Personal Capital is a digital asset management service that offers investment advisory services to its clients. It also provides an online dashboard, making it easy and secure to manage all aspects of your finances, from saving money in banks to getting advice on what accounts you should open.

The personal wealth management company was founded by Bill Harris, a former PayPal and Intuit chief executive. Today, Personal Capital is considered one of the top online financial advisory services and has multiple offices across the US.

Personal Capital Fees

Who Is Personal Capital For?

Personal Capital is for anyone with a balance of $100k or more and who wants to invest their money, grow it by minimizing taxes and fees while maximizing returns.

The types of investors Personal Capital is most suitable for are:

High Net Worth Investors

Since Personal Capital requires a minimum balance of $100k, it is most suitable for high net worth investors. High net worth individuals can benefit from a dedicated financial advisor for their money while investing in private equity opportunities.

Socially-Minded Investors

Personal Capital is also suitable for those who want to invest their money and be socially responsible. It offers unique portfolios that give you access to the best investments aimed at creating a more sustainable future, such as energy efficient companies and organic food producers.

Retirement Investors

For retirement investors, Personal Capital provides free software tools and tax optimization strategies designed with one main goal: helping individuals maximize returns while minimizing taxes in every phase of life. This way, they can make sure they have enough saved up by the time they retire so that they never have to worry about outliving their savings again.

Hands-Off Investors

Personal Capital is an excellent choice if you want to invest your money but don’t have the time or expertise. The fees are on the higher side compared to other investment advisors. Still, they guarantee that their advice will earn you more than what it costs and offer personalized financial planning and ongoing support from dedicated professionals.

Complex Financial Situations

Personal Capital is suitable for anyone with a complex financial situation. They can help you manage your net worth by consolidating all of your accounts, investments, and assets into one place, making them easier to understand and optimize.

In addition, access to financial advisors can bring clarity to your overall financial situation. If you have a lot of assets but are not sure how to manage them, Personal Capital can help by providing professional advice on the best way for you to invest or save money to reach your personal goals.

Investors Who Want To Track Daily Financial Accounts

Suppose you are looking for a way to track your daily financial accounts. In that case, Personal Capital provides its clients with free real-time information on all of the spending and transactions that happen across their different bank and credit card accounts. This way, they can make sure they know precisely where every dollar is going, which will help them better manage finances.

Inquisitive Investors

For investors interested in many different financial products and want to find out about new ones as soon as they hit the market, Personal Capital is perfect for them.

They have access to many investment opportunities across all types of assets classes, including ETFs from most significant companies. In addition, Personal Capital produces many white papers, reports, and industry updates that can help investors stay ahead of the curve.

How Much Does Personal Capital Charge?

As you might expect from a service that pairs you with a dedicated financial advisor who has in depth knowledge of your personal circumstances, pricing and account minimums are higher than at rivals like Betterment and Ellevest.

Annual fees range from 0.49% – 0.89% depending on how much capital you invest. Deposit $100,000 and you’ll pay the higher amount; the more you invest the bigger the fee break.

With a high minimum of $100,000 to get started, not everybody will be a fit for Personal Capital but even if you don’t qualify for money management services, you can still download the free Personal Capital app.

It ranks among the very best personal finance apps and helps you to easily track income, spending, and net worth.

If you want the best of both worlds: automated investment management plus human advisors who know your financial situation intimately, Personal Capital is virtually unmatched.

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How Does Personal Capital
Make Money?

When you invest up to $1,000,000, you will be charged a management fee of 0.89%. For example, a client investing $100,000 would pay $890 per year.

For investors with larger account sizes, fee breaks are offered and drop as low as 0.49% for “whales” who invest $10,000,000 or more.

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How Personal Capital
Invests Your Money

Personal Capital incorporates the research of Nobel Prize Winner in Economics, Harry Markowitz, and behavioral finance expert, Shlomo Benartzi, to create an asset allocation formula called Smart Indexing^TM that is designed to boost returns and lower risk compared to the S&P 500.

Smart Indexing^TM is applied to portfolios with greater than $200,000 invested. (Elsewhere, Smart Indexing is referred to as Smart Beta)

The investment method is designed to increase returns and lower risk by allocating equally to all sectors, as opposed to mirroring the S&P 500.

In back-tested studies, the results show returns outperformed by 1.5% annually using Smart Indexing^TM  and reduced volatility compared to investing only in the S&P 500.

The weighted average expense ratio of a portfolio of exchange-traded funds in which assets are invested is a very reasonable 0.09%.

Personal Capital Experts

In addition to providing an online dashboard for managing your finances, Personal Capital also offers advice from experts on investment portfolios based on each individual need as well as risk tolerance levels.

It also helps you build a digital wealth plan according to your specific goals, such as saving enough money for college tuition, planning their investments, tracking their net worth, managing expenses, budgeting for goals, and monitoring investment options.

Personal Capital leverages modern portfolio theory and the effects of correlation and diversification to create a personalized plan for each client. The company also gathers information from other sources such as 401(k), IRA, brokerage accounts, and insurance policies to help clients achieve their goals.

Review Personal Capital: Free Tools

You can use Personal Capital’s free money tracking and management tools without cost. They provide valuable data, such as net worth and expenses. You can also visualize how you spend money each month, what income sources are bringing in the most revenue, and how much cash flow is available to invest or save.

The money management & long term financial tools available include:

Net Worth Calculator

The net worth calculator allows you to track your assets and liabilities over time. It helps you understand how much money is being generated by the investments or holdings that you own and what portion of your net worth reflects cash savings.

Personal Capital also provides steps to how you can improve your net worth, like setting up an automatic savings plan, paying down debt, and investing in tax-deferred accounts.

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Cash Flow Analysis

Cash flow analysis allows users to understand their cash position by using data collected from all transaction history linked with bank accounts, credit cards, and investment portfolios added to the system through connections to third-party providers.

Users will be able to see which transactions are complete first in terms of priority, giving them a clear idea of how much cash they have available in the immediate future.

Savings Planner

The savings plan allows users to set a monthly savings goal and see how much they need to save to meet their goals. Users can also choose from different time horizons for saving, which will give them an idea of the types of returns that are expected based on when they start investing.

The savings planner is handy for those who are saving for retirement. This is because users can set a target that will give them an idea of the amount they must invest every month to reach their goals.

Budgeting Tools

The budgeting tools allow you to track expenses and analyze spending patterns. Users can also generate reports so they can gain an understanding of their income, expenses, and net worth over time. This will help them plan for the future by setting short-term goals or establishing a monthly savings target that is more realistic than before.

Users can automatically organize their spendings and savings by category or date, giving them the ability to monitor their expenses and make adjustments based on the real-time data.

Retirement Planner

The retirement planner is a powerful tool that helps users calculate their progress towards retirement, no matter how much they have saved so far.

Users can input desired income and expense amounts and the number of years until they retire to ensure that their savings are on track with what is needed to reach this goal. They can then add expected significant expenses like college fees, home purchases, and other big-ticket items to understand their spending needs.

The retirement planner uses Monte Carlo simulations to give users an idea about the probability of achieving specific goals or what could happen if different factors are changed – for example, by increasing the rate at which you save money over time.

Investment Checkup

The investment checkup is a tool that helps users understand whether their assets are appropriately allocated to maximize returns. Users can also assess the risk of their portfolios by looking at asset allocation, past performance, and investment costs.

The investment checkup compares your current holdings with other possible allocations and how they could affect your portfolio. The results will help investors determine whether or not there is a need to diversify their investments by adding low-cost funds, ETFs, and stocks from different companies to cover all risk levels.

Education Planner

The education planner is a tool that gives users an overview of their financial path to college. Users can input different data, including the amount of money saved so far, the number of children currently in school, and expected tuition rates, to see how much they should be saving each year towards their future education costs.

The education planner is an excellent tool for parents who are saving towards their children’s education – especially since they can set a goal of how much money they will need to cover tuition costs. This is beneficial because users can track each year’s progress and make adjustments based on what is realistically achievable instead of simply guessing or setting unrealistic goals.

Fee Analyzer

The fee analyzer is an essential tool that helps users understand how much they pay for their investments. Users can uncover hidden fees and compare fees across different investment accounts to see how to reduce costs or switch to a cheaper option.

The fee analyzer can help to expose unnecessary fees. This will help you determine whether certain investments are actively managed or sitting in an account and contribute to higher broker fee costs.

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Paid Client Services

Personal Capital’s primary focus is on personal wealth management, and they provide a range of paid services.

These include:

Financial Roadmap

The Financial Roadmap is a personalized financial plan that helps you take control of your future. The tool creates prioritized lists based on data from an individual’s financial history.

The tool helps you make critical financial decisions. It will recommend how much to save for retirement when it’s time to pay down debt and build up an emergency fund or start saving in baby steps by adding more money each month into your savings account every single week without fail.

Personal Strategy

In the world of finance, there are millions of dollars worth of investments happening each day. If you’re looking for a way to diversify your portfolio and get in on some great opportunities at one time or another, then Personal Strategy service can help.

With Personal Capital’s advanced technology combined with their expert team, they offer personalized solutions. This means every individual has their own customized strategy designed just for them, which means better returns along with increased risk management.

Clients will receive a dedicated advisor to help them through their plan and keep track of all progress. Clients will get a tax optimization strategy and the best possible return for their money.

Smart Withdrawal

The Smart Withdrawal service is a tool that gives users the ability to make better spending and savings decisions. This enables them to manage their money optimally while using Personal Capital’s advanced technology. Using Personal Capital’s advanced tax forecasting, clients in retirement will be able to optimize withdrawals for tax efficiency.

Employed Plan Analysis

The Employed Plan Analysis gives clients insight into their existing employer-sponsored plans by providing them with a complete review of their accounts.

This service enables clients to understand the value and potential risk involved in their Thrift Savings Plan (TSP), 403(b), or 401(k). They can use this information to make better decisions that will affect both short-term spendings and long-term retirement planning.

The Employed Plan Analysis helps clients to forecast the value of their accounts in the future by leveraging Personal Capital’s advanced financial technology and tax optimization strategies. This will help them understand how much they should be saving each month to retire comfortably at a time when it best fits into their lifestyle instead of worrying about whether they are on track for their retirement goals.

Socially Responsible Personal Strategy

Like its rival, Betterment, Personal Capital has added socially responsible portfolios to its lineup of products.

The Socially Responsible Personal Strategy^® allows customers to invest in companies that make them feel good about where their money is allocated.

For investors who care about environmental, social, and governance factors (“ESG”), and the sustainability practices of companies, Personal Capital now makes it easy to align investments with personal values.

ESG and sustainability data comes from Sustainalytics, a global leader in ESG and corporate governance research so you can have confidence in the integrity of the strategy.

If you elect a Socially Responsible Personal Strategy, the same features apply to your portfolio as with core portfolios, including exposure to all six major asset classes.

It also features Personal Capita’s proprietary Smart Weighting^TM methodology to balance exposure to style, size, and sectors within U.S. equity asset classes.

Plus all the benefits that customers enjoy elsewhere still apply to socially responsible portfolios, including:

• Rebalancing
• Tax-loss harvesting
• Tax location
• Dashboard reporting

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Personal Capital Review:
Pros and Cons

Personal Capital sets itself apart from other robo-advisors by connecting clients enrolled in its advisory service to human financial advisors.

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Personal Capital
Fees & Account Minimums

Personal Capital charges higher fees than pure robo-advisors who offer no human advice but less than the average human financial advisor.

Personal Capital
Account Types

Personal Capital will manage the following accounts and will advise on accounts that it will not manage.

Personal Capital Tax Strategy

Personal Capital allocates assets across taxable and tax-advantaged accounts to optimize for tax consequences.

Personal Capital Alternatives

Although there are many benefits to using Personal Capital, investors have other options as well. Some of the alternatives include Betterment and Wealthfront.

Some of the top alternatives to Personal Capital are:

Betterment

Betterment is one of the best alternatives to Personal Capital because it is a mixture of Robo-advisor and bank account. Betterment is perfect for hands-off investors who don’t want to manage anything but still need a way to save for retirement and other financial goals.

Wealthfront

Wealthfront is a cheaper alternative to Personal Capital because their advisory fees are 0.25%. However, unlike Personal Capital, Wealthfront won’t offer instant access to financial advisors or tax optimization services.

Instead, Wealthfront focuses on its technology and automation to help investors grow and manage their money.

Vanguard

Vanguard is a low-cost alternative to Personal Capital. They have one of the most well-known investment strategies and focus on long-term returns rather than short-term.

Mint

Mint is a free alternative to Personal Capital which you can use if you don’t have enough money to meet their minimum investment of $100,000. It is a budgeting app that makes it easier to track where your money is going.

Is Personal Capital Safe?

Personal Capital Security

Users are required to register each device when logging on.

We found that even after registering a computer, Personal Capital looks to validate a user who moves to a different IP address.

For example, if you navigate to the Personal Capital login from a local coffee shop, your identify will be validated again.

All your information is stored as read-only, meaning that even if someone gets a hold of your mobile device and somehow gets past your pin code or fingerprint scanner on iOS devices, they still cannot transfer money from within the Personal Capital app.

The only way Personal Capital could heighten its security is by adding two-factor authentication, which is standard on cryptocurrency digital exchanges, which store your money.

But because your money cannot be accessed via the Personal Capital app, two factor authentication is not as big a concern.

The Future For Personal Capital

Personal Capital has visibility at over $1T in linked account value and provides a wide range of services to individuals and businesses.

It has over 26k wealth management clients and have grown by over 33% in new assets under management within the last couple of years.

With new technologies being developed rapidly, Personal Capital will also look to adapt its services accordingly. This can be seen in their technology-forward mentality and their app, available on both iOS and Android devices.

Personal Capital Review: The Bottom Line

Personal Capital is one of the best online financial advisors and wealth management companies for those with a high net worth. It provides many different services that will help people make smarter decisions with their money, whether optimizing taxes or finding new investment opportunities. For those who may not afford Personal Capital’s services, there are still many free tools on their site that can help you make the most out of your money.

It is designed for higher net worth, fee-savvy investors capable of meeting the $100,000 account minimum.

Is you wish to avoid the higher fees associated with human financial advisors yet still want to have contact on-demand with a dedicated financial advisor, Personal Capital is your best option.

For those who can’t meet the account minimum, Personal Capital offers an excellent mobile app complete with great tools to evaluate spending habits, recommend asset allocation improvements, and visualize retirement goals.

Few robo-advisors provide the top tier service offered by Personal Capital. Even those that offer human advice tend not to pair clients with dedicated financial advisors. So the bottom line is you are looking for a top tier service that combines automated investment management with a personal touch, Personal Capital likely has everything you need and then some.

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Still not sure? Check out our Personal Capital vs Betterment review.

Bonus: Personal Capital App Review

In addition to its investment management services, the free Personal Capital mobile app is available to anyone. You can download the app from the App Store if you have an iPhone or iPad, or the Google Play store if you have an Android device.

The app syncs with your bank accounts, credit cards, brokerage accounts and other investment accounts so you can easily track travel, entertainment, taxes, loans, personal care, clothing, groceries, and so on.

You can use it monitor spending habits but it’s more than a simple budgeting app because it tracks your assets, liabilities, and net worth too.

Bonus 2: Personal Capital Retirement Fee Analyzer

For fee-conscious investors, the Retirement Fee Analyzer is an excellent tool to help you identify at a glance how much of your money is being lost on pesky fees charged by funds.

It will also inform you how much to modify each asset class holding to match your recommended targets.

And it provides retirement forecasts so you can see what needs to be done to hit your retirement income goals.

> Compare Personal Capital vs Mint

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The article Personal Capital Review 2021 – Pros, Cons & Fees was originally posted on Investormint

BETTERMENT SPOTLIGHT
InvestorMint Rating 1 2 3 4 5 5 out of 5 stars	Promo: Up to 1 Year Free Management Management Fee: 0.25% - 0.40% Account Minimum (Betterment Digital): $0 Account Minimum (Betterment Premium): $100,000 Get Started via Betterment secure site

In this Betterment review, you will see how Betterment stands apart from its competitors and why it deserves its perfect rating.

Betterment uses a sophisticated computer algorithm as well as a team of investment managers to manage client funds.

The company manages approximately about $22 billion in assets serving hundreds of thousands of investors, and feedback from Betterment clients is overwhelmingly positive.

From automated investment management to human advice and from retirement tools to smart saving, Betterment is the most complete robo-advisor and is virtually unbeatable on price.

Betterment Review

There are good reasons why over 500,000 people have signed up to Betterment.

While most robo-advisors launch their services with purely digital advice, Betterment has expanded its product offering to include a wide variety of additional features, including tax-loss harvesting, socially responsible investing, goal-based investing, and cutting-edge financial tools and calculators.

Although Betterment has been an industry leader for years, it strengthened its claim as the best robo-advisor when it added human financial experts to its already strong product offering.

With so many bells and whistles, you might expect Betterment to charge hefty fees, but its pricing is highly competitive, ranging from 0.25% to 0.40% depending on what service level you choose.

If you want automated investment management only, the lowest fees are charged however if you want access to human advice, you will pay the higher amount.

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Betterment Promo + Features

Betterment Promo

If you make a deposit within 45 days, you can receive a reward and with a deposit of $250,000+ get up to one year of automated investment management free.

You also get a free investment review to help you assess your current investment approach. Four areas are covered, including:

• Investment accounts
• Tax savings
• Fees
• Risk exposure

Is Betterment Right For You?

Betterment initially offered just a pure robo-advisor service, now called Betterment Digital. Now, Betterment includes Chartered Financial Professionals as part of its Premium offering; this has a higher minimum of $100,000, compared to no minimum for Betterment Digital. 

Fee-conscious, hands-off investors focused on the long-term will find Betterment portfolios to be a great fit.

Unlike traditional financial advisors, who typically charge north of 1% annually, Betterment fees are just 0.25% for its fully automated offering, Betterment Digital.

Customers who value support will find Betterment to be exemplary. Customer service is embedded in the Betterment culture. For example, CEO Jon Stein is known to answer customer phone calls from time to time, thereby setting the example across the firm that customer satisfaction is a top priority.

Betterment CEO Jon Stein

The company serves stock market beginners, savers and non-self-directed investors exceptionally well. The online portal is easy to use and complete with education, financial tools, and retirement calculators.

It’s easy to transfer funds, set financial goals to target retirement objectives and shorter term targets, such as buying a car, and even analyzing outside portfolios to gauge diversification and fee levels.

For clients wishing to save and invest for retirement, but who are not keen on a self-directed approach, Betterment is the de facto standard other robo-advisors aspire to reach.

Betterment portfolios are best for:

• Investors of any wealth level
• Investors focused on the long-term
• Hands-off investors
• Investors who want excellent support
• Retirement investors

RETIREMENT INVESTORS

Betterment doesn’t just serve growth-oriented investors who are a long way from retirement. It also offers a low-risk alternative to the Betterment portfolios that are designed for retirement investors, called the Blackrock Target Income Portfolio Strategy.

The portfolio is made up 100% of bonds with a range of income targets designed to provide steady income with low risk.

The interest earned from bonds is generally taxed as ordinary income, so it is best suited for a retirement portfolio that enjoys deferred tax breaks, like a Betterment IRA.

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Betterment Fees

Betterment fees are tiered based on the customer plan selected:

• 0.25% of assets under management for Betterment Digital, which is a purely automated advisory and tools service.

• 0.40% of assets under management for Betterment Premium, which provides account monitoring by a team of Chartered Financial Professionals and permits unlimited phone calls and email access.

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Reviews Of Betterment Investment Method

How good are Betterment returns? According to the robo-advisor, annual returns are 2.9% better than the average investor.

Betterment Investing Review: The company’s investment philosophy has been influenced by Robert Shiller and Eugene Fama, both Nobel Prize winners.

Betterment offers an automated investing solution designed to counter the risks associated with emotional investing, such as being greedy when markets are buoyant and selling in a panic when markets fall.

Betterment portfolios are designed to generate optimal returns for each level of risk appetite by creating low-fee, diversified portfolios made up of exchange-traded funds from up to 12 asset classes.

Proprietary algorithms are in place to automatically rebalance portfolios if certain positions start to drift and weigh more heavily on the overall portfolio.

BETTERMENT ETF STOCK FUNDS

BETTERMENT BOND FUNDS

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Betterment Tools

Betterment’s stand-out tool is its advanced retirement calculator, RetireGuide. Other valuable tools help you to understand if you are overpaying on fees in your 401k, and help you to invest unused cash.

Retirement Calculator

Betterment provides a retirement calculator called RetireGuide, which calculates how much you need for retirement and whether you are on track to hit your financial goals based on a series of questions you answer.

Retirement goals can be applied to IRA, 401k, and taxable accounts. You can even link external accounts (e.g. bank savings account) to a Betterment Safety Net goal.

Retirement Advice Goals

RetireGuide is not a standalone service. Instead it is integrated to the Goals area so you and your spouse, for example, can project retirement income.

Retirement Goals provides advice on:

• How much to save for retirement each year
• How to spread money across taxable accounts, employer-sponsored plans, and IRAs

If you are not sure how much you should be saving each year and what income you can earn from your savings, the RetireGuide calculator can give you insights on these questions and other common ones, such as how much you can afford to spend in your retirement years annually.

The big idea is that spending and savings rates are compared to assess whether sufficient funds will be amassed by retirement to meet spending needs.

By understanding how much you plan to spend each year in retirement and how much you will earn from social security and other supplemental income sources, a nest-egg estimate can be approximated.

All you need to do is sync your existing bank and financial accounts, and Betterment figures out the rest.

Betterment Smart Deposit

Another nice feature we found as we conducted our Betterment review was Smart Deposit.

When you activate it, this tool automatically calculates how much excess cash you have in your bank account above a certain threshold and sweeps it into your Betterment accounts.

Betterment 401k Analyzer

Betterment allows users to connect third-party accounts, including 401ks, analyze fee-savings and recommends portfolio optimizations.

In our Betterment review, we found it easy to connect to outside accounts so portfolios held elsewhere can be analyzed to identify and improve upon expense ratios and performance returns.

External Account Analyzer

What separates Betterment from most robo-advisors is its external account analyzer.

It’s a cinch to set up alerts when high fees hit your account or you have excess idle cash sitting around.

And you will receive visual financial projections to see what your portfolio would look like if you rolled it over to Betterment.

The bottom line is goal projections factor in external accounts too.

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Socially Responsible Investing

Socially responsible Investing (Betterment SRI portfolios) is available to all Betterment customers to better align their investment dollars with their personal values.

Is Betterment a good way to invest? Increasingly, customers demand robo-advisors invest their dollars in a way that is aligned with their philosophical beliefs.

You may wish to avoid companies that have controversial histories, such as oil spills and data hacks.

Highlights of Betterment SRI portfolios include:

• Tax loss harvesting and tax-coordinated portfolios supported
• No loss of diversification but a 42% increase in social responsibility scores on U.S. large cap assets
• Global diversification, tax optimization and cost controls maintained while orienting investments towards environmental, social, and governance criteria.

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Betterment Flexible Portfolios

If your preferences differ from Betterment advice, you can choose Flexible Portfolios that provide you more control over how you allocate your capital to asset classes. 

Betterment Investing Review: Beyond socially responsible portfolios, Betterment now offers Flexible Portfolios to customers who want to exercise more control over their investing preferences.

You can modify asset class weights within a Betterment portfolio strategy and receive real-time feedback about how those changes affect portfolio diversification and risk.

The standard benefits apply to Flexible Portfolios, including  automatic rebalancing, Tax-loss Harvesting+, Tax Coordination+, and Tax Impact Preview.

The one caveat is you will need to invest $100,000 or more to gain access to Betterment Flexible Portfolios.

Betterment Tax Efficiency

Betterment Tax Strategy: The goal of investing is to put more money in your pocket, and while focusing on gross stock market returns is good, paying attention to how much you get to keep after taxes is important too.

To optimize for tax efficiency, Betterment uses two primary methods: tax-loss harvesting and tax-coordinated portfolios.

Betterment allocates money between taxable and tax-advantaged accounts to optimize for tax consequences.

TAX LOSS HARVESTING

When you have winners in your portfolio that you plan to sell, you can lower your tax bill by selling losers that count against those winners. This practice of counting losers against winners to minimize your tax impact is called tax-loss harvesting.

But if you have sold two positions, is your portfolio still diversified? Maybe not! And that’s why Betterment replaces the sold security with a similar one to ensure that your asset allocation is optimized.

Capital losses can lower your ordinary taxable income by up to $3,000 annually, creating significant savings over time.

Betterment claims that tax-loss harvesting can generate surplus returns of as much as 0.77% annually.

That may not seem like a lot, but over time it translates to an extra $44,692 in portfolio gains in a taxable account.

TAX COORDINATED PORTFOLIOS

How good is Betterment? Boosting after-tax returns in your taxable account via tax-loss harvesting is one thing but how do you minimize the impact of taxes across all your accounts, both retirement and taxable?

That’s where tax-coordinated portfolios come into play.

The idea in a nutshell is to put tax-inefficient assets into tax-efficient accounts and tax-efficient assets into tax-inefficient accounts.

If that sounds like a brainteaser, here is the simple way of thinking about it. A municipal bond already enjoys tax advantages, so Betterment wouldn’t put it into a retirement account, such as an IRA, that already enjoys tax benefits. Instead, the municipal bonds would be placed into a regular taxable account that is less tax-efficient.

Without asset allocation applied to accounts, a portfolio may look something like this:

But with asset allocation, the overall portfolio would look like this:

Betterment claims tax-coordinated portfolios can boost portfolio value by as much 0.48% per year, which translates to as much as 15% over 30 years.

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TaxMin Lot Selling

Betterment has developed a series of rules called TaxMin that automatically apply when a security is sold.

Most brokers use an approach called FIFO (first-in, first-out) that compares when securities are bought and sold but Betterment examines not only the timeline of purchases and sales, but also the cost basis too in order to lower the tax impact of stock or ETF sales.

Betterment strives to generate higher returns after taxes by following a strict order in which lots are sold:

1. Short-term losses
2. Long-term losses
3. Long-term gains
4. Short-term gains

The idea is to exploit all taxable possibilities in one category before moving to the next.

In the example below, Betterment saves a customer $3,883 by using its proprietary TaxMin algorithm versus applying traditional brokerage FIFO rules.

Tax Loss Harvesting For Spouses

If you already have tax loss harvesting turned on in your own account, you can apply it to your spouse’s account too so that your overall portfolios as a couple are managed holistically as one to optimize for taxes.

Betterment Pros and Cons

Betterment has a demonstrated history of success attracting and retaining clients by offering low fees, superb customer support, access to Chartered Financial Professionals, and easy-to-use retirement tools. Although account minimums are high for more personalized service, the fees charged are highly competitive compared to traditional financial advisors.

Where Betterment Shines

Betterment Digital is designed to meet the needs of all sorts of investors, so there is no account minimum – a big advantage. The management fee is 0.25%, which is lower than or equal to the amount charged by competitors.

Best of all, financial advisors are available through in-app messaging, so investors aren’t completely on their own.

As a new customers enjoy promotional pricing on management services. For example, Betterment Premium regularly offers up to one year of free management with a qualifying deposit.

Outside of promotional periods, Betterment Premium clients pay 0.40% for extra features, including unlimited phone access to certified financial planners. There are no annual fees, transfer fees, or closing fees with a Betterment account, which can make a big difference for small investors.

While Betterment does most things quite well, there are a few areas of opportunity. If these are important to you, another provider might better fit your needs.

What You Need To Know

First, Betterment does not offer a tool for direct indexing. On large accounts, direct indexing may offer substantial tax savings. Investors with taxable accounts have reduced ability to isolate opportunities for tax-loss harvesting when they work with Betterment.

Next, some financial advisors disagree with Betterment’s strategy for investing funds intended to cover emergency expenses. They state that emergency funds should not be in an account that could lose principal, and they should be easy to access if needed.

In addition, distributions from investment accounts may incur capital gains taxes, while withdrawals from standard savings accounts do not.

Finally, some former clients have pointed out that moving their assets from Betterment to another firm is unnecessarily difficult. They indicate that the process is inconvenient and time-consuming. This could be an issue if you don’t intend to stick with the service long-term.

Betterment Review: Fees & Minimums

Betterment has competitive fee charges compared to other robo-advisors and substantially lower fees than most traditional personal financial advisors.

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Betterment Account Types

Betterment manages the following accounts and advises on accounts that it will not manage, such as 401ks.

Is Betterment Safe?

Betterment uses bank-level security and offers SIPC protection on each account up to the maximum $500,000.

Betterment Review Summary

A new breed of investment tools has finally leveled the playing field. So-called “robo advisors” make it possible to automate your investment strategy, even if you don’t have millions in your account.

At the top of the list stands Betterment, a top-rated robo-advisor service that offers high-quality financial tools and support at an affordable price.

Should You Choose Betterment?

Betterment serves non-self-directed investors of all wealth levels who are fee-conscious and goal-oriented. In addition to its purely automated investment offering, Betterment Digital, Chartered Financial Professionals are available with higher account minimums for investors seeking more accessibility to experts.

As a top tier roboadvisor, it has lots of tools to support analysis of retirement objectives and provides free syncing with non-Betterment accounts to identify lower fee funds and improved allocation opportunities.

Plus, for customers looking for a little extra handholding, a nice feature Betterment provides is the ability to message licensed financial experts via the Betterment mobile app.

Betterment earns high marks for its focus on tax efficiency through tax-loss harvesting, tax coordinated portfolios, and even optimizing for tax impact across spouse’s portfolios.

The bottom line is if you want an automated investing solution that allows you to be hands-off and is jam-packed with portfolio-return-enhancing features and insightful tools all for a highly competitive cost, Betterment is very hard to beat.

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The article Betterment Review 2021 was originally posted on Investormint

Wealthfront does not offer some of the bells and whistles that other robo-advisors provide but in three very key areas Wealthfront makes a compelling case to earn your business.

1. Where Betterment and Personal Capital offer dedicated financial advisors for their premium offerings, Wealthfront has remained a pure robo-advisor. But where Wealthfront shines is its focus on tax-optimized investing, an underappreciated yet very important consideration that can enhance after-tax portfolio performance by up to 2% annually according to Wealthfront.
2. Wealthfront also distinguishes itself as the only robo-advisor in our review sample that offers a 529 Plan, which is a tax-advantaged savings plan designed to encourage saving for future college tuition costs.
3. When it comes to fees, Wealthfront is nearly impossible to beat. It has a highly competitive fee schedule and one of the best introductory offers of any robo-advisor: zero fees for the first $10,000 of assets under management.

Wealthfront Spotlight

WEALTHFRONT SPOTLIGHT
InvestorMint Rating 1 2 3 4 5 4 out of 5 stars	Management Fee: $0 for first $10,000 An additional $5,000 managed free for each friend invited who signs up Management Fees thereafter: 0.25% Account Minimum: $500 Get Started via Wealthfront secure site

Wealthfront Customers

Wealthfront targets fee-conscious investors who prefer a hands-off investment experience that is highly automated and who have no need or desire to connect with a dedicated human financial advisor. It’s also designed for investors who value the benefits of tax-optimized investing as well as those who may have or be guardians to children and wish to start saving for college tuition expenses.

Wealthfront has always offered a low-fee robo-advisory service and, unlike Betterment which added dedicated human financial advisors in 2016, remains a pure robo-advisory service.

For investors who desire the hybrid of a human financial advisor and the low fees associated with robo-advisory firms, Personal Capital and Betterment may be better choices. But for investors who need less hand-holding or have simpler financial situations that don’t warrant portfolio oversight or analysis from a dedicated advisor, Wealthfront has ample features to recommend it.

Wealthfront does have fast response times to answer customer phone calls but surprisingly does not offer a Live Chat feature, which is virtually standard across robo-advisory and brokerage firms. Email support is available but customers should choose phone communication for urgent issues.

Wealthfront serves Millennials, beginner investors, retirees, and hands-off investors well. With a pure robo-advisory service, Wealthfront provides the intuitive, easy-to-use website interface and simple navigability expected of a company that wants customers to spend time on its website.

Wealthfront is best for:

• Millennials
• Hands-off investors
• Retirees
• Fee-conscious investors
• Tax-aware investors

Wealthfront Management Fees

Wealthfront has perhaps the most competitive fees in the industry.

• 0.0% for the first $10,000 of assets under management
• 0.25% thereafter

In addition to higher long-term client portfolio returns from lower fees, Wealthfront claims that its tax-loss harvesting service enhances returns by up to 2% annually. Balances over $100,000 are required to avail of the tax-loss harvesting service.

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Wealthfront Investment Method

Similar to Personal Capital and Betterment, Wealthfront stacked its team with renowned financial veterans who lend credibility to its investment philosophy and methods. Dr. Burton Malkiel is the Chief Investment Officer for Wealthfront and author of the renowned book A Random Walk Down Wall Street.

Wealthfront seeks to optimize risk-adjusted returns by allocating assets to a diverse group of sectors, including domestic and foreign stocks, emerging markets, bonds and natural resources. Low expense ratio exchange-traded funds are used to keep costs low though these costs are passed onto clients as is the industry norm.

Customers should be aware that Wealthfront does not perform the same level of in depth due diligence via its short questionnaire as a human financial advisor might when evaluating risk tolerance and setting an investment allocation. Plus, fractional shares are not supported meaning that some cash is left uninvested, which creates a drag on portfolio performance.

Wealthfront employs a tax-optimized investment method called Direct Indexing. This approach is applied to accounts over $100,000 and works by purchasing up to 1,001 individual securities versus a single ETF of an Index Fund and identifying individual tax-loss harvesting opportunities.

Wealthfront Tools

Wealthfront launched Path to compete with Personal Capital’s Retirement Planner Tool and Betterment’s RetireGuide, allowing clients assess spending capacity in retirement and savings adjustments needed to realize retirement objectives.

Wealthfront provides a financial planning tool called Path that is designed to identify where a client sits relative to retirement goals. Path allows clients better understand the impact of saving more monthly as well as the probability of maintaining their current lifestyle in their retirement years.

Like retirement tools offered by other robo-advisors, such as Betterment’s RetireGuide, Wealthfront links third party accounts that are subsequently analyzed to assess retirement spending capacity.

Wealthfront Pros and Cons

Wealthfront is a low-fee leader among robo-advisory firms. It’s also the only robo-advisory firm in our sample company list that offers 529 Plans. Its focus on tax-optimized investing via tax-loss harvesting is in our view an underrated advantage that the company claims increases annual returns by 2%. Investors looking for more human interaction via a dedicated financial advisor would be best served elsewhere, such as Personal Capital or Betterment.

Wealthfront Fees & Minimums

Wealthfront has competitive fee charges compared to other robo-advisors and substantially lower fees than most traditional personal financial advisors.

Wealthfront Accounts

Wealthfront distinguishes itself in supporting not just individual and joint non-retirement accounts, Roth IRAs, Traditional IRAs, SEP IRAs, Rollover IRAs, and Trusts but also 529 Plans – unlike other robo-advisory firms.

Wealthfront Tax Strategy

Wealthfront’s Direct Indexing investment method on accounts over $100,000 is a tax-optimized strategy that purchases up to 1,001 individual securities versus a single ETF of an Index Fund to improve tax-loss harvesting.

Wealthfront Summary

Wealthfront focuses on tax-optimized investment methods that optimize for the all-important after-tax returns. With exceptionally low fees, but no dedicated financial advisors, Wealthfront is an ideal solution for hands-off investors who are seeking an automated investment solution.

Parents and guardians will be attracted to Wealthfront as the sole robo-advisory firm in our sample set offering 529 Plans.

Wealthfront also has the tools to support visualizing and analyzing retirement objectives and recommend actions needed to best achieve them.

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The article Wealthfront Review 2020 was originally posted on Investormint