Personal Capital Review
Personal Capital offers client-based robo-advisor wealth management and investment services. The real and unique difference is the combination of both human and computer-based advice.
To date, the company holds at least $4.2 billion worth of assets and another $350 billion in tracked accounts. The main aim of Personal Capital is to offer valuable and objective investment advice on their platform. The only limitation is it targets those with bigger assets although you’ll pay lower fees if you fall in this category.
Nevertheless, those who pay higher fees get access to financial advisors who will help you in formulating investment strategies. To achieve this, they use a combination of techniques such as personalized asset allocation, the modern portfolio, disciplined rebalancing among others which will be discussed in detail later on in the article.
The Strategies at Personal Capital
At Personal Capital, you have three strategies at you can choose from. The strategies are categorized according to the value of investable assets in your possession. Once you figure out how much investments you’d like to make, you can choose a suitable strategy for you which includes other services and benefits.
The Investment Service Strategy
This is the first strategy and it targets people with $200,000 worth of investable assets. The services available in this strategy include dynamic tactical weighting, an advisory team on finance, 401k advice, a tax compliant ETF portfolio as well as cash flow and spending trends.
In addition, you’ll also access online tools offered by Personal Capital via your dashboard. However, you’ll need to have at least $100,000 to start investing at Personal Capital.
Wealth Management Strategy
This is the next plan and it targets those willing to invest assets worth $200,000 to $1 million. In this strategy, you’ll access all the services provided in the Investments Service Strategy and others.
Some of the additional services include customized ETFs and stocks, two personal financial advisors, a full retirement and financial strategy, financial decisions support, tax location and tax loss harvesting not forgetting 529 planning and college savings.
The financial decisions support includes support with compensation, stock options, home financing and insurance. However, keep in mind that Personal Capital doesn’t offer 401k for retirement plan and 529 plans savings even though they help you with advice regarding these plans.
Private Client Strategy
This is for the big players, those with over $1 million worth of investments. In this strategy, you’ll get all the services in the previous plans and several others.
The services include exclusive CFP access, investment committee, advisors, support and investment portfolio mix of ETFs, individual bonds and individual stocks.
Furthermore, you’ll also get private banking services, legacy portfolio construction, estate tax, family tiered billing as well as donor-advised funds. In addition, Personal Capital will offer their private clients hedge fund review and private equity, CPA collaboration, an estate attorney and deferred compensation strategy.
The Accounts and the Fee Structure
As an incentive to invest with Personal Capital, they offer lower fees for those investing huge amounts of money. Therefore, the more the investments, the smaller the fees. For example, an investor pumping in a maximum of $1 million, they’ll have to pay 0.89% of the investments in fees.
An investment of over $1 million, the initial $3 million worth of assets will attract a fee of 0.79% while the following $2 million will attract a fee of 0.69%.
For the extra $5 million afterward, you’ll have to pay a 0.59% fee while $10 million after that will be charged at 0.49%. the best part is you won’t be charged any additional fees apart from management fees, therefore, you can rest easy with worrying about closing, transfer or annual fees.
That’s it about the fees. Let’s dive into the accounts supported by Personal Capital. They include combined non-retirement and individual counts, trusts, rollover IRAs, SEP and traditional and Roth.
By using Personal Capital for your investments, stand by for a healthy range in terms of the investment portfolio. As an example, when they buy U.S. equities, they’ll buy a wide range of about 70 individual stocks that take advantage of the tactical weighting approach while also optimizing the account for the sake of taxes.
Personal Capital only buys liquid securities. Therefore, if you get in a cash crunch and you need money fast, you can always retrieve your funds during a settlement phase which will take about three days.
Pershing Advisor Solutions will hold all investment funds. This is one of the biggest custodians in the U.S. and they also hold more than $1 trillion in worldwide client assets.
Strategies to Optimize Tax
Personal Capital employs a number of strategies and techniques to make sure all their clients optimize the taxes on all investments. One of the tactics is avoiding mutual funds since they consider it as inefficient when it comes to taxes.
The asset location remains personalized regardless of whether you own retirement or taxable accounts. For example, they will place all fixed income and high-yielding accounts in tax-free or exempt accounts. The REITs can also fall in the retirement accounts since they offer non-qualified dividends.
The last strategy used by Personal Capital is tax loss harvesting. This means they use the individual securities which accrue losses and can be used to provide tax deductions or offset gains.
There are a number of online resources you can capitalize on at Personal Capital even though you aren’t a client. All you have to do is create an account and link all your financial accounts for them to analyze whether you can invest with them.
This is how the program works. It will analyze your credit cards, investments and bank accounts to come up with a final report on whether you can invest your resources. The report will then guide you regarding the adjustments you can make on your investments.
Moreover, you can perform an overall check on your investments by taking a look at how much in fees you get charged. You can achieve this by using two ways.
- The Mutual Fund Analyzer: This can help you to compare the performance inclusive of fees with the wider markets. Afterward, you can utilize the Fee Analyzer which will help you to get a glimpse of what you’re charged on the non-taxable retirement accounts.
- The budget check-up: You can use this tool by Personal Capital to analyze your spending and savings. In addition, you can include the Retirement planner to help you out with the long-term savings.
This program will provide you with a variety of scenarios you can expect during your savings journey. These scenarios help you to prepare psychologically in such eventualities.
Investment Tools and Strategies
Personal Capital employs five strategies in their investment plans. Read on to find out more about these strategies.
The Modern Portfolio Theory
The main objective here is to come up with quality and efficient portfolios for their clients while producing the highest returns with as little risk as possible.
There are six asset classes Personal Capital partners with to achieve this balance. These classes should be investable and liquid and they include cash for liquidity, ETs and commodities, international bonds and stocks and U.S. bonds and stocks.
Earlier on, we talked about how Personal Capital uses asset location, avoiding mutual funds and tax loss harvesting to optimize your taxes.
These methods can improve your overall annual returns by up to 1% since Personal Capital uses a wide range of tactics, unlike other advisors who use one or two.
Personalized Asset Allocation
Personal Capital understands that everyone is different in terms of investments. That is why they go through your financial goals as well as your personal data to come up with a balanced and effective portfolio which means taking a closer look at the risks involved.
They’ll use Retirement Planner software to analyze your savings and spending habits on top of your income. This will help you form a clear picture of your future financial status and whether you need to make any changes regarding your finances.
Style Weighting and Equal Sector
Personal Capital uses a number of tactics to diversify your portfolio and they do this by equalizing your portfolio composition by style, size and sector.
By doing this, they aim to overcome the volatile conditions which can affect your investments. In addition, they don’t depend on a handful of companies, but they spread out the stock investments over 70 to 100 stocks.
Personal Capital will do daily reviews of your portfolio to check whether its need any rebalancing. For high-value assets, they’ll get a rebalance any time they stray more than the set percentage points.
Certain securities will get smaller margins and will be rebalanced once they deviate at least 0.5% from the target. With this rebalancing, you can take advantage and buy low, then sell high.
Should You Go for Personal Capital?
Personal Capital provides valuable services to investors with high-value assets, especially if you have some millions worth of assets. If you subscribe to the Private Client strategy, you’ll get advice on a number of investments including real estate and retirement among others.
You’ll also access custom asset management, thanks to the algorithms and the representatives who’ll add a human touch to your investments.