands-off portfolio management on a mass scale, Betterment made trustworthy financial planning accessible to all levels of investors.

Screenshot of Betterment Diversified Portfolio PageBut rather than resting on its considerable laurels and waving to newer, better, faster, stronger competitors as they raced by, Betterment has just continued raising the bar, winning awards, attracting new users and investors, reinventing itself and staying relevant year after year.

This is a huge selling point to choose Betterment. In an industry and era where startups are often quite literally big news one day and obsolete or simply gone the next, Betterment has proven it is here to stay and grow and evolve and serve its clientele with attentiveness and excellence for the long haul.

Investment Types: Personal Capital vs Betterment

What is most important to know about choosing to invest your funds with Personal Capital vs Betterment is that the two platforms approach building a diversified portfolio quite differently.

Where Personal Capital allows you to cherry-pick each security right down to the fractional level as you build your portfolio from the ground up, always with attentive human financial guidance, Betterment functions using a digital algorithm working with a tiered system of ETFs that range from low to high risk.

Both Personal Capital and Betterment offer socially responsible investing (SRI) and both offer tax-loss harvesting and periodic portfolio rebalancing. So the real question essentially becomes how involved you want or need to be in selecting each and every security (right down to the individual stock, bond or otherwise) that goes into your portfolio.

Personal Capital Socially Responsible InvestingPersonal Capital will absolutely ask – require – more of your time and involvement and take a bigger chunk of the proceeds to boot. But in exchange, there is no ceiling in terms of handling complex portfolios down to the nitty-gritty details.

Betterment lets you choose how much time and energy you want to offer to building your own portfolio and assesses lower management fees as a result. But some of the more personalized asset management and tax time hand holding human service is missing as a result.

As you can see, this essentially means there is no “better” option when comparing the two – there is only the option that works best for you.

Personal Capital offers these investment options:

  • Domestic stocks
  • Domestic bonds
  • International stocks
  • International bonds
  • Real estate
  • Commodities
  • Gold
  • Cash

Betterment offers these investment options, all as part of ETFs:

  • Domestic stock ETFs
  • Domestic bond ETFs
  • International stock ETFs
  • International bond ETFs

The Mobile & App Experience: Personal Capital vs Betterment

If there is one clear-cut area where both Personal Capital and Betterment hit a slam-dunk home run, it is in their mobile and app experience.

The two apps are literally neck and neck in both Apple and Android user experience. In all four cases, the averages are comprised of several thousand reviews each.

Who does it better – Personal Capital or Betterment? Essentially, they are even.

Personal Capital App

iOS/Apple: 4.7 stars (out of 5)

Android: 4.5 stars (out of 5)

Betterment App

iOS/Apple: 4.8 stars (out of 5)

Android: 4.5 stars (out of 5)

In Summary: Personal Capital vs Betterment

Personal Capital and Betterment are each a major force in the digital investing industry. Each is solid and stable, popular and highly rated. Separately and together, they help millions of users manage trillions of dollars worth of assets each year.

Yet they are dissimilar in certain important areas right down to their core.

Personal Capital appeals to the investor with high net worth and complex portfolio management needs – to the point where the revolutionarily high management fee becomes justified and even palatable.

This doesn’t describe your average investor. Personal Capital appeals to a very narrow and specific group of investors and you’d better believe they know it.

Betterment has a lower barrier to entry, an easy on-boarding process and a much milder learning curve thanks to a hard-working robo advisor digital algorithm founded on Nobel Prize-winning science.

With no account minimums and a reasonable management fee (based on fee surveys across the greater fintech industry), Betterment also keeps its eye firmly trained on its more general target market and serves its diverse community of users admirably in this regard.

The two platforms have done their utmost to make it easy to choose between them. Which is best for you?

About Author

Tim Fries Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim is also the co-founder of Protective Technologies Capital (protechcap.com).