In the good old days, there was no such thing as free wealth management. You would have to pay an advisor a fee to get some advice. Today, thanks to technology, everyone has access to free wealth management to help you manage your wealth.
For all of you who want to optimize your finances, I recommend signing up with Personal Capital. They are the best free wealth management tool today. In addition, the tool aggregates all your financial accounts in one place so you can get a holistic view of your money.
Personal Capital is based right here in my hometown of San Francisco. It was founded in 2011 by Bill Harris, former CEO of Intuit and Paypal. From 2013-2015, I spent time in their offices consulting for them on a part-time basis. Until this day, I still keep in touch with senior management and use their free product weekly.
With uncertain times, it’s more important than ever to keep track of your finances. Do not waste all those hard-working years building wealth only to see it disappear because you weren’t paying attention! The last thing you want to do is wake up 10 years from now and wonder where all your money went.
Free Wealth Management Using Personal Capital
Despite being free, Personal Capital has the best free wealth management tools to help you build your net worth. Here are 10 reasons to use Personal Capital today.
1) Helps You Reduce Financial Stress
Before Personal Capital, I had to log into eight different financial institutions to track over 30 different financial accounts. These accounts ranged from brokerage accounts, money market accounts, CD accounts, checking accounts, IRA, and my 401K. My finances were a mess, and I’m sure your finances could use some organization as well.
Now I can just log into Personal Capital to see how everything is doing in one place. It’s important to have a holistic view of your overall financial health so you know where to allocate resources. The better you can track your net worth, the less stress you will feel. Here’s a snapshot of the command center when you first log on.
2) Net Worth Overview
Gone are the days where you have to use an Excel spreadsheet to manually update every single asset and liability line item to calculate your net worth. Free wealth management by Personal Capital updates your net worth automatically as soon as you log in because all your accounts are linked. They provide a pie chart of your assets as well as gives you a historical chart of your net worth progression.
If you cannot find an account in their database, you can simply add it yourself. Personal Capital will also conveniently e-mail you a weekly snap shot of your latest net worth. In the snapshot, you will get a summary of the stock market, upcoming bills, and latest insightful blog posts.
3) Tracks Your Cash Flow
Budgeting is personal finance 101. By tracking your income and your spending like a hawk, you will be able to save a lot more money than if you simply tried to guess everything. Think about all the times you withdrew cash from the ATM machine and had no idea where all your money went a couple days later.
Aggregating all your accounts allows you to see where all your money is going. In the example above, this entrepreneur brought in over $38,000 in income and spent only $3,096. Now that’s great cash flow!
When it comes to money management, cash flow is more important than net worth. The reason why is because cash flow is real. It can pay the bills, while net worth is subjective. Net worth is important, but it’s also more of a vanity metric.
4) Helps You Balance Risk
With so many accounts, it’s often hard to see exactly what’s going where. Free wealth management helps you see the overall big picture.
For example, so many people were too overweight stocks before the financial crash in 2009. With Personal Capital, you can easily see where the imbalances are in your net worth so you can make smart adjustments.
The Investment Checkup tool analyzes your portfolio’s holdings based on size, style, and sector. Personal Capital excels for those who have assets in the stock market. Personally, I like to maintain a 35%, 35%, 30% split between stocks, real estate, and bonds.
5) Helps Reduce Fees
One of my favorite tools Personal Capital provides is their Portfolio Fee Analyzer. I ran my 401K through their fee analyzer and discovered that I am paying over $1,750 a year in management fees.
I had no idea my Fidelity Large Cap Growth fund cost $1,200 a year. This was due to a 0.74% expense ratio compared to sub 0.3% for my Vanguard Funds. As a result, I found a similar Large Cap index fund instead and am now saving $1,000 a year.
Without Personal Capital, I would have spent over $87,000 in excessive fees over the next 20 years. Take a look at my example below. Portfolio fees are a serious problem which will rob you of your retirement wealth if you are not careful. Don’t let ignorance rob you of your financial well being.
6) Shows Your Portfolio’s Investment Efficiency
Based on your risk tolerance and investment objectives questionnaire, Personal Capital will give you an idea of where your current allocation is on the Efficient Frontier Curve. The Efficient Frontier Curve is the best returns for a certain level of risk. You want to be on the curve and not above or below.
7) Recommends Specific Dollar Amounts To Invest
Financial advice is useless if there is no actionable advice. Personal Capital’s free wealth management will recommend the specific dollar amounts to invest or reinvest in each asset class. The goal is to get you to an optimal asset allocation. In this example below, the investor is too heavily weighted in cash.
In order to get to his recommended target allocation the investor needs to increase stock holdings by roughly $226,200 and bond holdings by $72,500. All investment related charts and analysis can be found in the Investing tab.
8) The Best Retirement Planning Calculator
Personal Capital has the best retirement calculator on the market because it uses real data. In addition, it uses Monte Carlo simulations to come up with the most realistic financial scenarios for your future.
In comparison, other calculators simply ask you to guess input values to then come up with your financial future. The problem with this method is that we often underestimate how much we are saving and spending.
For example, you can input different life events such as a wedding or home purchase in your cash flow statement and recalculate your financial future to see how you’ll do. Everybody should give it a try. This is what free wealth management is all about.
9) Recession Simulator
In June 2020, Personal Capital came out with its Recession Simulator. The new free tool provides users and clients the ability to view their current portfolio during past recessions such as the Dotcom Crash and the Global Financial Crisis of 2008. The idea is to allow users to see what might happen if the next recession is like the past.
Below is an example of the Recession Simulator at work. Notice how the Projected cash flow is short about $800/month in retirement if the simulated recession plays out according to the variables. If you believe the variables in the model (duration of recession and depth of decline), then you would try and save more or change your investment style.
If you don’t believe in the variables, you can always adjust them to your liking.
10) Free Portfolio Analysis
Personal Capital re-introduced it’s free investment portfolio analysis with a registered investment advisor, – a $799 value. Once you link an investment portfolio or more with over $100,000 in assets, you can schedule to speak to a fiduciary advisor to discuss your objectives and analyze what’s going on with your portfolio.
In 2014, I went through their free financial consultation and the advisor laid out exactly how conservative I was (snapshot below) and what my potential opportunity cost would be if I kept so much cash.
In the end, I decided to reinvest half the cash into the S&P 500 and more tech stocks and use the other half to buy a fixer with an ocean view in Golden Gate Heights, San Francisco. So far, so good. Here is the link to sign up to get your free investment portfolio review.
Leverage Free Wealth Management
When you know where your money is going and where it’s being invested, you gain a tremendous amount of confidence. With more financial confidence, you can live your best life today. You may not be wealthy now, but if the direction is correct, sooner or later you will get there. Free wealth management helps you get there quicker.
Once you are financially secure, you free to do whatever you truly want. Get a handle on your finances by signing up with Personal Capital for free and aggregating all your accounts. Not only are the financial management tools free, it takes less than a minute to sign up.
I spent the past 13 years meticulously tracking my own finances to achieve financial freedom. In conclusion, if I discovered Personal Capital’s free wealth management tools earlier, I think I would have reached freedom even sooner!
Retirement Planning Alternative
If you’re looking for purely a retirement planner, you can also check out NewRetirement. NewRetirement is software built from the ground up. They get even more granular by helping you manage your real estate assets and other investments. Further, NewRetirement has fantastic passive income and “what if” scenario models to help you plan better for your future.
You can check out my detailed NewRetirement review. The company has a free 14-day trial and then charges a yearly $120 fee after.
About the Author: Sam worked in finance for 13 years and received his undergraduate degree in Economics from The College of William & Mary and got his MBA from UC Berkeley. In 2012, Sam was able to retire at the age of 34 largely due to his investments that now generate roughly $250,000 a year in passive income.
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