Personal Capital Socially Responsible Investing (Review)

Personal Capital’s Socially Responsible Strategy surpassed $1 billion in assets in mid-2020. It’s a solid option if you are looking to work with a human financial advisor and customize your portfolio.

SustainFI Updated October 10, 2021

Rating: Excellent (4.5 / 5)

Pros

  • Ongoing access to human financial advisors
  • Ability to customize portfolios
  • Smart Weighting reduces your investment exposure to any given industry
  • Great online financial planning tools
  • Tax optimization strategies
  • Socially responsible portfolio excludes fossil fuels for U.S. stock investments

Cons

  • High management fee (but you get personalized services)
  • High account minimum
  • Socially responsible options only offered for U.S. and international stocks

Personal Capital Advisors Corporation (“PCAC”) compensates SustainFi for new leads. SustainFi is not an investment client of PCAC.

Summary

SustainFi Rating:4.5 / 5
Account minimum$100,000 ($200,000 for Socially Responsible investing)
Management fee• First $1 million: 0.89%
• First $3 million: 0.79%
• Next $2 million: 0.69%
• Next $5 million: 0.59%
• Over $10 million: 0.49%
ESG optionsThe Socially Responsible Personal Strategy replaces U.S. and international equities with ESG options
Investment expense ratio (ESG portfolios)Varies
Accounts supported• Individual and joint investment accounts
• Traditional, SEP, and Roth IRAs
• Trusts
• 401k rollovers
• Checking account
Human advisors• Access to dedicated financial advisors
• Investors with over $200,000 invested have access to two advisors
Tax-loss harvestingYes
Automatic rebalancingYes
Best for• Top-notch access to human advisors
• High-net-worth investors

What is Personal Capital?

Personal Capital is a hybrid advisor that combines a robo-advisor with human professionals. The company actually likes to call itself a “digital wealth platform.” It is not a typical robo-advisor, so comparing it to low-cost robo-advisors that don’t provide the same level of services isn’t quite fair. Founded in 2009, Personal Capital was acquired by a Canadian insurer, Empower, in the summer of 2020. In September 2021, the company had over $21 billion in assets under management.

Personal Capital has a higher account minimum ($100,000) and charges higher fees (0.89% to start) than most robo-advisors. But, in return, you get ongoing access to human financial advisors. They can help you with complex financial needs, like optimizing your portfolio for stock option ownership.

In 2018, Personal Capital launched its Socially Responsible Strategy. The Strategy reached $1 billion in assets by mid-2020.

Personal Capital signup process

To start, the signup process for Personal Capital’s wealth management is similar to other robo-advisors. You answer a few personal questions and complete a questionnaire. The difference is that you need to schedule a time to talk to a financial adviser to open an account. This makes sense because the minimum investment is much higher than for other robo-advisors.

Personal Capital account minimum 

Opening an account requires a $100,000 minimum investment, which is much higher than for most robo-advisors but lower than for many financial advisors. However, you need to invest at least $200,000 to choose the Socially Responsible Strategy and customize your portfolio.

Personal Capital management fee 

Personal Capital’s fees are closer to financial advisor than robo-advisor fees. For the first $1 million invested, you pay 0.89%, but that drops to as low as 0.49% for over $10 million invested. Here is the full breakdown:

  • Up to $1 million: 0.89%
  • First $3 million: 0.79%
  • Next $2 million: 0.69%
  • Next $5 million: 0.59%
  • Over $10 million: 0.49%

Personal Capital account types

Personal Capital offers the following account types:

  • Individual and joint taxable investment accounts
  • Traditional, Roth, and SEP IRAs and 401k rollovers
  • Trusts

Personal Capital Cash

Personal Capital offers Personal Capital Cash, a free, FDIC-insured cash (checking + savings) account. There are no fees and no minimum balance.

The account pays a 0.10% APY to advisory clients (0.05% to everyone else.) However, you don’t get a debit card so you can only use the account for electronic transfers, not cash withdrawals.

Personal Capital service tiers

Personal Capital offers three service tiers, depending on how much you want to invest:

  • Investment Services ($100k-$200k investment assets.) You get ongoing access to a financial advisor, and your portfolio is invested in exchange-traded funds (ETFs.) You are not eligible for the Socially Responsible Strategy at this service tier
  • Wealth Management ($200k-$1 million investment assets.) You get ongoing access to two financial advisors. Your portfolio is invested in stocks and funds, which you can customize. You are also eligible for the Socially Responsible Personal Strategy
  • Private Client (over $1 million investment assets.) In addition to two dedicated financial advisors and customization options, you get priority access to investment specialists and private equity investments 

Human advisors

Personal Capital gives you ongoing access to financial advisors. Investors with over $200,000 invested have access to two advisors.

Automatic rebalancing

Personal Capital will automatically adjust your holdings if the portfolio strays from the allocation that best suits your goals. Nearly all robo-advisors offer this feature.

Tax-loss harvesting

Personal Capital offers tax optimization strategies, including tax-loss harvesting. It is one of the two robo-advisors that can offer more advanced tax-loss harvesting using individual stocks rather than ETFs. (The other one is Wealthfront, where stock-level tax-loss harvesting is reserved for clients with over $100,000 invested.) The strategy aims to reduce your tax bill by selling losers to generate losses that offset taxable gains.

Smart Weighting 

Most robo-advisors invest your money in ETFs that mirror the broad market. But the broad market is generally skewed towards more popular sectors, such as technology. For example, technology stocks represent over 30% of the S&P 500 index. To diversify your investments and protect from market bubbles, Personal Capital allocates your money equally to all sectors (excluding fossil fuels for the Socially Responsible Strategy.)

In practice, that means that your U.S. stock exposure to any sector is anywhere between 10% and 12%. The downside to Smart Weighting is that you might miss out on hot sectors while those are doing well. 

Free tools

Personal Capital offers an array of free financial planning tools, including a net worth calculator, a savings planner, a fee analyzer tool, and much more. You don’t need to be a wealth management client to use these tools. 

Personal Capital Socially Responsible Personal Strategy

Personal Capital offers an environmental, social, and governance (ESG) option in partnership with Sustainalytics, a leader in ESG data and research. Just like the core portfolio, the Socially Responsible Strategy invests in six types of assets:

  • U.S. stocks
  • International stocks
  • U.S. bonds
  • International bonds
  • Alternatives
  • Cash

The Socially Responsible Portfolio replaces large and mid-cap U.S. and international stocks with sustainable stocks and funds. Personal Capital relies on conventional funds for other types of investments, like small-cap stocks and bonds.

Source: Personal Capital

For sustainable U.S. stocks, Personal Capital will invest your money in a basket of individual, high-ESG-scoring stocks. In contrast, most other robo-advisors invest in exchange-traded funds (ETFs) instead of stocks.

To come up with the sustainable basket of stocks, Personal Capital takes the Russell 3000 index of U.S. stocks, ranks each company using Sustainalytics ESG scores, and excludes all stocks rated below their industry average. They aim to invest in the top 10% of stocks in each industry.

They also exclude certain industries:

  • Energy (except utilities)
  • Tobacco
  • Adult entertainment
  • Gambling
  • Small arms

According to Personal Capital, the U.S. stocks they select show stronger performance on ESG issues such as:

  • Carbon intensity
  • Environmental policies
  • Greenhouse gas reduction programs
  • Diversity programs
  • Health and safety management
  • Data privacy and security
  • Bribery and corruption programs
  • Political involvement policies
  • Whistleblower programs

The final portfolio includes between 75 and 85 stocks across nine sectors. In the end, 10-12% of your portfolio is invested in each sector, so you are more diversified. Further, 60% of the U.S. stock portfolio is in large-cap stocks, and 40% is in mid and small-cap stocks. The small-cap portfolio is around 20% of the overall U.S. stock portfolio, and it is the only part of that portfolio that is not ESG-optimized.

Personal Capital is one of the few full-service robo-advisors that remove fossil fuels (with the exception of utilities) from your U.S. stock investments. We agree with their decision to leave utilities in the ESG portfolio. Utilities may use fossil fuels to generate electricity, but they provide an essential service. Also, utilities are the major investors in renewable energy projects. In the end, Personal Capital believes that total energy exposure is minimal at less than 1% of U.S. equity assets.

For the international stock allocation, including both developed and emerging markets, Personal Capital invests in ESG funds.

The portfolio can be customized for each client, so expense ratio and portfolio construction will vary.

Personal Capital Socially Responsible Strategy Performance

Personal Capital is one of the few robo-advisors that publish performance data. Although past performance doesn’t guarantee future performance, according to Personal Capital, the Socially Responsible Strategy has performed in line with the benchmark made up of non-ESG, low-cost ETFs from Vanguard and iShares since its inception in March 2018. The track record is just over three years, though.

Over the past year (through 6/30/2021), the performance of the Socially Responsible Strategy vs. the non-ESG benchmark varied depending on the riskiness of the portfolio. The riskiest (Full Growth) Socially Responsible Portfolio returned slightly less than the non-ESG benchmark, but the least risky portfolio beat the non-ESG benchmark by 0.5%. All in, it doesn’t look like the performance of the Socially Responsible Strategy is materially different.

💰 Takeaway

  • Personal Capital is a great option for investors who want a robo-advisor but also want to talk to human professionals
  • Personal Capital is best for high-net-worth investors who want to invest sustainably and benefit from portfolio customization (such as excluding certain stocks from your portfolio)
  • If you are looking for something cheaper for beginners, consider Acorns

🔔 Want to compare more robo-advisors? Read our guide to socially responsible robo-advisors.

Methodology

We compared robo-advisors with an ESG offering based on management fees, ESG portfolio expense ratios, the percentage of the ESG portfolio invested in ESG funds vs. traditional funds, ESG portfolio ratings (from Sustainalytics and MSCI), portfolio exposure to energy, transparency, features like tax-loss harvesting and automatic rebalancing, and access to human advisors.