• Personal Capital News

Humans, Technology and Better Financial Lives

February 23, 2018 | Jay Shah

Today’s investor has more options than ever when it comes to financial advice — apps, advisors, brokers, robos, blogs … the list goes on. And in an era where traditional brokerage and advisory firms are adding technology, and new contenders like robo-advisors are adding people, I’m often asked how Personal Capital fits into the mix.

It’s a great question, and one where I want set the record straight: Personal Capital is a digital wealth manager. We’re not a traditional advisor, nor are we a robo-advisor. In fact, for years we’ve communicated to our clients, users, and the general public that we are fundamentally different from the robo-advisor universe, and yet we continue to get lumped into that category by folks who are unfamiliar with our offering. That’s unfortunate, but often it comes from a limited understanding of what can be a pretty complex – and often confusing – industry.

The Meaning of Digital Wealth Management

We pioneered digital wealth management in 2009, and our mission is to create better financial lives through technology and people. Both are important, and each reinforces the other. We provide a combination of the best online financial tools available, and the personal touch of skilled, human financial advisors. Robos, on the other hand, are primarily driven through technology, with few if any human advisors. Call us a hybrid, even call us bionic, but don’t call us a robo.

To be clear, robos are often a fine solution for smaller investors, or those with uncomplicated financial lives. In many ways, they are creating accessible and affordable advice for a cohort of investors who were previously left entirely on their own. That’s admirable and is a great example of capitalism at work. On the other hand, this type of advice is usually insufficient for investors with larger portfolios or more complex financial planning and tax strategy needs, and that’s where Personal Capital comes in.

Serving America’s Underserved Mass Affluent Investor

Mass affluent investors currently make up over one-quarter of U.S. investing households and over half of the investable assets held in this country. Like a middle child, this segment is caught between two extremes, and often woefully underserved. They’re typically not eligible for or interested in white glove concierge services from traditional wealth management firms with face-to-face, brick and mortar, low-tech platforms. They’re also not part of the mass retail segment – those with relatively simple finances, who are often met with products from retail brokers and robo-advisors through simple ETF or mutual fund portfolios.

When we set out to solve this problem, we knew the starting point was killer consumer-facing technology. We needed to provide engaging tools to help investors fully examine their entire financial lives (not just their investment portfolios) in one place: banking, credit cards, mortgages, 401ks, 529s, brokerage accounts. Our core customer is in their 30s, 40s, or 50s, with 15-plus financial accounts and accumulates a complex financial life. To effectively advise them, our advisors need a holistic view of their entire situation. We allow clients to quickly and easily answer complex questions like: What is my net worth? Am I diversified enough? What am I paying in investment account fees? Should I be saving more and spending less? The tools that answer these questions are the same tools that our advisors use in conversation with clients about their long-term financial strategies.

With connectivity to all of their financial accounts in one dashboard, and with the analytics our charts illustrate, our clients can easily track their cash flows and see how their spending and savings goals are paving the way to retirement and beyond, while working with an advisor to customize an investment strategy.

Fiduciary Means Customer-Centricity and Trust

While we are not a robo, one thing we definitely are is a fiduciary. Unlike many robos, we are a pure fiduciary, meaning by law we always act in our customers’ best interest, not our own. We’re dealing with people’s life savings and long-term financial goals, so putting them first is something we don’t take lightly. Investors should always seek out a fiduciary when selecting a financial advisor because fiduciaries cannot recommend an investment product that isn’t right for the customer’s financial situation in order to put more money in their own pockets, or charge hidden fees. Operating as a fiduciary gives our advisory force the peace of mind that they are doing what is right.

Personal Capital Since Inception

Today we have over 1.6 million users with visibility into $500 billion in consumer finances on this free platform. Our core customer logs in 15-20 times per month and only has to remember one single password to see all of their financial accounts. They come to us to understand where they stand today, where they’re headed and what’s possible for their financial future. It’s become an indispensable part of their financial lives.

As or more important than the technology, our advisors and CFPs bring clarity and confidence into our clients’ complex and frequently chaotic financial lives. Our advisory force serves clients with over $6.5 billion in assets. We offer holistic financial planning, reaching far beyond the basic investment portfolios offered through robo-advisors and fund distributors. Our average client has more than $440,000 in a custom portfolio implemented across both taxable and tax deferred accounts, with tax optimization as a primary goal. More than 40% of our assets come from relationships larger than $1 million.

Conversely, most robo-advisors and retail brokers manage portfolios with assets of less than $100,000 on average, with many managing less than $50,000 in assets per client. They often manage a single account in an ETF portfolio, mapping to their clients’ more simple needs. As I mentioned previously, that’s perfectly adequate for many, but larger investors deserve and should expect more.

The Bottom Line

We believe – and we are proving – that digital wealth management is the future for investors with complex financial lives requiring sophisticated solutions. With the best technology available, and human advisors to guide them towards their goals, Personal Capital clients have the clarity and confidence they couldn’t get anywhere else.

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