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Financial Planning for the Masses: My Session with Personal Capital


I know I wrote about Personal Capital quite a few times recently, but I’m really excited with their services. They are bringing financial planning to the masses through their website. I think this will help many regular people who are unsure about financial advisors to understand financial planning better. The main website and portfolio analysis tools are free which is awesome for most of us. Personal Capital generates revenue by charging a fee if you sign on with their investment management services.

Financial Planning Session

Last week, I had a financial planning session with Michelle, one of Personal Capital’s financial advisors. The call was very pleasant and she seems quite competent. Michelle gathered a snapshot of my personal and financial data over the 30-minute session.

My personal and financial data

  • I’m 39, married, and have one small child.
  • We went over my investment portfolio. You can read more about it in the first post I wrote about Personal Capital, My Overdue Portfolio Checkup.
  • I told her that I just left my job and I’ll be a stay at home dad for a while. Mrs. RB40 plans to retire in 15 years or so and will continue to max out her 401(k) contribution. We will avoid withdrawal from retirement portfolio until we are both retired.
  • Our income is enough to cover normal monthly expenses with a little left over.
  • We are planning to pay for college (as much as possible), but we don’t plan to leave an estate to little RB40.
  • I have a target asset allocation that I came up with and stuck with it through the down markets. Mrs. RB40 is not an aggressive investor and she doesn’t pay close attention to the market fluctuation.
  • We don’t have any plans to spend any lump sum in the next few years. We won’t need a new vehicle for a while and I don’t think we’ll buy any more properties.

My question

What kind of fee does Personal Capital charge?

They charge a graduated fee scale at around 1% of the portfolio they manage.

  • $1 Million or Less — 0.89% Annual Fee
  • $1 Million to $3 Million — 0.79% Annual Fee
  • $3 to $5 Million — 0.69% Annual Fee
  • $5 to $10 Million — 0.59% Annual Fee
  • $10 Million or More — 0.49% Annual Fee

So if I transfer $100,000 to the firm and let them manage that portion, then I’ll pay $890 per year for the service. Michelle told me that she can give advice on my total portfolio as well. This means they will manage $100,000 and I manage the rest of my accounts with their advice. For many of us, the 401(k) is a big part of our saving and it has to stay with the employer’s trustee. You won’t have to pay a fee on the asset you manage.

*Personal Capital recently lowered the minimum for their investment management service to $25,000. This should make the service accessible to many more people. Check them out if you need help managing your investment.

Analysis and Recommendations

Michelle took all the info to analyze and we made a follow up appointment. This time we talked about my portfolio and what we can do to improve it for our personal situation.

Here are the feedback of my total portfolio.

  • Good asset allocation overall for growth focused strategy
  • Currently over-exposed to emerging markets – not enough exposure to foreign developed stocks
  • No international bond exposure – these bonds provide another level of diversification
  • Adding alternatives will dramatically increase the diversification and manage risk within the strategy
  • Not enough in college savings account- increase to $30-40K (currently at $10K)

financial planning session with Personal Capital

Pictured above is their Optimal Investment Allocation for our situation.

The main takeaway for me is the Domestic to International ratio. They recommend 2/3 domestic and 1/3 international. This seems to be the magic ratio for us. They also recommend 2/3 developed international equity and 1/3 emerging market. It’s the same for fixed income (bonds) as well.

Another big recommendation is the alternatives investments. These are gold, metals, agricultural/food, energy, domestic and foreign real estate. We have rental properties and that’s about it for alternatives. It’s probably a good idea to diversify more.

financial advisor Personal Capital review

Tactical Weighting

I have been trying to inject some growth and diversity into our portfolio with small and mid cap equities (mutual funds and ETFs.) Michelle said this is better than many investors, but we can do better by diversifying though sectors. From the slide above, the SP500 is over weight in the Technology sector and is under weight in Basic Materials, Communication Services, and Utilities. I will need to run my total portfolio though Morningstar Instant X-Ray to see how it is weighted*. By keeping the sectors more equally weighted, you’ll have more diversity and should be better protected through the down turns. I think this is a good idea and will try to do this for our portfolio.

*Currently Personal Capital does not show the sector weighting of your portfolio. You can see that with Morningstar Instant X-Ray. That’s a bit disappointing, but I guess they can’t get everything right the first time out. They are a new company after all.

Good financial planning sessions

All in all, I was impressed with the free financial planning sessions. It was good to see a snapshot of our finances and have a plan for the immediate future. I learned a few things and I can take direct action with Michelle’s advice. If you are a self directed investor like me, I think you should make an appointment with Personal Capital and see what they have to say. It’s free and Michelle didn’t pressure me to sign up with their investment management service much. For now, I’ll stick with self directed because 1% seems like a lot of money to me. Although, I could let Personal Capital manage a portion of my account and I would manage the rest. This will drive the fee down below 1%. It could be tricky to get all the accounts to work together though.

There are a few compelling reasons to hire Personal Capital. The investment management service is probably good for people who want to be more hands off with their investments. Also, as we get older, our plans and goals will change. You can’t stick with the same strategy as you age. If you are not comfortable planning your own investment strategies, then a personal financial advisor will be helpful. I plan to reassess in a few years to see if this will be a good option for me.

Sign up with Personal Capital through this link.


Disclosure: I didn’t take note so I wrote this from memory. There are details that I left out such as how Personal Capital invest their client’s investments because I don’t remember the whole thing. If you sign up with Personal Capital, I may receive a referral fee depending on the size of your portfolio.

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Joe started Retire by 40 in 2010 to figure out how to retire early. He spent 16 years working in computer design and enjoyed the technical work immensely. However, he hated the corporate BS. He left his engineering career behind to become a stay-at-home dad/blogger at 38. At Retire by 40, Joe focuses on financial independence, early retirement, investing, saving, and passive income.

For 2018, Joe plans to diversify his passive income by investing in US heartland real estate through RealtyShares. He has 3 rental units in Portland and he believes the local market is getting overpriced.

Joe highly recommends Personal Capital for DIY investors. He logs on to Personal Capital almost daily to check his cash flow and net worth. They have many useful tools that will help every investor analyze their portfolio and plan for retirement.

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{ 46 comments… add one }
  • Jason @ WorkSaveLive October 31, 2012, 6:05 am

    I loved their site and all of their software! I’d never heard of this company before and I wonder if they’ll be able to make a big splash before some other large advisor firm just does the same thing (Mint on steroids). Great, honest review!

    • retirebyforty November 1, 2012, 8:33 am

      The CEO is from Intuit so I think they will be able to ramp up very quickly. They have a great product with no competitor right now and it’s good to be the first out of the gate. I would like to see some competitors too because it will drive everyone to deliver better products. 🙂

    • Nate December 22, 2013, 1:13 pm

      I agree. The design and functionality are impeccable. If you are on the fence about signing up — just do it (through the RB40 link of course!).

      It took me about one (1) hour to link all my accounts and get straight to the “full net worth picture). The Android app is beautiful as well.

      Very cool product. I am scheduling my personal session with them this week — thanks for the “behind the scenes” Joe!!

      • retirebyforty December 23, 2013, 10:35 am

        Thanks! Personal Capital is a great product that’s very useful for DIY investors.

  • SMB October 31, 2012, 2:21 pm

    Thanks for the review. I signed-up with them when you first posted about them but I’m having issues uploading all of my accounts (which they know of). So until I can get those together, it’s not very helpful. Can’t wait until it is though, maybe then I’ll set up one of these appointments.

    • retirebyforty November 1, 2012, 8:35 am

      Hopefully they will work that out soon. That’s their biggest weakness right now. I had to manually input a few investments too.

  • Wayne @Young Family Finance October 31, 2012, 7:00 pm

    I haven’t utilized a financial planner yet, but I have thought about it. Does this company have any guarantees or insurances? I have heard a few financial planner horror stories, as I am sure we all have.

    • retirebyforty November 1, 2012, 8:38 am

      From what I understand, investment management services doesn’t have guarantees or insurance. I think that’s just how private funds operates. You can’t trust guarantee anyway. Their brokerage is Pershing so that’s one good thing.

  • Financial Samurai October 31, 2012, 8:48 pm

    Pretty cool you spoke to them and provided the fee structure! Better put in that $5 million with them to get the lowest fee rate! 🙂

    • retirebyforty November 1, 2012, 8:38 am

      I hope someday we’ll hit 5 millions. 🙂

  • Jeremiah November 1, 2012, 5:55 am

    I’ll be interested to follow your journey with a financial planner. I don’t mean to paint them all with the same brush, but we hired one a couple years ago – and fired him shortly thereafter. He gave a series of recommendations that at the best were idiotic, though in retrospect were more likely unethical. Thankfully, we were knowledgeable enough to not implement his recommendations. If we had, we would be significantly worse off financially than we are are today!!!

    Anyhow, I don’t know what $950 of worth of financial advice looks like for you but I hope you do find it!

    • retirebyforty November 1, 2012, 8:40 am

      The first thing to ask any financial planner is how they get paid. I’m not sure how to value financial advice either. If they can boost my return by xx%?

  • Evan November 2, 2012, 2:28 pm

    Working in the financial sector you are NOT the normal client lol…was she shocked at your organization? or did she know your background?

    • retirebyforty November 3, 2012, 8:12 am

      She said I’m doing better than most clients, but didn’t seem that surprised. I told her I was an engineer and I’m changing career. 🙂

  • JC January 16, 2013, 11:18 am

    Was wondering if you have any updates since this last Nov 2012 posting. I’ve talked with Personal Capital too and trying to decide to sign up with them. Is it worth giving that 1% away to them?

    • retirebyforty January 16, 2013, 10:21 pm

      I decided to not sign up with them at this point. I took their advice and diversify my IRA with sector weighting. 1% is quite expensive, but that’s the standard rate.

  • Argus May 16, 2013, 5:57 pm

    For what it’s worth, i also did their free planning session and got the exact same allocation suggestions as you show above (exact same slides). My situation is fairly different tho in that i’m about 10 years older, single, no children, employed. It’s not the worst news in the world, but their personalized investment breakdowns seems like it may be fairly boilerplate…

    • retirebyforty May 17, 2013, 9:50 am

      Thanks for letting me know. I was wondering how personal their plan is. I guess they just put us in an age range and risk tolerance, then spit out the result. I really appreciate your feedback.

  • R July 24, 2013, 11:19 pm

    I have an appointment with same PC advisor next week. I will try to post feedback. I am curious how different my advice will be from yours and Argus’s above.

    • retirebyforty July 25, 2013, 9:08 am

      I’m looking forward to seeing it. Who did you get?

      • R July 25, 2013, 10:50 am

        Exact same person you and Argus got. Very professional and not pushy, but I would like to see how customized the advice will be.

  • Fahim August 1, 2013, 10:09 pm

    had a chat with an advisor at personal capital today and was shown the exact same slide too! Before finding this page i thought they were doing a good job od providing personalized allocations and recomendations, clearly it is very cookie- cutter. Any one actually sign up and use them? thoughts / experiences?

    • retirebyforty August 2, 2013, 6:08 am

      I wonder if it’s the same for every financial advisors. They have a template and only varies it just a little bit for each client. It just make their job easier to have one template.

  • Bryan August 15, 2013, 8:06 am

    I spoke with Personal Capital yesterday and brought up that some of their plan seemed boiler plate. The advisor responded with that they have many plans that are similar having each client with a completely unique plan is not really feasible or scalable. He did say that within each plan there are unique elements to each individual that the advisor can help with.
    I also mentioned that the graphs sent to others were exactly the same each time.
    I like there tools and approach but it does concern me that their plans aren’t as unique as advertised.

  • Moneycone December 22, 2013, 2:00 pm

    Very beneficial RB40!

  • The Passive Income Earner December 22, 2013, 3:54 pm

    Personally, I have found that my international allocation is covered by companies such as KO, JNJ, MCD and so forth … They have so much revenues coming from other countries that I decided it was enough international exposure. Buying directly in international countries means buying ETFs or mutual funds very often otherwise you expose yourself to the regulations and politics of those countries and it falls outside understanding my investments.

    In short, I find the rule book thrown at the allocations a little too basic … They would need to do much more to convince me.

    • retirebyforty December 23, 2013, 10:39 am

      That’s good too, but I still think we can use a little more international allocation than that.
      I like to have some emerging market in my allocation. They can give a big boost some years.

  • Sean December 23, 2013, 3:19 pm

    RB40, I’m wondering if she gave any info on rates of return? I’m also interested in less management when it comes to my retirement fund. Anyway, thanks for looking into that. I’ve been looking at Personal Capital for a bit and have been interested in their portfolio management aspect.

    • retirebyforty December 24, 2013, 12:54 pm

      She didn’t mention specific ROI. It just depends on how the market performs.

  • dave April 9, 2014, 6:26 pm

    I signed up and gave it a try. Sadly, their tool doesn’t work. Probably not their fault, but most of the banks or financial institutions I use have multi layer security…..so it is NEVER synced on the Personal Capital site. I have tried and tried. It simply won’t work unless you have just a few accounts at banks that have simple security.

    But what is the point if you only have a few accounts anyway

  • Marie August 1, 2014, 4:42 am

    I’m also married with one daughter and my husband is working as a Software Engineer but our income is just enough after paid all the bills and expenses. This is such a great review and we just did a review of Personal Capital on our site too. I couldn’t believe how much information they give you for free. Almost seems too good to be true!

  • socrates August 2, 2014, 1:44 pm

    I also had a review with a Financial advisor and had the same exact recommendations and slides presented to me. It seems like they are selling a cookie cutter portfolio of stocks, bonds, and etfs. The advisor I had was pushy and his math skills were lacking, The amount they charge is standard and too expensive for my taste. The advisor when I said that I will not be going with personal capital, gave me a dirty look and hung up. It was a very sad way to end a call. After that I closed out my account via their app. Like others said above, this seems to be too good to be true.

  • Chattanooga Cheapster August 2, 2014, 6:44 pm

    Maybe I’m a bit of a skeptic but I’m not sure what is so intriguing about financial capital. It is easy to find a brick and mortar financial advisor/manager that will give free consultations and charge similar or lower fees for money management. I’m surprised that virtual all of the established FI bloggers recommend them even though paying a fee to have your money managed goes against many of their other mantras. Why pay a fee for something that will not beat the market?

    • Ravi October 11, 2014, 6:32 am

      Not everyone enjoys managing their finances or understands all the parlance (small cap, large, emerging markets, risk, return, whatever else).

      Personally, I really enjoy it, but at this early point in my life and career, I have the time and similar expertise as someone I would pay to manage 100-200k. Once I’m at 3mm+, I may not want to spend my time worrying about things like personal finances any longer.

      The real value for most people is a disciplined adviser who keeps you sane when the markets are not. Many will buy/sell emotionally rather than rationally, at which point 1% is a bargain.

  • Kevin August 2, 2014, 8:29 pm

    My call with PC was much different. After the advisor learned I wasn’t interested in their service, he ended the call within seconds. It was pretty obvious they weren’t interested in the free users.

  • papadad August 6, 2014, 12:24 am

    Joe, it’s clear to me that PC is enlisting bloggers to boast about their “free” service as a mechanism to attract paying customers. While earning online income is good, I too had a similar experience about “not wanting their services so the adviser ended the call quickly”…

    Be careful/cautious about touting these guys too much. They may pay you advertising click throughs and such, but beware their growing negative reputation (1%cost, cookie cutter/less sophisticated approach, etc).

    Adopting a Bogleheads investment approach as a DIY investor, with as few as 2 (more likely just 3 or 4) ETF’s is a lot cheaper (less than 0.1 percent….) and gives a very similar investment return / diversification base.

    • retirebyforty August 6, 2014, 9:36 am

      Okay. I will keep that in mind. I really like their site and tools, but not sure about the financial management service. 1% is a bit high for cookie cutter service. My adviser was really nice so maybe the quality of their advisers went down with the growth. That’s too bad.

  • Ravi October 11, 2014, 6:40 am

    Not sure about the paid service, but would gladly pay a subscription fee maybe fee a month or few hundred dollars per year if their tools were significantly upgraded for a DIY investor.

    For example, you choose exposure by asset class, country, sector, mkt cap, etc, and it spits back a series of efts across many providers that would give you that exposure and also compared them between fees, performance, etc. also, portfolio back testing would be a very nest feature.

    DIY tools aren’t for everyone and neither is a fee based advisor.

    I do admit seeing myself needing a wealth manager (albeit many years down the road) once I have more complex investment needs like tax planning, estate services, and other items. I think eventually they would like to extend their services, but need to have a core platform as well. We shall see. I like what they have started. Along with services like betterment, wealth front, and a handful of others, I’d love to eventually see some partnerships in services.

  • Michael January 9, 2015, 11:50 am

    Early 2015 — I just had a discussion with my assigned financial advisor (trying to get me to partake in the paid service), and they showed me the exact same proposed Tactical Weighting of US Stocks. What I suspect changes by situation is the percentage to put into the US stock market…and into other sectors. They’re similar, though…
    pie-chart above my pie-chart
    us stock 53 52.5
    intl stock 23 22.5
    US bonds 8 9.8
    Intl bonds 3 2.8
    Alternatives 13 11.5
    cash 1 1

    I’m turning 50 late this year, and my oldest of 3 kids will be a college sophomore when I do.

  • David February 3, 2015, 7:51 am

    I got the same allocation, but I don’t think this is unusual. It is basically working like a fund. The .89% is not really high it is lower than almost all mutual funds and includes trading cost. I am not an expert but to me the fees should not a deterant, I was hoping to find more comments on the allocations.

    • Henry February 4, 2015, 7:31 pm

      Yesterday I wrote a comment about Personal Capital on the website donebyforty.com.
      I tried to get back into that website donebyforty.com today to see more comments.
      I did a search, but I accidentally went into this website, the Retireby40.org website.
      What’s funny is that almost all of the comments about Personal Capital
      by online posters on this website Retireby40.org were positive, while almost all of the
      comments about Personal Capital on the website donebyforty.com were negative.
      It can’t be a coincidence. Can anyone explain that?
      Could it be that the opening post on this website was very positive, so everyone else
      just followed suit? The opening post on the website donebyforty.com was neutral,
      but almost all the replies were negative.

      • retirebyforty February 5, 2015, 7:48 am

        I’m not really sure. I wrote this a while back when they were new so that might have been a factor. I like the free tools, but I didn’t sign up for the wealth management service. For my retirement funds, I’m going to stick with Vanguard.

  • jake February 20, 2015, 6:06 pm

    Spoke to one of their advisors today as part of the initial consultation and curious what they propose for a plan, specific stock and ETF choices, and more importantly what type returns they are getting their clients. I have a mixed bag of assets with Roth IRAs, coverdells for the kids, a 529, 401k, and an AMA. I use all individual stocks except for the 529 (Utah) and the 401k, and would be very happy to pay them .89% to beat the S&P consistently.
    Who is their current competition?

    • retirebyforty February 20, 2015, 9:05 pm

      You might want to check out Betterment and Wealthfront. They are a bit different and you won’t get a live advisor. Also, call Vanguard. They have a Personal Advisor service for a pretty affordable price. I think the cost is less than Personal Capital, but they will probably recommend Vanguard funds.

  • Andreas Mai May 7, 2018, 8:45 am

    Entrusting Personal Capital with our nest egg cost us years of retirement savings!

    You may say that it was our own fault not to catch Personal Capital’s abysmal investment performance earlier. However, allow me to share our costly lessons to help prevent others from losing money with Personal Capital:

    • Over the last 3 years, Personal Capital’s “smart portfolio management strategy” performed 60% worse than market.
    • Personal Capital’s “tax optimization” produced higher returns on our taxed account and lower returns on our tax deferred IRA account.
    • Personal Capital’s “lower fees” consumed 18% of the returns they delivered.

    During a turbulent time of job changes, founding our own company and multiple family health emergencies, we decided to entrust Personal Capital to manage our money. Personal Capital advertised a good story with a convincing webpage: “We act in your best financial interest and optimize risk & return on your behalf. We do this through our smart portfolio management strategy and Smart Weighting™ approach.”

    Our experience was much different and cost us dearly. From 2015 until we canceled our accounts in 2018, the portfolio Personal Capital managed for us earned 4.9% annually. This is significantly lower than the risk adjusted “moderate historic” ROI target of 8.3% Personal Capital advertised and even worse in one of the best bull markets for a long time that easily returned more than 12% each year during the same period.

    When we confronted Personal Capital with this significant performance gap, they responded that our “claim was without merit: As written in our “Client Agreement” [..], it is explicitly stated that you understand that (a) investment results cannot be guaranteed, (b) past performance may not be indicative of future results, and (c) your investment decisions on my behalf may be different than I or other investment managers would have made under the circumstances”.

    The objective observer may realize the irony of this response in one of the most bullish markets we had in years.

    In retrospect, we made another peculiar observation, the consequence of which we only now understand too well. Overall, Personal Capital has great analysis tools and a nice user interface. However, the key analysis tool that is standard with any other broker we worked with, is suspiciously missing on Personal Capital’s webpage: The portfolio performance compared to generally accepted benchmarks.

    After Personal Capital unduly delayed the immediate liquidation of our accounts we had requested, we transferred our accounts to another institution. As a result, we had to liquidate nearly 100 micro-positions ourselves, a time consuming and costly affair. Noteworthy, but in line with our overall experience, Personal Capital refused to reimburse us for the related transaction fees.

    However, our losses with Personal Capital did not end there. Personal Capital claims: “Tax optimization – We do this by applying tax loss harvesting, reallocating assets to tax-deferred accounts, and helping you realize higher yields in your retirement account”

    When we liquidated our underperforming IRA and taxed investment accounts, we realized that in addition to the abysmal underperformance, the gains had actually accumulated mostly on our taxed accounts, while the performance on the tax deferred accounts was even worse. Hence, in addition to losing years of retirement savings, we now have to bear the cost of Personal Capital’s failure to optimize and reduce tax.

    Adding insult to injury, we paid Personal Capital sizable fees for their abysmal investment performance. Personal Capital advertises: “We have much lower fees than traditional brokers”.

    18 Percent of the total return Personal Capital made for us was consumed by the fees Personal Capital charged us over the years. Bottom line, Personal Capital has a one-sided business model: They can invest their customer’s money anyway they like. They do not hold themselves accountable for their advertising and for the results of their investment strategy. They refuse and obfuscate any comparison of their investment performance with generally accepted investment benchmarks. Independent of investment performance, Personal Capital claims sizable service fees. Good deal for Personal Capital, an abysmally bad deal, at least for us!

    Our recommendation: Check the performance of your holdings with Personal Capital against the relevant market benchmarks today! Otherwise, you may end up losing like us.

    • retirebyforty May 8, 2018, 10:20 am

      Thank you for sharing. This is exactly why I recommend DIY investing. Nobody cares about your money more than you do.
      Personal Capital has great online tools for DIY investors, but I don’t know about their wealth management service.
      Although, to be fair. Many hedge funds under perform S&P500 over this period. That’s just how managed funds are. They spread out the risk and gain less in a bull market.
      It’s disappointing to hear that Personal Capital has such bad customer service, though.
      I’ll stick with Vanguard and use Personal Capital free tools.

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