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Personal Capital

January 24th, 2018 at 04:52 pm

I have a had a few phone consultations with a representative from Personal Capital. Of course they want me to sign up to have them manage my investments. The percentage is small, only 0.89% for up to $1 million then it goes down. Their asset allocation calls for some REIT's & gold, neither of which I'm sold on. Has anyone worked with them?

12 Responses to “Personal Capital”

  1. AnotherReader Says:

    The percentage of AUM is outrageous. Over time, their fees will cost you a significant percentage of your account growth. Study some basic investing principles, hang out at the Bogleheads site, and do this yourself.

    They have a nice free investment tracking program. Use that and skip the management fees.

  2. snafu Says:

    Another voice supporting AnotherReader's viewpoint. Personal Capital is likely a 'boiler plate' package created for all clients who meet listed target like age, income, initial sum to invest category, education level and where you touch their aggressive - conservative ratios. You will be paying about $ 8,500. and the sum that reduces your portfolio's progress.

    I hope you'll talk to one of the Vanguard representatives for their allocation suggestions for people of your age, initial sum to invest category, and where you are in risk ratio spectrum. Following conversation of Bogelheadslearning is a wonderful learning experience.

  3. PatientSaver Says:

    I would also steer clear of REITs and gold.

  4. Dido Says:

    As someone who works for an RIA (fee-only investment advisor): for just a tiny bit more (.11% for 1% AUM for the first million, typically going down afterward), you could get individualized retirement advice as well as free financial planning advice: retirement planning, insurance reviews, estate planning advice, educational funding planning, cash flow planning, etc. Plus, depending on the advisor, they might charge considerably less for what are considered "assets under supervision"--assets in your 401k/403b, 529--my company charges .35%. So you could get a *lot* more service for similar cost, rather than the "robo-advisor" approach. On that basis, not worth it.

  5. Terri77 Says:

    Thanks everyone for your responses. It sometimes helps to hear others' opinions to confirm your first thoughts. I do have a financial plan through a CFP at Vanguard & feel really good about it. I started to doubt myself when I spoke to this financial advisor, but will stick with our plan.

  6. AnotherReader Says:

    Paying 1 percent of AUM for "free" financial planning is a monumental waste of money. These fees act as a huge drag on your performance results. If you need financial advice, seek out the correct professional and pay an hourly rate for a couple of hours of their time. If you have a large enough portfolio, you can get a basic financial plan from Vanguard or Fidelity for free. Estate planning? An attorney needs to oversee this.

    Paying these parasites to "oversee" your assets in retirement accounts such as 401(k)'s and 403(b)'s is insane. Construct a simple portfolio of low cost index funds, contribute consistently, and skip the overpriced "advice."

  7. Dido Says:

    AnotherReader, admittedly, the financial planning advice provided by most RIAs is paid for by the AUM fee, unless the planner has a separate financial planning fee for additional services, and in that sense it is not free.

    A CFP(R) would never prepare an estate plan on his or her own. An estate planning attorney would be proper to consult and a CFP will have a network of vetted professionals to refer clients to. The role of a CFP can be to help coordinate between various "correct professionals." It is common for a client to go to an insurance agent and get advice about "investing" in whole life insurance, to a broker/dealer and get advice about investments, to an estate attorney and get advice to establish a trust, and meanwhile, nobody talks to the client about their plans for funding college for their children or provides a second set of eyes to review their property and casualty insurance.

    A CFP(R) (Certified Financial Planner) and/or an RIA (Registered Investment Advisor) is a *fiduciary* and that means that they have the client's best interest in mind, and what is in one client's best interest will not work for another because they have very different assets, risk tolerances, etc, and the advisor will understand this and try to coordinate what is best for the client to help the client reach his/her goals.

    Most "financial advisors" are *not* fiduciaries, which is why you hear so much in the news about the Department of Labor and the Fiduciary Standandard, which Obama pushed and Trump is trying to roll back, and most clients don't understand the difference between a broker/dealer and an RIA and the different standards governing these advisors.

    Not every financial advisor is a "parasite" and the client's goal is not always just to accumulate as much as possible with the least risk necessary. People go through different life stages, and not every stage involves accumulatation. A financial advisor can be a trusted advisor who helps manage life problems. I've worked with advisors who have figured out a plan for a middle-aged couple to be able to step back from work to help their terminally ill daughter through the end of her life, who have purchased cars as the authorized agent of busy clients, who have helped terminally ill clients get their affairs organized and have helped the survivors afterwards, who have accompanied clients to the Register of Wills to help them get started on the probate process, who have found exterminators for clients with a pest problem and reputable personal organizers for clients in need of that service, all without getting paid a separate fee.

    And particularly, when the market has turned south for a prolonged time, as it did in 2008 and the years after, advisors have helped clients stay the course when their own instinct would be to sell and to do better with their portfolio returns in the end.

    As it says, for everything, there is a season. This might not be the season for you to seek the advice of an advisor, but to flat out label all financial advisors as "parasites" is unnecessarily harsh.

  8. AnotherReader Says:

    Let's look at the withdrawal/decumulation phase of life that is retirement. The rule of thumb for a diversified portfolio is that if you withdraw four percent of the portfolio per year, it is very likely your portfolio will last at least 30 years. Hence, the term "Safe Withdrawal Rate (SWR)."

    Many if not most financial advisers like to put their clients into actively managed funds. The expense ratios the funds charge are in addition to what your adviser charges, which is typically the one percent cited. Actively managed funds typically charge around one percent of your investment for managing the fund. More for foreign or specialty funds, less for index funds. Effectively, you are paying two percent, or to your adviser. Another way of looking at this is you are withdrawing for expenses, not four, and not a safe withdrawal rate.

    There are graphs illustrating the huge percentage of returns lost over time if two percent of your portfolio is siphoned off annually by the financial adviser and the products s/he uses. It's hundreds of thousands of dollars, assuming historical returns and a couple fully funding all available retirement accounts.

    If you feel you need professional help, pay a fee-only financial planner for their time. Get recommendations for professionals in other areas to assist you. Pay them for their time. Use the services that Fidelity and Vanguard offer for free. Don't allow someone to siphon off 25 percent or more of your portfolio returns over time because they hold your hand.

  9. AnotherReader Says:

    Well, I guess the bold tags don't work. Skip the above post. Sorry...

    Let's look at the withdrawal/decumulation phase of life that is retirement. The rule of thumb for a diversified portfolio is that if you withdraw four percent of the portfolio per year, it is very likely your portfolio will last at least 30 years. Hence, the term "Safe Withdrawal Rate (SWR)."

    Many if not most financial advisers like to put their clients into actively managed funds. The expense ratios the funds charge are in addition to what your adviser charges, which is typically the one percent cited. Actively managed funds typically charge around one percent of your investment for managing the fund. More for foreign or specialty funds, less for index funds. Effectively, you are paying two percent, or half of your safe withdrawal rate to your adviser. Another way of looking at this is you are withdrawing six percent of your portfolio for expenses, not four, and not a safe withdrawal rate.

    There are graphs illustrating the huge percentage of returns lost over time if two percent of your portfolio is siphoned off annually by the financial adviser and the products s/he uses. It's hundreds of thousands of dollars, assuming historical returns and a couple fully funding all available retirement accounts.

    If you feel you need professional help, pay a fee-only financial planner for their time. Get recommendations for professionals in other areas to assist you. Pay them for their time. Use the services that Fidelity and Vanguard offer for free. Don't allow someone to siphon off 25 percent or more of your portfolio returns over time because they hold your hand.

  10. Dido Says:

    I'm glad AnotherReader acknowledges that fee-only financial planners have their value. And for Terri, it certainly sounds as though the advice to stick with a free source of advice and to study and ask questions at Bogleheads certainly sounds appropriate.

    While many advisors use active management for targeted parts of the portfolio, typically those where markets are less efficient, it is also the case that most RIAs also use a broad base of passive index funds.

    "Financial advisor" is actually a meaningless term. ANYONE can call themselves a financial advisor, and our society does not educate people on the differences between advisors of different stripes (CFP, ChFA, RIA, B/D, LUTCF, etc, etc). I had to be in the industry for six months before I even began to understand the differences. Broker/dealers *will* more often steer one to higher fee funds--it was the unsatisfactory experience of dealing with an Ameriprise advisor 14 years ago that got me thinking "I could do a better job of this myself," which in turn started my avidly reading the Bogleheads board and on the transition from teaching to my current career in the industry.

    There is a lot of wisdom in the advice AnotherReader says, if painted in brushstrokes that are overly broad. Many basic services can be gotten for low-cost or free, and certainly one should avail oneself of that, in particular as you are first building up your portfolio.

    However, investment planning is NOT financial planning; it is a tiny piece of that pie (only one of seven courses in the basic CFP curriculum). And while specialists indeed have their place, there may also be a place for someone who can help you see the whole picture and put things into context when the specialists, as is not infrequently the case, end up giving conflicting advice. Too many people, in that case, throw up their hands and don't decide at all.

    And while a "one-off" fee-only plan may help you answer a particular question ("should I cash in my whole life insurance policy to pay for new windows?"), much of the value in an advisory relationship happens when you meet with an advisor year after year. A financial plan is NOT a static document. While you can indeed pay for a particular piece of a plan, comprehensive, holistic financial planning is an ongoing process, and a lot can get lost when people get too stuck on that binder that they paid one time to receive. Lives change, the economy changes, and what might have been an adequate answer five years ago might not be right now.

    There are people and/or phases of life where an advisor--one who knows you over a period of years, knows your quirks, preferences, strengths, weaknesses, concerns--does add value. As Warren Buffet said, "Price is what you pay. Value is what you get."

    For some clients, not for everyone, there may value that is worth it from having a trusted advisor who invests not only their assets but in their lives.

  11. AnotherReader Says:

    To understand how much the 1 percent you are paying to have someone hold your hand, read this article.

    https://www.nerdwallet.com/blog/investing/millennial-retirement-fees-one-percent-half-million-savings-impact/

    Is this hand holding worth half a million dollars or 25 percent of your portfolio over a 40 year investment horizon?

  12. terri77 Says:

    I will stick with the plan the CFP from Vanguard & I came up with. I also have quarterly meetings with my local Bogleheads group. They give great feedback & I always learn a lot from the meetings.

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