Personal Capital is a financial software company founded in 2006 by Rob Arnott and Chris Larsen. It offers online tools for managing your personal finances, including investment portfolios, retirement planning, and budgeting.
Personal Capital is a service that provides tools for personal finance. The personal capital safe is a tool to help you grow your wealth and achieve financial freedom.
Personal Capital is a California-based online financial consulting company that serves over 1 million individuals in the United States with wealth management, cash management, and other financial solutions. The firm now manages approximately $13 billion in assets.
Bill Harris, the company’s founder and CEO, is supported by a team of seasoned financial experts, including former SEC Commissioner Luis Aguilar, Karen Schaeffer, the former Chair of the CFP® Board, and Harry Markowitz, Ph.D., the creator of Modern Portfolio Theory (MPT).
What is Personal Capital, and how does it work?
Personal Capital was founded in 2009 and was formerly known as SafeCorp Financial Corp until 2010. The Securities and Exchange Commission (SEC) of the United States has registered the business as an investment adviser. Customers throughout the nation may get money management guidance from the firm, which uses a tried-and-true investing strategy that focuses on long-term holding periods and wide diversification to produce consistent returns over time.
Wealth management and cash management solutions are among the company’s goods and services, as well as a collection of technology tools to help customers manage their money.
Personal Capital differs from conventional online advisors in that it provides both free and paid services, while traditional online advisors charge a percentage of the account balance each year for plain-vanilla investment management solutions.
What Is Personal Capital and How Does It Work?
Personal Capital provides three kinds of services to its customers to help them manage their money:
Services for Cash Management
Personal Capital provides the Personal Capital CashTM account, which is a no-fee bank account offered by UMB Bank NA.
This service enables customers to store all of their money in one account and earn a 0.05 percent Annual Percentage Yield (APY) (as of August 2020).
For customers who have registered in Personal Capital’s investment management services, the yield rises to 0.10 percent.
This account has no minimum daily balance requirement and allows for an unlimited number of monthly transfers with a daily withdrawal limit of $100,000.
The Federal Deposit Insurance Corporation (FDIC) insures the account for up to $250,000 per depositor and $1.5 million per account. However, as of this writing, this account does not have a debit card or a bill-paying function.
Personal Capital is the source of this information.
Personal Capital’s free financial and money management tools, which are designed to help individuals track the evolution of their net worth while also allowing them to monitor their income, expenses, investments, and other aspects of their personal finances, are often what attract clients to the company’s services.
As of this writing, Personal Capital offers the following tools to people in the United States:
- Calculate Your Net Worth
- Budgeting Software
- Tool for Managing Cash Flow
- Plan Your Retirement
- Fee Calculator
- Plan your education.
Personal Capital’s platform makes all of these tools accessible, allowing customers to manage their money in one place after connecting their retirement accounts, credit cards, bank accounts, and brokerage accounts.
Solutions for Wealth Management
Through three distinct programs, Personal Capital offers financial counseling to customers with more than $100,000 in investable assets:
- Personal Capital will build a broadly diversified portfolio consisting of a wide range of asset classes incorporated via exchange-traded funds (ETFs) for clients with $100,000 to $200,000 in assets, as well as provide unlimited investment advice from the company’s team of Certified Financial Planners (CFPs®).
- Clients with assets between $200,000 and $1 million will have their portfolios managed by two dedicated financial advisers, and they will be able to take advantage of Personal Capital’s tax-optimization techniques.
- Personal Capital will provide two financial advisors to oversee the client’s portfolio for wealthy individuals with assets exceeding $1 million, as well as priority access to the company’s Investment Committee members who can provide in-depth specialist support for both retirement and wealth planning. (Alternatives to public equity include private equity.)
Creating a Bank Account
To establish an account for Personal Capital’s services, you must first provide a preferred email address, a password, and a phone number. Personal Capital’s Android and iOS mobile apps may be used to sign up, as well as the company’s official website.
Users may utilize Personal Capital’s free financial tools by linking all of their bank, retirement, and investment accounts for the program to evaluate. Then a dashboard is produced, which can be used to track and monitor how money is spent as well as how investments perform over time.
Personal Capital’s terms and conditions (which include rolling over any existing account or assets to the business and recognizing the costs arising from the service) must be agreed to in order to join up for one of the company’s investment management services.
Personal Capital will ask many questions to evaluate the client’s financial position once they have agreed to the service’s terms and conditions.
Personal Capital is a free personal finance website with a lot of useful features.
Let’s take a look at the free personal financial tools and services that Personal Capital provides to its customers.
Net Worth Calculator
The net worth calculator is one of Personal Capital’s free products, and it calculates an individual’s equity by combining data from his or her financial accounts (such as bank, retirement, and investment accounts) with the value of any other physical assets submitted to the platform (such as real estate, vehicles, art, or collectibles).
Liabilities, such as mortgages, credit card, and loan amounts owing by the account holder, are also subtracted from the value of the assets.
Personal Capital’s software, after gathering and analyzing this data, provides an in-depth analysis of the account holder’s net worth structure, as well as the ability to track its evolution over time — the user’s accounts remain linked to the net worth calculator, and the net worth figure will adjust as the value of each of the linked accounts fluctuates.
Planner for Savings
The Savings Planner is a tool that may help people reach their financial objectives, whether they’re saving for retirement, a vacation, an emergency fund, or paying for their children’s college tuition.
The program evaluates how much the account user is saving and how much more needs to be saved to meet their savings goals using the account holder’s financial account information.
The application also enables Personal Capital investment management customers to set up monthly withdrawals to ensure that they remain on track with their payments.
The Savings Planner also contains a debt management and monitoring feature, which allows you to see how your credit accounts have changed over time and how close you are to achieving your debt-reduction objectives.
A budget is one of the most important aspects of good money management. Personal Capital has created a tool that enables users to monitor their income, expenditures, and individual transactions over time using data from the bank institutions they’ve connected to the site.
Customers may use this service to keep track of their spending, savings, and other comparable objectives.
The cash flow function is similar to the budgeting tool mentioned before, but it examines how money is spent over time by classifying expenditures and transactions.
This data is available on Personal Capital’s dashboard, which enables customers to monitor transactions across various time periods.
Plan Your Retirement
To achieve personal financial objectives, retirement planning requires discipline and a commitment to make regular payments.
Personal Capital has created a retirement planning tool that uses the information provided by customers — such as retirement age, target monthly income once retired, and so on — to determine not only how much the customer needs to contribute or the average return the portfolio must earn, but also how their progress toward their retirement goals will be impacted.
Users may model their retirement portfolio using the retirement planning tool to account for the effect of various economic situations, such as a recession or a stock market collapse, and get a percentage of probability showing the possibility of achieving a chosen retirement objective.
The program also calculates the financial effect of various financial choices, such as changes in monthly payments, withdrawals for education costs or real estate purchases, and income events, such as new sources of income or windfalls.
The fee analyzer looks at how mutual funds, pension funds, and other financial institutions charge fees and how that affects returns.
The functionality works by using data from the platform’s connected 401(k) account. Once the information is in the system, a summary of how these funds are doing is given, as well as a categorization of the 401(k) funds that charge higher-than-average fees.
Understanding the financial effect of fees on returns allows you to make more timely and informed choices (such as which funds someone may want to withdraw their money from to take advantage of cheaper alternatives in the market).
Personal Capital is the source of this information.
Planner of Education
The Education Planner is a component of the Retirement Planning feature that is intended to assist parents and prospective students in saving money for college tuition.
The education planner will calculate how much money needs to be set aside each month to cover the cost of attending those institutions once the future student reaches a certain age, based on average costs for public in-state colleges, out-of-state colleges, and private institutions (depending on the user’s preference).
In addition, the program calculates how much money has to be put into the account in the future to achieve that objective — and progress can be monitored in real time to ensure everything is proceeding as planned.
Examine Your Investments
Personal Capital’s Investment Checkup function is an evaluation tool that assists customers in finding the optimal portfolio allocation that reduces risks while increasing the return on their investment account over time.
Modern Portfolio Theory (MPT) is a method that integrates different asset classes and their associated risks and returns to calculate the optimum proportion of assets that should be allocated in each asset class in order to obtain the greatest return for a given degree of risk.
The function also looks at the user’s current portfolio allocation mix to see whether it’s time to rebalance, based on the percentages presently allocated to each asset class and if they’ve strayed from the system’s ideal portfolio allocation.
Features of Personal Capital Wealth Management
Personal Capital has a lot to offer in terms of investing and robo-advisor services, as shown by a look at their offerings.
Weighting Techniques That Work
Personal Capital’s Smart Weighting function is part of the company’s investing philosophy, and it offers a different approach to diversification than broad-market indexes like the S&P 500.
Apart from what the S&P 500 index does, Personal Capital thinks that giving various sectors similar weight in the portfolio may produce better returns, as shown by their back-tests. For outperforming sectors, the weight given to each sector rises, and this benchmark is market-cap weighted.
According to Personal Capital’s analysis, its Smart Weighted portfolios would have outperformed the S&P 500 by 0.7 percent during the 30-year period between 1991 and 2019, resulting in an extra $1.8 million in profits for a $500k portfolio.
The Smart Weighting function also attempts to decrease volatility, and according to the company’s back-test, it would have achieved a 16.8 percent standard deviation over the same 30-year period, compared to the S&P 500’s 17.6 percent.
Optimization of Taxes
Personal Capital has a tax-optimization function that follows these three steps to obtain tax-efficient returns:
- Asset Location That Is Tax-Affective
- Harvesting Tax-Loss
- Efficiency in Taxation
The tax-sensitive asset location distributes assets within the client’s tax-deferred accounts (401(k)s, IRAs) and taxable accounts that may improve the portfolio’s tax efficiency.
This may be accomplished by placing high-yield assets in tax-deferred accounts and tax-exempt securities in taxable accounts, for example. (Personal Capital believes that doing so would save its customers approximately 0.30 percent each year.)
The tax-loss harvesting function focuses on selling assets that are generating a capital gain loss to offset the capital gains a customer has achieved over a given year, enabling them to lower their tax burden and subsequently reinvest those money into other securities.
This approach may boost the portfolio’s yearly returns by 0.2 percent to 0.4 percent.
Finally, instead of mutual funds, Personal Capital constructs its portfolios by investing in exchange-traded funds (ETFs). They think that greater portfolio turnover rates in mutual funds result in higher taxes.
Rebalancing Your Portfolio
Personal Capital rebalances its customers’ portfolios on a regular basis to ensure that their asset allocation mix remains consistent with the goals established for them when the portfolio was created.
They do this rebalancing in a tax-efficient manner, which means they purchase and sell assets while considering the taxable effect of transactions while still accomplishing the rebalancing’s goal.
Allocation of a Dynamic Portfolio
Personal Capital collects and analyzes a client’s financial position on a regular basis in order to recommend possible portfolio adjustments depending on their financial objectives, stage of life, marital status, net worth, income, tax regulations, risk tolerance, and other variables that vary over time.
Personal Capital analyzes the data supplied by the customer inside the platform using Monte Carlo simulations and other similar techniques to offer timely suggestions that may help the client achieve his or her objectives.
Investing for a Social Purpose
Personal Capital may create a Socially Responsible portfolio based on ESG securities (Environmental, Social, and Corporate Governance) at the client’s request, in response to increasing demand from investors looking to have a positive effect in the world with their money.
Personal Capital claims to have accomplished this by working with Sustainalytics, a company that studies and evaluates companies based on their social effect. They also apply filters to the portfolio to exclude and include various industries.
Personal Capital, for example, eliminates energy, tobacco, and gambling companies from its socially responsible portfolios, but allows companies that offer essential services or data privacy and security solutions, among other things. This portfolio includes all of the features included in the Personal Strategy® portfolio, including tax-advantaged investing and Smart WeightingTM.
Types of Account
Personal Capital presently has the following account types available:
- Individual, joint, and trust accounts are all taxable.
- Traditional Individual Retirement Accounts (IRAs)
- Roth IRAs are an alternative to traditional IRAs.
- SEP IRAs are a kind of IRA that allows you to save
- IRA rollovers
- Rollovers from a 401(k) plan
- Cash accounts with a high rate of return.
Apps for Personal Capital
Personal Capital has created a mobile app for Android and iOS that enables users to keep track of their financial progress via a user-friendly dashboard.
This app gives you access to all of Personal Capital’s services, including the cash account, investment account, retirement account, and all of the other tools mentioned above.
Personal Capital is the source of this information.
Personal Capital Fees and Pricing
For their Wealth Management services, Personal Capital charges a percentage fee that fluctuates based on the amount of money invested by the customer.
The following is a list of the percentages charged for each bracket:
- 0.89 percent for the first $1 million.
- 0.79 percent on the first $3 million
- The next $2 million is worth 0.69 percent of the total.
- The next $5 million is worth 0.59 percent of the total.
- 0.49 percent of those with a net worth of more than $10 million
The company’s costs are lower than the industry average of 1%, and financial tools like the net worth calculator and budgeting software are completely free.
Pros of Personal Capital
- Personal Capital is a well-known financial advice company run by top-notch industry experts.
- Personal Capital is a qualified investment adviser and is regulated by the Securities and Exchange Commission (SEC).
- Personal Capital invests according to a tried-and-true investing strategy that seeks to deliver consistent returns with minimal downside risk over a lengthy time horizon.
- Individuals who want to handle their money more intelligently may use the company’s free tools.
- The Wealth Management solutions from Personal Capital offer features like tax efficiency and Smart Weighting. ™
- The business has a lower flat percentage fee than the industry norm.
- The Personal Capital Cash Account pays a higher-than-average interest rate and has no fees.
- Although the business depends on technology, trained human advisers offer assistance.
Cons of Personal Capital
- Personal Capital’s percentage costs are greater than those charged by robo-advisors.
- To be qualified for their Wealth Management service, you must invest a minimum of $100,000.
- As of this writing, the company’s cash account does not provide a debit card.
- For Wealth Management customers, there are no financing options available.
Alternatives to Personal Capital
Let’s examine the best alternatives to Personal Capital for their free personal financial tools, as well as the top alternatives for robo-advisor services, to make sure we’re comparing apples to apples.
Mint is a budgeting and personal financial software that enables users to connect their bank accounts to the app and keep track of their expenditures, income, and transactions.
While Mint includes some of the same free features that Personal Capital provides on its dashboard, it lacks Personal Capital’s in-depth investment management and retirement planning guidance, making it more of a budgeting tool than an investment management tool. To understand more, read our entire Mint review.
A robo-advisor is Betterment. This implies that the firm uses algorithms and computer systems to construct its customers’ portfolios, while adhering to a comparable investing philosophy.
Furthermore, Betterment is considerably less expensive than Personal Capital, charging 0.25 percent on invested assets and 0.40 percent for premium customers. Betterment’s lower percentages may wind up saving you a lot of money in the long run.
Betterment, on the other hand, has much of the same features as Personal Capital, with the exception of Personal Capital’s free financial calculators and tools.
Furthermore, Betterment’s cash account comes with a debit card, and there is no minimum balance need to establish an investing account, which is beneficial for Betterment customers when compared to Personal Capital’s $100,000 minimum requirement.
However, Personal Capital’s Smart WeightingTM feature is an intriguing approach to wide diversification that may give it an advantage over Betterment, but it’s difficult to say if it balances the effect of higher fees. To discover more, read our complete Betterment review.
M1 Finance is a company that specializes in financial services
When compared to Betterment, the differences between Personal Capital and M1 Finance are exactly the same, except that M1 Finance has a larger advantage — even ahead of Betterment — since it does not charge any fees for maintaining its investment accounts.
However, there is a drawback: they do not include any of Personal Capital’s sophisticated features, such as tax optimization or dynamic portfolio allocation. To discover more, read our whole M1 Finance review.
Who Should Use Personal Capital?
Personal Capital is arguably a better option for those with a $100,000+ investment or retirement account since it offers human guidance — but it does rely on technology to monitor and keep track of customers’ progress toward reaching their financial objectives.
Personal Capital’s investment management tools, such as the net worth calculator, budgeting tool, and retirement planning tool, are also helpful, since they provide important insights that may assist customers in choosing the best course of action for their financial life.
Furthermore, Personal Capital’s Smart WeightingTM approach is intriguing, and it may be one of the best reasons why investors should consider this firm, as research suggests that returns obtained through this approach are significantly higher than returns obtained through investing directly in broad-market indexes.
However, although Personal Capital’s percentage fees are lower than the industry average, they are greater than those paid by other robo-advisors, which is a negative, particularly when considering their effect over a long-term investment horizon.
Personal Capital Frequently Asked Questions
Here are the answers to some of the most commonly asked questions regarding Personal Capital.
Is it Safe to Invest in Personal Capital?
Yes. Personal Capital is a registered investment advising company with the Securities and Exchange Commission in the United States (SEC).
Is the fee for Personal Capital worth it?
That is debatable. Most of Personal Capital’s capabilities are accessible for a fraction of the price of some of the most popular robo-advisors. Personal Capital, on the other hand, may be a better option if you prefer human advisers over computers for managing your assets.
Is it true that personal capital is unrestricted?
Both yes and no. While Personal Capital provides some free services to its users, such as a net worth calculator and a retirement planning tool, their Wealth Management solutions are only available to clients with $100,000 or more in assets, and the company charges an annual percentage fee for managing its investment accounts.
Is it Safe to Have Personal Capital?
The FDIC insures the cash account provided by Personal Capital for up to $250,000 per depositor and $1.5 million per account.
Since a caveat, investment accounts are exposed to market risk, as financial assets may vary in value over time and market downturns are unprotected.
Personal Capital, on the other hand, is just as safe as any other registered and regulated financial advice company.
Personal Capital makes money in a variety of ways.
Personal Capital earns money by charging a percentage fee on the balances of the investment accounts it administers, as well as receiving revenue from the banks that support the cash accounts they presently provide.
Personal Finance is an intriguing option for affluent people who want a person to handle their money over a cold algorithm.
Personal Capital is supported by a team of world-class financial experts who manage more than $13 billion in assets. Their investing philosophy is based on tried-and-true methods, and they provide a number of appealing advanced features that should help their customers’ portfolios grow substantially over time.
Although Personal Capital charges higher percentage fees than some of its rivals, the sophisticated techniques and deep human knowledge it provides may be worth the additional money.
Personal Capital is a powerful service that helps users grow their wealth. It is a personal finance application that allows users to track their spending and investments. Reference: personal capital review reddit.
Frequently Asked Questions
Is Personal Capital a legitimate company?
Personal Capital is a legitimate company.
How does Personal Capital perform?
Personal Capital is a personal finance company that helps you manage your money.
Is Personal Capital good for budgeting?
Personal Capital is a tool that helps individuals manage their personal finances. It is not designed to help with budgeting, but it can be used for this purpose.
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