Over the last few weeks, I've been doing a thorough analysis of my investments: evaluating whether I have sufficient portfolio diversification, looking at my emergency fund allocation, and attempting an in-depth look of whether the current fees I pay are worth it. One tool that has allowed me to dive deeper into these question is Personal Capital.
Personal Capital is like Mint for investing: after connecting your bank and investment accounts, you can visualize your net worth, asset allocation, portfolio diversification, and your cash flow. But the tool can be much more if you want it to be: if you decide to invest your money in Personal Capital, you can get access to dedicated (human) financial advisors who will help you allocate your investments properly.
The jury is still out on whether I'll actually end up investing my money in Personal Capital, but I'm definitely going to be using the free tool extensively. (As a heads up, I have no financial affiliation with Personal Capital; I currently don't make any money by referring customers).
Here are my observations on the service thus far:
The free tools alone are great
Personal Capital's free tools are serve as a perfect complement to a budgeting tool like Mint. I pretty much ignore Personal Capital's budgeting tools because my cash flow is too complicated. Where I get the most value is in the net worth calculation and asset mix. Personal Capital provides much more flexibility than Mint for entering arbitrary stocks that might live in accounts that can't be connected (such as Robinhood or Coinbase). This makes it possible to get a true picture of your net worth that changes over time. It was really exciting to finally see that number reflected in a nice-looking dashboard.
Financial advice + connected accounts = game changing
I've talked to several financial advisors over the course of my years. I've always felt that the advice I received was disconnected from the true intricacies of my financial life. Often times, an advisor would ask me a question and I wouldn't really know the answer, so I'd make some broad estimate. I was never quite sure whether the advice I was receiving was truly relevant to my situation.
When you sign up for Personal Capital, you get a free session with a financial advisor. In fact, for me, it's really three sessions: one quick introductory call, an hour-long session going over my specific financial situation, and a third hour long call because I had too many questions in the second one.
With Personal Capital, the data is there right in front of the advisor. That's the big game changer. For example, a big topic with my advisor was my large asset allocation in private stock options in a tech startup I used to work for. He was thus able to design a financial plan that would account for a large amount of privately held technology stock by de-weighting technology the other parts of my portfolio.
The approach still feels very traditional
I honestly wasn't quite sure what to expect from my call with an advisor. Because Personal Capital is targeted at higher-net-worth millenials, I was curious whether the approach would differ starkly from that of a traditional financial advisor. Nevertheless, my chat with my financial advisor did feel very traditional: there's a certain type of tone and repetition of ideas that I've found common in financial advisors. (This may not be a bad thing, getting people financially educated is hard!)
The jury is out on whether 89 bps is worth it
Personal Capital currently charges .89% for assets under management. As anyone who has researched the impact of investment fees knows, this can add up to a lot of money over time. For $200k+ accounts, Personal Capital offers the following services:
- Two financial advisors
- Customizable individual stocks and ETF's
- Financial plan
- College savings plans
- Tax loss harvesting
- Financial decision support
Are these worth the fees? I'm not sure. The first two are probably the biggest areas of potential value. Having two qualified advisors to lean on for personalized financial advice could be a pretty substantial game changer. Additionally, a more personalized asset allocation and a somewhat smarter investment strategy could theoretically increase returns enough to offset fees.
Of course, all of these are things I could do myself for cheaper. The key question comes down to where I want to spend my time.
Stay tuned for more
I have my follow-up call this week with Personal Capital. I'll be asking more hard questions and posting about my experience 🙂