Author: Chris Muller / Source: fivecentnickel.com
Investing is frustrating. It can be confusing to know which investments you should choose, and when and how to rebalance your portfolio. Until now. Find out how this investment management tool can help in our Personal Capital review.
For many investors, a robo advisor makes sense–everything is done automatically for you.
But what if you’re at the point in your financial life where you need just a little bit more?
That’s where Personal Capital’s Wealth Management service comes into play.
Designed for individuals with a slightly higher net worth, Personal Capital combines amazing software with robo advising, plus adds in the benefit of having a live investment professional to guide you.
In this article, I’ll review Personal Capital’s Wealth Management service in detail so you can decide if it meets your needs.
What is Personal Capital?
Personal Capital was founded in 2009, and in the personal finance community, was always known for its amazing money management software (which you can still get for free). Slowly but surely, the word got out about Personal Capital’s Wealth Management solutions. That’s what I want to talk about with you today.
Their platform is different than other traditional robo advisors because they utilize a computer algorithm with experienced investment professionals. So the algorithm determines your initial portfolio, but it’s overseen and managed by an investment advisor.
The founders of Personal Capital have a goal of building a better money management experience for consumers. They do this by “blending cutting edge technology with objective financial advice,” and they “believe this is the best way to empower individuals and their money.”
As of this writing, Personal Capital has 1.8 million users tracking over $550 billion in assets. On the Wealth Management front, their advisors manage over $7.5 billion (yes – BILLION) in total assets. This is no small boutique broker, folks.
Here are some of the pertinent details of Personal Capital Wealth Management:
| Detail | More Info |
| Minimum account balance | $100,000 |
| Management fees | Varies; see below |
| Investment expense ratio | 0.08% (weighted average) |
| Annual fee | $0 |
| Account closure fee | $0 |
| Transfer fee | $0 |
| Accounts supported | Multiple; see below |
| Tax-loss harvesting | Yes |
| Automatic rebalancing | Yes |
| Access to advisors | Chat, email, phone, or web conference |
Personal Capital has six core values that they stand for, and it shines through their work with you:
- Objective – they give their clients objective financial advice, not advice that will line their own pockets.
- Holistic – with access to their free software, you can take a holistic view of your money instead of focusing just on assets you carry (or don’t carry) with Personal Capital.
- Transparent – everything they do is transparent, including transparency on the costs to you as the investor.
- Dedicated – their advisors are dedicated to their clients and don’t want to make investing a poor experience.
- Strategic – they’ll find cost-effective solutions that align with your long-term financial goals.
- Personal – this is more than a robo advisor. Personal Capital pairs algorithms with human beings to give you an extremely personalized experience.
Key Features
I’d like to share the best features of Personal Capital’s wealth management service:
MPT Portfolio Construction
Personal Capital’s algorithm utilizes MPT (Modern Portfolio Theory) to select investments for you. MPT was published by a guy named Harry Markowitz in the 1950s and he eventually won the Nobel Price in 1990 for the concept. Its basis is that you invest in the lowest-risk assets possible, given your targeted return. Obviously, he won the Nobel Prize, so it’s much more complex than that, but Personal Capital uses the theory to construct the lowest-risk portfolios possible based on a desired return/risk level.
Robo Features to Reduce Costs and Headaches
Utilizing a roboadvisor approach, Personal Capital’s algorithm will automatically rebalance your portfolio whenever it gets too far out of whack. Rebalancing is critical, and this is a service that saves you time and money. They’ll also help you reduce costs by directly investing in stocks instead of ETFs or mutual funds. Finally, you’ll get tax-loss harvesting, which is an automatic feature that reduces your taxes based on the trades that occur within your portfolio.
Multiple Account Type Options
With Personal Capital, you have a few options on the types of accounts you can open:
- Roth IRA – an excellent option for anyone, allows you to contribute taxed money each year and enjoy tax-free earnings and withdrawals at retirement.
- Traditional IRA – free from income restrictions, a Traditional IRA allows you to take advantage of tax credits for your contributions in the year you contribute, but you have to pay income tax when you withdraw money in retirement.
- Joint accounts – this is a joint taxable account and can be used as a savings account (which is what a lot of people do nowadays, since you can choose a low-risk portfolio).
- Individual taxable accounts – I would recommend opening one of these once you max out…
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