Personal Capital

People often ask me, “How do you know when you are done”. My response is, “What is your net worth and your regular expenses” and there’s almost always a blank stare.

The next thing I do is to tell people about Personal Capital, a company that I have been using since 2015. The company is part of a new segment of the investment community called Robo Advisors. Basically it’s a free service where you can connect up all your existing bank accounts, credit cards, mortgages, student loans, and income sources to pull your financial life into view. If you sign up for an account you get $20 for free (and so do I), and if you end up longer term converting to a paid account then you get 3 months of free human guidance as do I.

The great thing about the free version of Personal Capital is that you get a very fast real time view of all your income, expenses, and investments and poof, net worth. Additionally you can get automated advice on your accounts such as which investment have higher than average fees, asset allocation recommendations etc. (Brian enjoys creating multiple scenarios for retirement at different ages.)

After using the free version of Personal Capital for a year I personally chose to upgrade to a paid version. The ONLY difference is you pay 0.95% (or less) on whatever funds you give to Personal Capital to invest on your behalf, and you get a human adviser to walk you through strategy and execution (which they take care of for you for free i.e. free buying/selling and they make ZERO commission on that, shocking I know). Personal Capital makes it’s money from the minor % they charge on the assets under their control. Also, if you have money linked to Personal Capital but NOT under their control (i.e. they can’t buy and sell for you) they will STILL ADVISE YOU on how to allocate those other assets. Example if you have a 401K at work, you tell them your investment options and current balances and they will tell you how to allocate in terms of the rest of your portfolio. In my case, they have about 1/3 of my assets under their control, and I’ve been very happy with them.

Another very important fact is that Personal Capital has Fiduciary Responsibility as a stated policy of their company. What that means is that their recommendations must be in your (not their) financial best interests. For a while there was a law or pending law to implement required fiduciary responsibility but it was struck down, yet Personal Capital maintains the underpinnings as a matter of good business practice which I value greatly.

Anyway, look them up, try the free version out for yourself, you’ll be glad that you did.  And as a major added freebie, you can ALSO map out your retirement plan with specified dates of income and duration as well as expenses and they run 5,000 monte carlo simulations to project the results of your portfolio and choices in the future given past performance of the market and associated standard deviation to land on both a median (middle) and lower 10 percentile view of your portfolio over time with various assumptions, some of which you can control such as inflation, future tax brackets, level of ‘aggressiveness’ and such. Not to mention that their investment philosophy is investment methodology which is mathematical portfolio management strategy and incorporates Modern Portfolio Theory and equal sector/size weighting.

Overall as I was looking for a wealth manager I learned that the 0.95% fee was very competitive, especially relative to the services they provide:

  1. Fiduciary Responsibility
  2. Tax Optimization (Tax-loss harvesting offsets realized capital gains)
  3. Regular rebalancing
  4. Avoiding Hidden Fees
  5. Holistic financial planning

Sign up for the free account, you have nothing to lose and $20 to gain 😉