Personal Capital Review 2024 – Pros and Cons

One of my favorite books as a kid was Alice in Wonderland

“Alice: Would you tell me, please, which way I ought to go from here?
The Cheshire Cat: That depends a good deal on where you want to get to.
Alice: I don’t much care where.
The Cheshire Cat: Then it doesn’t much matter which way you go.
Alice: …So long as I get somewhere.
The Cheshire Cat: Oh, you’re sure to do that, if only you walk long enough.”

What gets measured gets managed – Peter Drucker in The Practice of Management. I am sure, everyone has found value in some form of measurement to track goals which are important to them.

In order to accelerate our Financial Freedom; we should at any point in time know which direction we want to go.

1. Knowing our current financial situation and
2. also tracking how far we are away from our goals will not only keep us motivated; but it will also inform our investment choices and the risks we are willing to take with respect to our Human Capital or investments. 

As you know by now; I am a huge fan of automation. Even investing in stocks is an automated process for me. I use M1Finance to automate all my purchases since the platform has zero fees, very low minimums, automatic rebalancing to pre-defined asset allocations and fractional shares. You can read my M1Finance review and why I prefer it over Vanguard, Schwab and Fidelity.

The time and energy spent doing anything manually; is just not worth it. It can be better spent either earning more money or enjoying life.

I have over 45 different financial accounts –  bank accounts (for bonuses); investment accounts and credit cards (for rewards). Keeping track of all these; was a nightmare before Personal Capital. I used to login once a month to the 45+ accounts and manually update my excel. As I started using the free version of Personal Capital, I also found additional features which were quite useful. 

What is Personal Capital?

Personal Capital is a Registered Investment Advisor with over $12B in assets under management. They are ranked #3 on RIA Channel’s list of the Top 100 Wealth Managers in 2019, as featured in Forbes.

Personal Capital provides a free tool which enables you to track your net worth; cash flow, budget, emergency fund.

It also provides information with respect to your investments such as asset allocation, performance against benchmarks, any hidden fees which are eating away your retirement savings.

You can also use it for retirement planning, savings planning and checkup on your investments.

Get started by signing up and linking all your banking, investment and retirement accounts. Your entire financial life at-a-glance is now visible in a simple, easy to use actionable dashboard.

Personal Capital Sign up process

When you sign up; the software will prompt a questionnaire. I just skipped it and went to directly link my accounts. 

The linking screen provides icons for most of the common bank and investment accounts. You can search for the ones you do not notice and add them all. Some financial institutions can be linked by just providing the username and password. Others may send you an additional verification code which you need to enter.

After all accounts are linked you can either run the Investment check or Go to Dashboard. Let us go to the Dashboard and take a look

Personal Capital Dashboard

Net Worth Tracker

In order to figure out your net worth, we must track what we own (assets), minus what we owe (liabilities). Personal Capital capital aggregates all the information; in a visual form indicating how your net worth has changed over a period of time. It is pretty inspiring to see the line going higher and higher over a period of time.

It also list the Assets and Liabilities below by each account in case you want to drill down further. So if we click on the Bank of America line item; it lists every transaction in that account.

 

Cash Flow Tracker

The solid line shows where you are this month against the same time (dotted line) for the previous month. The Cash Flow tracker is one of the best features to visualize if you are on the right track or adjustments need to be made. 

Within Cash Flow you can also look at Income and Expenses. 

The income and expenses also have a graph with details below of each transaction which contributes to the overall numbers. 

Personal Capital Cash Flow Expenses shows your current month’s expenses (solid line) against previous month’s expenses (dotted line).

 

Budgeting

Personal Capital added the budgeting feature at a later point. 

When you first create an account, Personal Capital uses your last month expenses to define your budget. You can also set your monthly budget if you don’t believe the prior month is an accurate representation going forward.

The outer ring shows your total budget and the inner ring indicates how much you spent at this time in the previous month. 

 

Emergency Fund

This is a sum of all your linked bank accounts. I use a strategy to earn over 8% interest on my emergency funds with various bank accounts. So this feature is useful to know my total emergency cash, across all accounts at a quick glance.

 

Retirement Savings

This is a visual gauge for this year’s net inflow into your investment accounts. This is not how much you have saved in the previous years. But rather to see how much you are putting money aside this year.  It is currently zero for me since I have not yet done any contributions. It also provides a range which I should target in terms of Retirement Contributions this year.

Personal Capital Portfolio

 

Holdings

This indicates all your holdings and you can benchmark against the index you track.

Allocation

This indicates how diversified you are across different asset classes.

Sectors

You can also drill your portfolio across sectors to check if you are overweight or underweight based on your risk tolerance. Imagine how useful this is to have this information; not only across various funds but summarized across accounts. Looking at this graph, I realize that I am overweight technology and might need to dive deeper into it.

Personal Capital Planning

Now we come to the most exciting part related to our Financial Freedom Countdown.

Retirement Planning

The Personal Capital Retirement Planner indicates if you are on track for retirement based on all your assets and liabilities. You can also setup goals for the future such as amount needed for a child’s education or a kitchen remodel; and the planner takes all of that into account.

The Personal Capital Retirement Planner also takes into account the fact that some of your money is in Taxable accounts and some is in Tax deferred accounts such as IRAs and 401(k). Your Federal and State taxes are also considered when running around 5,000 Monte Carlo simulations. It shows the median draw down of your portfolio and also the 10th percentile so you know how you would perform in an average market v/s a really bad market.

Savings Planner

The Savings Planner shows how you are tracking against your savings goals against 3 buckets 

1. Retirement
2. Emergency Fund
3. Debt Payoff

 

Investment Checkup

Allocation

It looks at your current allocation and also recommends a Target Allocation. 

Stocks

This identifies not only your sector risk but also if you are overweight any particular stock so you can take action accordingly.

 

Costs

Here you can identify the costs in terms of Account fees and also Fund fees. Remember to examine these costs and make a conscious decision if you believe the accounts and funds justify the cost being charged. After all once your account reaches a sizable amount; the costs eat up a significant chunk of your money. Here are the details of the fees I am being charged. I plan to make changes based on this information. 

 

Benefits of using Personal Capital

1. Free: While Personal Capital has an advisory service which charges fees with the benefits of a personal advisor; all the features I have described above are totally free and can be used by just signing up
2. One single place to look at your entire financial life and take action saving you time and energy with respect to tracking.
3. Net Worth Tracker: No need of manual maintaining an excel sheet to track all your various account balances. Personal Capital Net Worth Tracker aggregates all your data.
4. Cash Flow Tracker: You can literally track on a daily basis how you are doing for the current month against the last month. Personal Capital Cash Flow Tracker helps you manage income and expenses.
5. Budget Tracker: You can set your budget and monitor it. Personal Capital Budget Tracker helps you get your spending back on track.
6. Emergency Fund tracker: Aggregates all your cash balances so at a moment’s notice you can know if you have enough funds to meet any emergency. Personal Capital Emergency Fund tracker also alerts you when your emergency fund is low.
7. Portfolio Tracker: Personal Capital Portfolio Tracker shows your entire portfolio across asset classes and sectors which helps you balance risk accordingly and avoid being too concentrated. You can of course make concentrated bets as I do with certain sectors but this needs to be a conscious choice. Else you would be caught unaware in a downturn. 
8. Retirement Planner: The Personal Capital Retirement Planner indicates if you are on track for retirement based on all your assets and liabilities. It also allows you to make changes for your future goals like home improvement or saving for college. The Monte Carlo simulations should make you more confident before taking the plunge into retirement. 
9. Savings Planner: The Personal Capital Savings Planner visually indicates how you are tracking against your savings goals for Retirement, Emergency Fund and Debt Payoff.
10. Investment Checkup: Personal Capital Investment Checkup highlights if your stock bond allocation is appropriate for your risk profile and suggests a target allocation. It also highlights all the account and fund fees you are currently paying thereby saving you money.

Why is Personal Capital Free?

Personal Capital operates on a “fremium” model. While the above features are all free; it also has a wealth management service with over $12 billion in assets under management. They would ideally like some of their users to start using their paid services. After you sign up; you would receive either an email or a phone call from a personal advisor asking if you need their services.

The wealth management service is only available for balances above $100K. For balances between $100K and $200K you get a team of advisors and for balances greater than $200K you get assigned two dedicated financial advisors. Personal Capital charges a 0.89% account management fee for the first $1 million and reduces to as low as 0.40% for larger account balances.

When I received the introductory phone call, I politely replied that I do not need wealth management service at this point. You are under no obligation to use the wealth management service and can continue to use the free service.

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FAQs

Summary

Readers, how are you tracking towards Financial Freedom?

Have you tried Personal Capital? How does it compare against other free tools you have used or are currently using?