I write this Personal Capital review as a user. I’ve used the service for roughly 3 years now and feel like it’s time to share my personal experience.
Personal Capital Background
More than 1,000,000 users are now using Personal Capital, and the company is now tracking more than $225 billion in assets on the free online platform. In addition to the excellent free tool, Personal Capital is a Registered Investment Adviser (RIA) with the SEC, and manages more than $2.3 Billion dollars for clients.
Bill Harris is the founder of Personal Capital. Harris is the former CEO of Intuit and PayPal. Bill and company raised $28 million in venture capital for Personal Capital at launch. Most employees have a background in finance and many hold the CFP® (Certified Financial Planner) designation.
Here is a brief introduction by the CEO:
Personal Capital is best described as an “account aggregator.” It exists to help you track and understand your financial accounts. After connecting your various financial accounts, including your mortgage, credit cards, bank accounts, investment accounts, and whatever else you may have, the free service will summarize your situation and offer basic investment guidance.
It is similar to Mint’s online budgeting service, but much more comprehensive. If you have any investment information, Personal Capital picks up where Mint leaves off. It still allows users to track basic budgeting and spending, while providing substantially better functionality for tracking investments. The free application also offers more help in the financial planning realm, including information on asset allocation, income tax planning, and a retirement planner.
How Personal Capital Works
After opening a free account, you must link your financial accounts to the online interface. This involves authorizing each account that you have from within Personal Capital. I found this to be extremely easy and efficient on the desktop version of the program. You simply click a small plus arrow, specify the type of account, and fill in the online credentials.
After linking accounts with Personal Capital, they remain linked until you unlink them or change any of the account information (change password, login info, etc.). Each day, your account information is automatically updated.
The site then aggregates all the information into a bright and colorful series of charts and graphs to help you make sense of your savings and investments, and to help you better understand your financial portfolio.
The generated graphs include:
Projected Investment Fees
Clicking on any of these allows you to zoom in for more information. For example, if you click income, you can see all of your sources of income. If you click spending, you can see what categories were involved, and where you spent the money. It’s all very useful and intuitive.
Tracking Spending and Saving
Personal Capital offers a very good online interface to track all of your spending and account balances, and they continue to improve ease of use. I actually prefer the Personal Capital interface to Mint’s online interface.
You can track your spending down to the penny. Every credit card transaction. Every checking account. Every automated payment. They can all be viewed in your account dashboard. You can also get the details you need to analyze each purchase. You can categorize spending by date, merchant, and category.
Personal Capital also allows you to stay on track to pay bills and meet your budget. You can view the last payment made and past payments. You’ll also see upcoming bills that are due, the minimum payment due, and the total amount outstanding.
Much like the savings feature, you can also keep track of all income sources on your Personal Capital Dashboard. These different features all blend seamlessly for an excellent user experience.
Retirement Planner and Investment Checkup
Personal Capital recently released their Retirement Planner tool, which allows you to know exactly where you stand relative to your retirement goals. Now you can build, manage, and forecast your retirement savings in one convenient location. The tool pulls in your actual financial data from the accounts you’ve linked to Personal Capital and lets you add your personal information and expected life events. That means it can help assess the following information for you:
Your Retirement Readiness – Using your actual financial data from the accounts you’ve linked to the Personal Capital Dashboard, you’ll see how prepared you are for retirement based on your ideal target retirement date.
Big Expenses – Planning for college? Buying a new home? Getting married? Adopting a child? Input these events into Retirement Planner, and the tool will evaluate if you can afford these large expenses and still stay on track for retirement.
Income Events – Retirement Planner automatically calculates your monthly income and projected Social Security distributions. You can easily add in other sources of income such as rental income, pensions, inheritances or other windfalls.
Another feature worth mentioning is the “Investment Checkup” feature. You input a basic risk profile, answer when you want to retire, what income sources you predict, and a few other basic questions. It then spits out a pretty graph showing their recommended portfolio:
They then explain the historical returns and the risks associated with such a portfolio, and compare your returns to an appropriate benchmark. You can compare the recommended portfolio to your current account holdings and see the differences.
In addition, Personal capital includes a fee analyzer that will list the fees that you currently pay on your investments. This feature is supposed to calculate hidden fees that are often overlooked, as well as management fees and expenses. This is a nice touch that encourages investors to be aware of their portfolio and the annual fees paid.
Personal Capital Fees
The service I’ve just talked about is completely free, but they offer an optional asset management service.
Personal Capital is a registered investment advisor providing the free service to attract more affluent site users – particularly those with investable assets of at least $100,000. If a user has $100,000 or more, Personal Capital offers professional financial advice and the ability to work with a (real) financial advisor (typically well trained with credentials). Personal Capital makes money by taking a percentage of the assets under management, or AUM.
The annual fees for their investment services are as follows:
$0 – $1,000,000: 0.89%
For clients that invest $1 Million or more:
First $3 Million: 0.79%
Next $2 Million: 0.69%
Next $5 Million: 0.59%
Over $10 Million: 0.49%
Please remember that these fees don’t include any underlying investment expenses, such as ETF expenses. If Personal Capital invests all or part of your money in passive ETFs, you will pay another 0.1-0.2% on top of their investment management fees for the ETF expenses.
Again, there is no obligation to pay for this service, and I choose not to do so. The reason is quite simple – there are quality alternatives on the market.
For example, Wealth Management firm Betterment will do it for 0.15% annually if you have $100,000 or more to invest. That includes advanced features like tax-loss harvesting. (Also see my review of Wealthfront)
Personal Capital Security
The security is very good. Personal Capital requires you to register each computer you use. They will send you either an E-mail or call your cell phone to register each device. Once your computer or smart phone is registered, you will not need to go through this process again.
There is another layer of security that is used when linking financial accounts to your Personal Capital account. You must sign in and verify the original online account in addition to your Personal Capital login. Like most other reputable online sites, the site is fully encrypted and requires an account image and password as well.
The account information you enter within Personal Capital isn’t stored in plain text. They use one-way encryption to allow future access to your account. You cannot perform any withdrawals or transfers from within Personal Capital’s service. All information via their service is read-only, which eliminates much of the risk.
Technology – Personal Capital can be used on the computer, tablet, or smart phone. They have apps available and all integrate seamlessly. This makes it easy to check or track accounts on the go. The interface is very intuitive
Ease of Use – Getting started and syncing accounts is incredibly easy with Personal Capital. I’ve had no problems at all with functionality during my participation. In addition, the graphs and charts are very easy to read and understand.
Comprehensive Service – As I mentioned earlier in the Personal Capital review, this service allows you to bring together all of your account into one attractive online interface. This allows the tracking of spending and saving. It also allows investors to compare their investment holdings and better understand their overall asset allocation.
Friendly Reminders – Personal Capital includes an awesome automated email feature that alerts you about weekly changes in your net worth. You can get additional information and even bill alert reminders.
Tax Information – Personal Capital offers several tools to help reduce your overall taxable income and even teaches you about tax loss harvesting, which involves selling losses to offset gains in a given year, thus lower your capital gains tax.
Fee Analyzers – You’ll find several investment fee analyzers available to use for free. These will check your 401k fees and other mutual fund or investment fees to let you know how much you’re paying in fees over time. This is good because in my experience, most people are unaware of how much they are throwing away in fees.
Performance Checker – In keeping with the point above, most people also don’t understand that actively managed mutual funds often under-perform the market on the whole, and more particularly, the closest related stock index. This tool will show you how your investments compare to the comparable index. Hopefully, this will drive people towards passively managed index funds and ETFs.
Asset Allocation – There is a tool that describes exactly how your investments break down into asset classes, such as foreign stocks, domestic stocks, bonds, and cash equivalents. This can be helpful for the individuals who don’t know what they hold in investment classes.
Investment Management Fees – Their investment management service isn’t horribly priced, but it’s a bit too high for me. Their website states that their stock portfolios have outperformed a basic Vanguard portfolio. It that’s the case, good for them, but I’d like to know what they are doing. For myself, I’ll continue investing with Vanguard and Betterment. Remember that this service is optional, and is the equivalent of hiring a financial advisor or wealth management firm.
Bugs and Glitches – Early on, Personal Capital had some technical issues on the site that made everything a little bit irritating. However, over the last 2-3 years, they have really improved the interface and usability. Since ironing out the early bugs, I have not witnessed technical issues when linking or managing my accounts. Some users still report issues when linking some online banking providers, but this is becoming increasingly rare. In my opinion, Personal Capital is exceptional for a free tool.
Personal Capital Review Summary
I love the free services provided by Personal Capital. They offer a lot and ask for nothing in return. I wouldn’t pay for their investment advice, but their fees are comparable to many financial advisors, so I’ll leave that up to you.