Thanks to technology, more people than ever are turning to digital tools to build their investment portfolios. Personal Capital and Betterment are two of the most popular digital wealth management tools on the market.
While they have some similarities, Personal Capital and Betterment have some critical differences, including the services offered, the accessibility of personalized support, and who they are best suited for.
In this comparison, we’ll break down all the similarities and differences of Personal Capital and Betterment and help you decide which is right for you.
About Personal Capital
Personal Capital is a digital wealth management company that offers a variety of financial services. While Personal Capital does offer a financial dashboard with free financial tools, this comparison will focus on the company’s wealth management services.
Personal Capital was founded in 2009 with the mission of giving people a better and more personal way to invest and manage their money.
When you sign up for Personal Capital’s wealth management services, you’re matched with a financial advisor who helps you develop a customized investment strategy based on your financial goals. You can access your hands-on advisor for answering questions, providing advice, and checking to see if your portfolio is still suited for your goals.
Betterment is a robo-advisor that uses computer algorithms to build your investment portfolio. The company was founded in 2008 with the goal of making money management more efficient for consumers by taking advantage of technology.
When you sign up for Betterment, you answer a series of questions about your current financial situation, your financial goals, and your time horizon (aka when you plan to use the money you’re investing). Betterment offers two tiers for investing; the premium fee-based version provides access to certified financial planners.
Personal Capital vs. Betterment: Products and Features
Types of Accounts
Personal Capital and Betterment both offer a wide range of accounts to choose from to correspond with your financial goals.
First, Personal Capital offers taxable investment accounts, trusts, and retirement accounts, including Roth, traditional, rollover, and SEP IRAs. Personal Capital also has a flexible cash account. Personal Capital advises on 401k plans but doesn’t offer them directly.
Betterment has many of the same options as Personal Capital, such as taxable brokerage accounts, trusts, and IRAs. The company also offers a 401k option for employers to provide to their employees. Finally, Betterment offers a checking account and a high-yield savings account.
Betterment doesn’t require a minimum investment for its digital investing tools, but you’ll need at least $100,000 under management for the premium plan, which allows you access to financial advice from financial planners.
Similarly, Personal Capital has plenty of tools — including its cash account — that are free to use without a minimum balance. But for the investing services, you’ll need at least $100,000 assets under management.
One of the stand-out features of Personal Capital is that each client has access to a hands-on financial advisor. All advisors are held to a fiduciary standard, meaning they are required to act in your best interest. Advisors also aren’t paid on commission.
“I have somebody on my side who listens, responds, and really cares. She does her homework. When we get together, we usually have a 30- to 45-minute conversation, but she’s already thought deeply about what we’re going to talk about. She understands the idiosyncrasies of my financial life.”
— Marla S., a Personal Capital client since 2020 in an unpaid testimonial
When you sign up for Personal Capital’s investment services, your advisor will discuss your financial goals with you and use that information to work with the portfolio management team to develop a customized investment plan.
Both Personal Capital and Betterment help clients to optimize their tax strategies. Both companies use tax-loss harvesting, which is a way of offsetting taxable gains with taxable losses so you aren’t stuck with a large tax bill at the end of the year.
Because Personal Capital has a portfolio management team working on your portfolio, the company also takes additional steps to help reduce your tax bill, such as placing higher yield securities in tax-sheltered accounts.
Both Personal Capital and Betterment use rebalancing to help your portfolio remain diversified and at your target asset allocation.
When you sign up for Personal Capital, your financial advisor will ask questions about your financial situation and goals and use that information to craft a customized investment portfolio. And because you have an ongoing relationship with your advisor, your portfolio can be adjusted as your goals and investment needs change.
Betterment’s robo-advisor uses a set of questions to build a portfolio based on your time horizon.
Socially Responsible Investing
Socially responsible investing (SRI) is a way of building your investment portfolio in a way that aligns with your personal values. SRI goes hand-in-hand with ESG — Environmental, Social, and Governance. ESG represents the pillars used to evaluate whether a company is considered a socially responsible investment.
SRI portfolios include companies that have socially responsible views on climate change, sustainability, diversity, labor relations, management structure, and more. Socially responsible investing is becoming more prevalent as consumers learn more about the importance of voting with their dollars.
Both Personal Capital and Betterment offer socially responsible investing strategies, allowing their customers to build portfolios that align with their values.
“It was so easy to opt into something that could have such a big impact,” said Katie Z., a Personal Capital client since 2019 in an unpaid testimonial. “I felt in good hands with people who specialize in this. It was a relief to invest in SRI without having to spend all the hours researching it myself.”
Personal Capital vs. Betterment: Pricing and Fees
Both Personal Capital and Betterment charge a fee that is a percentage of assets under management.
Personal Capital’s fee starts at 0.89% for investment portfolios of less than $1 million. Once you exceed $1 million under management with Personal Capital, the fees are:
- 0.79% for the first $3 million
- 0.69% for the next $2 million
- 0.59% for the next $5 million
- 0.49% over $10 million
Personal Capital’s percentage-based fee covers all of the services the company has to offer, including a financial advisor, financial planning services, tax strategy, rebalancing, and more.
Like Personal Capital, Betterment also charges a percentage-based fee on your assets. The company charges an annual fee of 0.25% for its digital plan. This plan only includes access to Betterment’s digital investing tools.
For customers with at least $100,000 under management, Betterment also has a premium plan, which has a fee of 0.40%. This plan comes with the same digital investing tools as the lower plan, along with unlimited calls and emails with the company’s CFP® professionals.
No matter which Betterment plan you choose, your portfolio is still built by the robo-advisor.
How Are They The Same?
Personal Capital and Betterment have one very important characteristic in common: They both provide for a hands-off investing experience. Betterment’s robo-advisor chooses your investments automatically based on your goals and time horizon. And with Personal Capital, the portfolio management team uses technology to manage your portfolio. In both cases, investors don’t have to worry about choosing individual investments themselves.
How Are They Different?
The most important difference between Personal Capital and Betterment is that Betterment relies entirely on a computer algorithm to build your investment portfolio, whereas Personal Capital’s investment portfolio management team uses Smart Weighting to give you a diversified portfolio based on your goals.
Unlike many online wealth management companies, Personal Capital combines the advantages of hiring a financial advisor with the low fees that come with robo-advisors. You get the best of both worlds.
Who Should Use Betterment?
Betterment is well-suited to investors who are just getting started. The service doesn’t have a minimum balance requirement, meaning you can get started with just a small deposit. You’ll have access to plenty of features like tax-loss harvesting and automatic rebalancing. And because a computer algorithm builds your portfolio for you, you don’t have to worry about choosing your own investments.
Who Should Use Personal Capital?
Personal Capital is another great option for anyone who wants help building and managing their investment portfolio. But Personal Capital is ideal for those who want to take advantage of more personalized features like a financial advisor and financial planning.
Because of the minimum balance requirement, Personal Capital’s wealth management services are better-suited to individuals who are a bit further along in their investing journey and who are ready to take their financial goals to the next level.
The client testimonials are representative of the clients’ views at the time they were collected. This comparison is intended for general informational purposes only, and does not constitute a guarantee of services nor is it all inclusive. Investors should perform individual research before investing. Personal Capital compensates Erin Gobler (“Author”) for providing the content contained in this blog post. Compensation not to exceed $500. Author is not a client of Personal Capital Advisors Corporation. The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. You should consult a qualified legal or tax professional regarding your specific situation. Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.