Executive Summary
PersonalCapital.com is a start-up company focused on offering online personal financial services. The difference with Personal Capital from other personal finance websites lies in the potential management of your assets. The objective of the company is to change the way that personal financial services are offered by providing financial tracking software free of charge and then creating a personal financial plan for users that they then manage. The fees (discussed below) are a little less than 1% of the value of the assets under management, but their base service is free of charge, providing the user an opportunity track their expenses as well as their investment portfolio for free.
Summary of Services
Free Investment Tracking
Free Expense Tracking
Investment Management – Graduated Fee Scale based on portfolio size
Does Personal Capital provide a summary of my financial position?
Yes. Personal Capital provides an excellent personal financial summary. They track spending, net worth, and investment portfolio. The emphasis for personal capital is primarily on the investment side so the budgeting and expense planning is not as robust, however, the user can easily track expenses and cash flow with the automatic categorization. It will be interesting to see what changes are made as the software goes forward because the CEO was formerly with Intuit, the current owner of Mint.com. Personal Capital’s focus on portfolio management provides a level of service that Mint does not have.
The summary pages are very clean and user friendly. The financial aggregator is also easy to use and you will be able to quickly get investment portfolio into their system. So is it safe? Let’s look at their security measures.
Is my personal information safe with Personal Capital?
When I tell people about online personal financial tools, their biggest concern is that their information will be stolen. It is an important question and a serious issue. Personal Capital assuages potential users by demonstrating their background in online security and noting the safety features of their system, both of which are impressive. Their information security standards are the same as or exceed most banks. Chief Executive Officer, Bill Harris, and Chief Technology Officer, Louie Gasparini, are the former founders of PassMark Security, which specialized in on-line authentication and created the authentication system used by most banks.
Personal Capital requires multiple authentication steps when you are logging in, which is consistent with the best banks. The two steps verify your password and then verify your computer. If the computer is not recognized, an additional verification is required for safety.
The company also ensures security through firewalls, data encryption, and constant monitoring of their site.
The information security at personal capital is very good.
Investment Management Services
At this time, there is no minimum investment to receive investment management services. There are also no performance based fees. The company’s focus is on asset allocation and portfolio diversification as opposed to analyzing individual securities. They look to help the user create a “Personal Fund” and a “Personal Strategy.” It’s really a personal financial plan and it’s free. The company describes the Personal Strategy as:
“A comprehensive investment portfolio designed specifically for you. It’s the way wealthy families and endowments manage their money – from the top down. Strategy first.
We start with a 360-degree view of your finances, and assess your goals. Then we custom-build a portfolio to match those goals, based on the time-tested principles of diversification, risk control, tax savings and low cost.”
The Personal Fund is described as:
“A Personal Fund is a managed portfolio of stocks and ETFs with a targeted investment objective. Unlike a mutual fund, you own the securities themselves rather than shares of a mutual fund.
Because you own the individual securities, a Personal Fund is customizable, tax efficient and less costly than a traditional mutual fund. For investors with $100,000 or more, Personal Funds offer a better alternative to mutual fund investing.”
Clearly this is the beginning of a potentially seismic shift in personal financial management. The typical financial advisor charges quite a bit in fees. Personal Capital looks to lower the cost for individuals by leveraging the power of the Internet. Early adopters of this service should expect a high level of service and should reward the company accordingly by telling the friends if it meets their standards.
Personal Capital is worth using if you are looking to shore up your future by creating a personal financial plan that requires asset and portfolio management. If your goal is to pay down credit card debt or to simply live within your means, you may want to start a Mint.com account. However, if you are looking for long term advice, it makes sense to get started with Personal Capital in order to leverage their professional investment management advice for free. Again, emphasis on the ‘free’ personal financial plan, regardless of the size of your portfolio, but the services of Personal Capital are best suited for people with a net worth of around $100,000.
How Much Does It Cost To Open An Account
Opening an account is free.
How Much Does The Investment Management Service Cost
That’s the real question. Let’s talk about what the services entail first.
The company summarizes their main service well when they say:
Finally, if you wish, we can help manage your money. Once we’ve created your strategic plan, you can delegate much of the implementation to us. Multi-asset-class diversification, risk-management, rebalancing, tax-optimization– this type of sophisticated wealth management has long been available to multi-millionaires, and now it’s available to you.
The service is designed for the upper-middle class, an under-served group in need of a lot of help. The question is whether or not Personal Capital can provide the help that they need. Convincing the use who has most of his assets tied up in a 401k and a home that he should pay a little less than 1% as a management fee will be difficult. The fees are on a graduated scale as follows:
$0 – $250,000 at 0.95%
$251,000 – $500,000 at 0.90%
$500,001 – $1,000,000 costs 0.85%
$1,000,000 – $5,000,000 at 0.80%
>$5,000,000 at 0.75%
The fees include what the company refers to as personal advisory services.
You may fall into Personal Capital’s target market so give it a try and let us know what you think. The question is how commoditized can personal financial services be while still maintaining their effectiveness. The fees are cheaper than standard personal financial advisors so you can feel confident that their investment management is competitively priced. I’ve written another piece summarizing a Wall Street Journal article on fee structures for financial advisors.
Also see the summary of PersonalCapital.com reviews for more opinions.
In the end, it’s worth opening an account with Personal Capital. You get access to professional software that helps you to build a personal financial plan, track your investments, and review your expenses. As your portfolio grows, you’ll have access to professional investment management to assist you on your journey to financial freedom.
Click the link to Join Personal Capital.