When it comes to investment providers, a lot has changed in a very short amount of time.
Tech companies are changing the way we invest. While these new firms have made it easier, they’ve also given us a lot more options.
Today I want to look at two of the most popular tech companies Betterment and Personal Capital.
We will start with a breakdown of Betterment vs. Personal Capital with regards to facts. Then, I’ll provide further insight into which one might be best for you.
Betterment vs. Personal Capital: Facts
Let’s start with some facts, as these two firms have their differences:
- Betterment: $0
- Personal Capital: $100,000
Access to Advisers
- Betterment: Yes but optional
- Personal Capital: Yes but requires
- Betterment: .25% for DIY investors to .5% for unlimited access
- Personal Capital: Starts at .89%
- Betterment: Yes
- Personal Capital: Yes
Tax Loss Harvesting
- Betterment: Yes
- Personal Capital: Yes
Situations I’d Recommend Betterment
One of the main differences between Betterment vs. Personal Capital is the account minimums.
Personal Capital requires a $100,000 initial deposit.
Another situation I’d recommend Betterment to is someone who has both a good chunk of investments in a IRA and a taxable account. Betterment’s Tax Coordinated Portfolio, which balances your overall asset allocation between your IRA and taxable account to minimize taxe is quite unique.
I simply couldn’t do as good as job as Betterment when it comes to minimizing taxes between my IRA and taxable account. This to me is a fee worth paying for.
Next, up is their team of advisers.
Betterment offers an annual call with a CFP®, plus additional account monitoring for a .40% fee. The minimum amount you must invest is $100,000.
For a .50% annual fee, you get unlimited access to their team of CFPs®. The minimum account balance here is $250,000.
For those who have a lot of questions or situation is a bit more complex, this advice is affordable.
Situations I’d Recommend Personal Capital
Most everyone will benefit signing up for a free account with Personal Capital. Their financial dashboard, tools, and calculators are first class.
This service is free to use, with no obligation.
The more important question however is letting Personal Capital manage your investments.
Is it worth it?
Personal Capital has a solid investment strategy, based off an index approach.
They allocate your investments according to the goals you set. They’ll take care of the rebalancing and minimizing your taxes.
This portfolio management services is much like other robo-advisers.
But Personal Capital is a hybrid robo-advisor, financial service firm. Besides the portfolio management, you’re getting a financial adviser to work with.
Foregoing a financial adviser for a reduced fee isn’t an option with Personal Capital, as it it with Betterment.
Personal Capital then offers three levels of financial service, based on the amount of your investable assets:
Quality, customized financial advice can be worth it. But it comes with a cost, which Personal Capital breaks down by:
We have one simple fee based on a percentage of assets managed. Wealth management, trade costs and custody are included – you do not pay trade commissions. We bill monthly, in arrears, and routinely help clients with financial planning and 401(k) allocations at no charge. Our fee schedule is as follows:
- First $1 million:0.89%
For clients who invest $1 million or more:
- First $3 million:0.79%
- Next $2 million:0.69%
- Next $5 million:0.59%
- Over $10 million:0.49%
So, first things first, if you’re not looking for a financial adviser–Personal Capital isn’t for you. It doesn’t make sense to pay the fees, for something you are not going to use.
Say you want a financial adviser, you’re looking at:
- a) Personal Capital – Fees that start at .89% and go down based on total assets
- b) Betterment – Fees that max out at .50%
It’s true that you pay for what you get. So, paying .39% more for quality financial advice can make sense.
While I don’t have first-hand experience with each of the firms, based on their service descriptions, I feel their services are quite equal. You pay for good advice, with a professional.
But nothing to me says it’s worth paying .39% more.
In the end, if you’re looking at a choice between Betterment vs. Personal Capital, they are both quality choices.
I’d give an edge to Betterment based on the lower fees.
But a lot will come down to the relationship you build with your financial adviser and the value you feel they can provide to your unique situation.