Robo-advisors and digital wealth managers are becoming increasingly popular with people who appreciate an automated or hands-off approach to investing and financial planning. There are several online financial software platforms to choose from that fall into these categories, each with various benefits. In this article, find out the main differences between two frontrunners: Personal Capital vs Wealthfront.
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Personal Capital is a digital wealth manager that provides a comprehensive investment management service as well as a suite of free financial planning tools. These online tools allow users to see all their accounts in one dashboard, calculate their net worth, track their spending and set a budget, manage their investment accounts and plan for retirement.
Investors with less than $200K in investable assets can access a tax-efficient portfolio of ETFs and support from a team of advisors. For investors with more than $200K in assets, they can get access to two dedicated financial advisors, individual stocks and ETFs, full financial planning/support and a complete tax optimization strategy.
Personal Capital’s investment approach is around low-cost ETFs for their basic investment service, and in respect of their wealth management and private client packages, a broad range of individual securities are included as well as ETFs. They use a Smart Weighting™ method to create a diversified, well-balanced portfolio.
Anyone can sign up to Personal Capital’s financial tools completely free of charge, with no obligation to become an investment client. For those who do want to invest, Personal Capital’s investment management fees are straightforward. They charge a monthly fee on a tiered scale, based on a percentage of the assets managed, as follows:
- $1 million or lower – 0.89%
- Above $1 million and up to $3 million – 0.79%
- Above $3 million and up to $5 million – 0.69%
- Above $5 million and up to $10 million – 0.59%
- More than $10 million – 0.49%
Wealthfront is an online investment manager and net worth tracker (this platform is widely known as a robo-advisor). It provides automatic portfolio rebalancing, making it easy to invest, even for beginners.
Users complete a short questionnaire to determine investment goals and level of risk tolerance. Wealthfront then devises a portfolio based on the answers.
Their investment strategy revolves around passive investing through a diversified portfolio of low-cost ETFs. These ETFs are broken down into different asset classes including U.S. stocks, emerging markets, real estate, bonds and more.
With this type of investment strategy, users can simply “set and forget” their investment choices, or check their portfolio balance whenever they like.
Wealthfront’s software is tax-efficient, executing trades strategically to help reduce the amount of tax users will have to pay. Wealthfront stipulates an account minimum of just $500, and regarding fees, they charge a low annual fee of 0.25% and their ETF expense ratios average 0.08%.
Wealthfront’s Path tool allows for financial planning, such as saving to buy a home, for retirement, or saving for a child’s college fund – for example, users can link a 529 college-savings account to Wealthfront (or parents may open one through the platform), and then see projected costs for college and a forecast for monthly savings.
Personal Capital seems to target two types of audiences; high-level investors and individuals that might not necessarily have a substantial investment portfolio but who can make use of their free financial management tools.
Wealthfront, on the other hand, offers investment services that are accessible for most people. There is a minimum account requirement of $100,000 with Personal Capital, yet just $500 with Wealthfront.
This low minimum, coupled with Wealthfront’s low-cost passive approach to investing make them an excellent choice for armchair investors and those who are just starting out in investing and may not have much experience or money to play around with for their initial investments.
2. Service level
Personal Capital’s investment service offers advice on 401Ks, whereas Wealthfront does not. They have also introduced a Socially Responsible Personal Strategy so that users with ethical values can invest in companies they believe in or are passionate about.
Individuals with more than $200,000 in assets may also appreciate a more diverse managed portfolio and the comprehensive financial planning service that comes with Personal Capital’s wealth management and private client programs.
3. Customer service
Another critical difference between these two platforms is the level of customer support available for users. At Personal Capital, real advisors are on hand to discuss queries and offer advice on investments, whereas Wealthfront is a robo-advisor with no human guidance.
With that said, those who need more complex advice on retirement, estate planning, or other saving and investment goals may prefer the human element that is available with Personal Capital.
*The details presented above are correct at the time of publishing.