How Does Personal Capital Compare To Other Robo-Advisors?

How does Personal Capital compare to other robo advisors?

Personal Capital is one of the leading robo-advisors today with free financial tools for everyone to use. They compare very favorably to other robo-advisors due to their hybrid human + digital solution.

What's been unique about Personal Capital since they first began in 2009 is that they always deployed algorithmic advice plus human advice to help you manage your money compared with companies like Betterment and Wealthfront, which used strictly algorithmic advice.

But at the start of 2017, it suddenly became popular for all the major robo-advisors to deploy a hybrid robo + human approach to wealth management. All, except for Wealthfront, which remains strictly robo. Wealthfront is my favorite pure robo-advisor if you don't need any human advice and want low cost.

T. Rowe Price began marketing its first digital-investment offering, Charles Schwab released Intelligent Advisory, a human-assisted version of its original robo service called Intelligent Portfolios, and Betterment has also began offering Betterment Plus for clients who want human advice as well. Clearly, it's become a crowded market!

Robo advice is evolving rapidly, but the basic product is a low-cost, semi-customized portfolio meant for “mass affluent” investors with $100,000 to $1 million in assets. Clients typically go online, answer a handful of questions about their age, assets, income and risk tolerance and get a highly diversified portfolio of regular or exchange-traded mutual funds.

Thanks to technology, this self-driving portfolio is automatically rebalanced to maintain the client’s desired mix of stocks, bonds and other asset classes. Most all robos now offer automatic tax-loss harvesting for taxable accounts, which involves selling losing positions to generate losses that can be used against taxable gains.

Given all these advancements and lower fees compared to traditional investment advisers who charge between 1% – 2% of assets under management, the robo-advisory space has exploded in popularity with roughly $100B in assets under management in the robo-advisory space. Despite the huge growth, the AUM figure is still quite small compared to traditional advisers with trillions under management.

The most interesting aspect of robo advice is that it is now evolving from strictly Millennials only to mass market. We now are seeing Millennials, GenXers, and Baby Boombers use robo-advisory services. For example, over half of Intelligent Portfolios' clients and Personal Capital's clients are over age 45.

Personal Capital Company Update 2020

Personal Capital is my favorite hybrid robo-advisor largely because they've been hybrid since day one. As a result, they've had years head start to perfect their product offering. They've built everything from the ground up, which means they're totally customer focused on the hybrid robo-advisory experience.

My favorite reason for using Personal Capital is due to its free financial tools which everybody can use to track their net worth, manage their cash flow, and analyze their investments. I've used Personal Capital's free tools since 2012, and have watched my net worth sky rocket since. I highly recommend everybody sign up for free and link your accounts to start tracking.

I've known the senior management of Personal Capital since the beginning. Living in San Francisco since 2001 has allowed me to meet many of today's great innovators in person. I've met with Bill Harris, the CEO over 30 times, as well as the other C-level exec. Here's the latest feedback from my meeting with their Chief Marketing Officer and Vice Chairman in late 2018.

* Surge in assets under management. Assets under management have surpassed $11 billion in 1Q2020, from just $2 billion at the start of 2016. In other words, their asset gathering has accelerated for those who utilize Personal Capital to manage their money. Personal Capital also tracks over $900 billion in assets (not managed) as more and more people gradually leverage their free software to track their finances.

* Key personnel hires. Personal Capital hired Mike Armbsy, ex CFO of Yodlee to be their new CFO. Mike was responsible for helping Yodlee go IPO in 2014. In addition to Mike, Personal Capital welcomed Paul Desmarais of Power Financial Corporation to their Board of Directors. Paul is intimately familiar with Personal Capital as he helped lead Power Financial’s $75 million investment in their Series E financing.

Personal Capital, CEO Bill Harris
Personal Capital employees with CEO, Bill Harris (in Green)

Eight Reasons To Use Personal Capital

Here are my favorite reasons for using Personal Capitals' free financial software.

1) Simplicity And Less Stress. Before Personal Capital, I had to log into eight different financial institutions to track over 30 different financial accounts ranging 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.

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. 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 along with how the markets did, upcoming bills, latest insightful blog posts and accounts that need your attention. Below is a sample headline snapshot.

Personal Capital Net Worth Tracking

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 the 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!

Personal Capital Cash Flow Tracker

4) Helps You Balance Risk. With so many accounts, it's often hard to see exactly what's going where. 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. Now that it's a bull market, investors are probably too overweight equities and way underweight bonds once again. 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 CDs/bonds.

Portfolio Risk

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 that my Fidelity Large Cap Growth fund cost $1,200 a year 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.

Mutual Fund Fees Graph Personal Capital

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.

Risk Return Personal Capital

7) Recommends Specific Dollar Amounts To Invest. Financial advice is useless if there is no actionable advice. Personal Capital will recommend the specific dollar amounts to invest or reinvest in each asset class 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 $200,000 and bond holdings by roughly $100,000. The fun part is figuring out which index funds to invest in each category. All investment related charts and analysis can be found in the Investing tab.

Personal Capital Recommendation Of Assets

8) The Best Retirement Planning Calculator. Personal Capital has the best retirement calculator on the market because it uses real data and Monte Carlo simulations to come up with the most realistic financial scenarios for your future. 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. 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.

Planning for retirement when paying for private grade school
Personal Capital sample retirement planner calculator. Are you on track? Click to find out.

Leverage Free Technology To Create Greater Wealth

Get a handle on your finances by signing up with Personal Capital for free. It takes less than a minute to sign up and you'll be amazed at how much more clarity you'll have with your finances.

Sign Up For Personal Capital For Free

About the Author: Sam began investing his own money ever since he opened an online brokerage account in 1995. Sam loved investing so much that he decided to make a career out of investing by spending the next 13 years after college working at two of the leading financial service firms in the world. During this time, Sam received his MBA from UC Berkeley with a focus on finance and real estate. He also became Series 7 and Series 63 registered. 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. He spends time playing tennis, hanging out with family, consulting for leading fintech companies and writing online to help others achieve financial freedom. was started in 2009 and is one of the most trusted personal finance sites today with over 1.5 million pageviews a month. Financial Samurai has been featured in top publications such as the LA Times, The Chicago Tribune, Bloomberg and The Wall Street Journal.