Personal Capital and Wealthfront are two of the most popular digital investing tools available. They have a lot in common, including that they take on the work of managing your investment portfolio, all for a low annual fee. But there are also some key differences between the two, including the level of hands-on service and the way they choose your investments.
Wondering which investment tool is right for you? We’re breaking down the similarities and differences between Personal Capital and Wealthfront to help you decide which is best to reach your financial goals.
About Personal Capital
Personal Capital is a digital wealth management company that provides a variety of online financial tools. Personal Capital offers a suite of free financial tools, including a net worth tracker, savings planner, and retirement planner. The company also offers wealth management services, which is what we’ll be focusing on for this comparison.
Personal Capital’s wealth management services include a relationship with a dedicated financial advisor. When you sign up, you’ll answer a variety of questions so your advisor can evaluate your financial situation and recommend an investment portfolio that fits your needs.
Personal Capital’s investment team takes a hands-on approach and guides you through each phase of your financial journey. They monitor your portfolio, provide financial advice, and connect you with the financial resources you need.
Read More: Personal Capital Client Stories
Wealthfront is a digital investing tool that uses computer algorithms to build an investment portfolio based on your financial goals. In other words, Wealthfront is a robo-advisor.
When you sign up for Wealthfront, you’ll answer a few questions about your financial goals and your time horizon. From there, the algorithm will design a suitable portfolio for you using 11 global asset classes. Your portfolio automatically adjusts with your time horizon. And as your goals change, you can update your settings in Wealthfront, and your portfolio will change accordingly.
Personal Capital vs. Wealthfront: Pricing and Fees
Personal Capital has a tiered fee schedule that’s a percentage of your assets under management. For customers with between $100,000 and $1 million under management, the fee is 0.89% annually. For customers with $1 million or more invested, 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% for more than $10 million
Because Wealthfront has just one automated investing service, it has one low percentage-based annual fee of 0.25%. This lower fee reflects the fact that Wealthfront doesn’t provide human financial advisory or planning services.
Personal Capital vs. Wealthfront Services and Features
Types of Accounts
Personal Capital and Wealthfront both offer plenty of accounts for customers to choose from. Both services offer taxable investment accounts; retirement accounts such as Roth, traditional, rollover, and SEP IRAs; and cash accounts. Wealthfront also offers 529 education plans, while Personal Capital offers trusts and other estate planning services.
To open an investment account with Wealthfront, you’ll need at least $500. Personal Capital, on the other hand, requires a minimum investment of $100,000. Personal Capital’s other tools, including its financial dashboard and cash account, can be accessed with no minimum deposit.
One of the areas where Personal Capital really shines is with the personalized financial advice you’ll receive. When you sign up for wealth management services, Personal Capital gives you access to a financial advisor who offers financial advice and who you can go to with questions. And if you have more than $200,000 under management, you have access to an even larger team of financial specialists to offer advice.
Wealthfront, on the other hand, doesn’t offer human financial advisory services. It claims to offer financial planning and expertise, but it really comes in the form of recommendations from Wealthfront’s computer algorithm.
Both Personal Capital and Wealthfront use a tax-loss harvesting strategy, which is where you offset capital gains with losses to reduce your tax bill at the end of the year. And because Personal Capital has hands-on advisors, they can offer even more customized tips on how to reduce your tax burden. For example, if you own both taxable and tax-advantaged accounts, Personal Capital generally places higher-yield securities in your tax-advantaged accounts to potentially reduce the tax impact.
Rebalancing is an investing strategy where you sell certain overweight assets in your portfolio and repurchase underweight assets to maintain your target asset allocation. This strategy attempts to keep your portfolio well-diversified.
Wealthfront’s investment portfolio is managed by a computer algorithm based on your financial goals and time horizon. But because there’s no human overseeing it, it isn’t really customized for you.
Personal Capital has financial advisors that personally meet with you to discuss your portfolio allocation. First, they help build a customized portfolio based on your specific situation. Then, ongoing monitoring is put in place to make adjustments as your goals and investment performance change.
Socially Responsible Investing
Socially responsible investing is a way of investing in a way that aligns with your values. Socially responsible investing has become increasingly popular, as consumers today expect more from companies in terms of social and environmental impact.
Socially responsible investing takes into consideration factors such as environmental impact, social impact, and corporate governance. Examples of socially responsible investing could include investing in a company that promotes diversity while avoiding companies that produce firearms or that have harmful environmental policies.
Both Personal Capital and Wealthfront offer socially responsible investing options, so you can have a portfolio that truly aligns with your values.
Personal Capital vs. Wealthfront: Customer Service and Accessibility
One of the most important differences between Personal Capital and Wealthfront is how they serve their customers.
When you sign up for Personal Capital, you get access to a financial advisor. You receive unlimited support and can reach out for financial advice or questions about your portfolio at any time. More than just customer service, Personal Capital’s wealth management style allows you to be a part of your own investing journey as much or as little as you want. Your advisor can walk you through your portfolio and help you understand what you’re invested in and why.
Wealthfront is a robo-advisor, meaning there isn’t a person on the other end of the relationship. The company has customer support available by phone or internet. Phone support is available during business hours, and emails are answered within one business day.
Who Should Use Wealthfront?
Robo-advisors help to make investing more accessible for people who can’t afford a financial advisor. Because of that, Wealthfront is well-suited to new investors who are just learning the ropes. The company offers a low minimum investment, low annual fees, and a hands-off investing approach that make it easy to get started.
Who Should Use Personal Capital?
Personal Capital has a minimum investment of $100,000. As a result, it’s designed for investors who are a bit further along in their investing journey. Clients get access to a financial advisor who works with them on an ongoing basis, making Personal Capital a great choice for those with more complex financial situations. You get the benefit of a hands-on financial advisor, with the perk of low annual fees you often see with digital tools.
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.