Personal Capital: One Of My Favorite Tools For Self-Directed Investors

Nicholas Ward

Financial literacy isn’t necessarily something that millennials are known for. When people think of our generation, they picture overly educated, under employed individuals who dwell in their parents’ basements. Thus far, trends like emerging adulthood and a preference for experiences rather than the typical materials that have traditionally represented the American Dream have stood out as defining characteristics of our generation. Sometimes we’re even demonized as naive, lazy, know-it-alls, soft, whiny “snow flakes”, or any number of other derogatory terms placed upon us by the older generations. But don’t take it personally.

We wouldn’t be the first generation to romanticize change. I imagine that no one wants to be like their parents when they’re young; most ambitious youth want to stride out into the world and make it on their own. Think about the hippies at Woodstock; I’d bet that the majority of those free and wild flower children eventually donned office attire, bought station wagons, and moved out into the suburbs where they spent their weekends weed eating along their white picket fences. Knowledge comes with experience and over time trends change, oftentimes, reverting to the historical mean.

As a general theme, emerging adulthood is alright with me. Placing a premium on experiences in the world will lead towards a higher perspective, better critical thinking skills, and more creativity. These are all values that will help individuals throughout their lives as they enter the job market and begin to start families. While data has shown that millennials are unique in their spending habits, I wouldn’t be surprised if this changed if/when our adult generation faces its first recession (it’s worth noting that the 08/09 “great recession” is what has molded us into an anti-materialistic/debt averse/frugal generation and led to the rise of innovative peer to peer business practices like AirBnB and Uber, circumventing the traditional market forces, cutting out the middle men in an attempt to save both time and costs). I don’t know if we’ll ever trust authority/government and side with big brands as opposed to local goods, but home ownership amongst the younger generation is rising and I don’t think the suburbs are going to the vacant wastelands anytime soon.

I wish everyone good luck finding me an old man who doesn’t think that the generation that came after him was inferior. That’s just the way the world works. Prior generators are better because of the hardships they’ve endured (many of our elders walked up hill to and from school, after all). I imagine we’ll be saying the same thing about generation Z (that are eating Tide Pods, aren’t they?). But name calling isn’t the point here. Regardless of whether or not Millennial stereotypes are true, the fact remains that we’re still young and just coming into our own professionally. That’s great. But, getting started on the career track and generating solid income is just the first step in the journey towards financial freedom. Learning how to budget, save, and compound (invest) that money is paramount.

Typically, I like to write about my portfolio management process, but in this piece I will be covering an online service that I recently came across and would like to recommend to others. For years now I’ve invested online with Scottrade, but they were recently purchased by TD Ameritrade and now that my assets have been transferred from the former’s platform to the latters, I’m beginning to realize that certain features that I used are gone. One such feature is flexible re-investment. This is a bummer and may result in my transferring my assets elsewhere (I don’t like the idea of DRIPing and I’m not about to pay commissions on smaller, monthly selective re-investment purchases). I’ve known that I might have run up against this issue for awhile now but I’m also in the process of requesting free trades from TD Ameritrade to make up for the lost opportunity to FRIP. However, one lost feature that I wasn’t expecting was the portfolio analyzer took that allowed me to link outside accounts to the ones I managed at Scottrade, giving me an accurate breakdown of all of my holdings. Since they money I manage is spread across a variety of different platforms it was really helpful (and probably necessary in terms of asset allocation decisions) to be able to track my portfolio’s overall weightings in real-time. In the past I’ve used spread sheets to give me this broader view of my holdings but I’ve grown jaded of manual data input, so I began to look for a financial planning website that offered services that would help me.

I was willing to pay for such services, but thankfully, I found a free option that offered everything I was looking for and more. I’m talking about Personal Capital. I’d heard about Personal Capital in the past but I never really gave it the time of day because I had services already in place that covered all of my needs. However, I was doing myself a disservice, because after poking around the Personal Capital website, I’ve been blown away with the organizational features that it presents.

Not only does Personal Capital allow me to link all of my investment accounts, creating a one stop shop for all of my personal investing information, but it allows users to link bank account information, which puts together an aggregated snapshot of one’s financial situation. It shows overall inflows and outflows of capital, making budgeting easier if you have multiple credit/debit cards. It tracks debt loads and helps you manage you household’s leverage. It gives historical data regarding the returns that your investments are making as well as average household net worth in the US. Oftentimes I talk about running more portfolio and my household’s finances like a business and Personal Capital helps me to do this, generating all of the necessary information without any manual input.

Admittedly, I was hesitant to link so much financial information to one source. I’m not making any actual transitions on Personal Capital’s website, so that was comforting. However, I’ve still given them access to my login/passwords and that is a concern. With that said, Personal Capital makes it clear that security is one of their highest priorities; they data is encrypted and this encryption is rated “A” by the “world renowned Qualys SSL Labs", which Personal Capital claims to be a higher grade than many banks/brokerage websites.

I read several third party reviews of Personal Capital from a security standpoint and saw good thing as well. I’m not a cyber security master by any means, but the general consensus seems to be that data centers are typically much more secure than you’re average computer/hand held device, so I’m probably putting my financial data at much more risk logging into bank/brokerage accounts on a daily basis than I am joining Personal Capital. I suppose in this day and age all of our assets are at some sort of digital risk. I own a bunch of stocks but not a single stock certificate. We’re all placing a lot of trust in the institutions that we partner with, but at the end of the day, I also know that all of my investment accounts come with SIPC insurance. What’s more, all of the information in one place should theoretically make it easier to detect financial fraud as Personal Capital tracks all incoming and outgoing transactions and fees.

In this regard, Personal Capital actually saved me money already. When I signed up for Personal Capital and linked all of my online brokerage accounts (which was free), I realized that I was paying a 0.01 management fee on one of the accounts that I recently had switched over from Scottrade to TD Ameritrade. One of the benefits that I said about joining Personal Capital was finding hidden fees associated with brokerages, mutual funds, and the like. Their website not only tracks fees, but it gives you long-term graphs showing just how much these fees will effect your finances over time and what this does to your retirement planning. This is a useful tool because while a 0.50% fee on a mutual fund might not seem like a lot, because of the nature of compounding over time, you might be surprised to see just how much money this will cost you over a 30-year time horizon.

I’ve always been opposed to paying management fees, whether that be on mutual funds, ETF’s, or adviser fees. I’ve never known an online broker to charge a management fee on an account; I’ve always kept money at different online brokerage houses for various reasons and I’ve never run up against this problem with anyone other than TD Ameritrade. I can assure you that I will be on the phone with them later today to resolve this and if I’m not able to resolve it, I will transfer those assets to another broker where the 0.01 fee is not charged, meaning that either way, Personal Capital has already saved me money.

Another useful took that Personal Capital has offered me is their free retirement planner. I’ve done a lot of planning for this myself, focusing on my passive income stream primarily, but with so many accounts connected, including my major debt loads (student loans, mortgages, car payments, etc), Personal Capital was able to give me a more in-depth analysis looking forward. I’m able to much better evaluate my spending and their tool also allows for the addition to future financial events, such as tuition for kids, an air conditioner upgrade at the house, or major vacations that you’d like to take one day. I’ve always had a firm grasp on where my passive income would likely end up, but Personal Capital has enabled me to better plan on my expenses along the way.

Granted, I’ve only been playing around with Personal Capital services for a couple of days now, but thus far, I’ve been really impressed. I think this is a tool that will benefit me as I management my household’s finances which is why I wanted to write this article and shed light on this website for others to check out.

What’s more, there’s actually some financial benefit for both of us in this regard. When I signed up Personal Capital offered me a referral code (like those ones offered by satellite TV providers) that gives you $20 and me $20 if you click this link and sign up for their free services (it does require you up link an investment account).

Although we’re both poised to profit from this link, I want to make it clear that I’m not writing this article to get rich. I’m sure that there is some small print somewhere that limits the amount of $20 referral fees that I can claim via think link. I’m writing it because I think Personal Capital offers a great service in terms of a one stop shop for investors who’re looking to track assets that are held across different platforms. I’ve had to build spreadsheets to do with Personal Capital does in the past and I know that personally, I’m pleased that I will no longer be spending my time doing this. To me, the knowledge that I’ve gained and the time the Personal Capital has saved me is worth whatever added risks I’m incurring by providing sensitive data to a third party source. Personal Capital claims that ~1.6 million individuals use their services, so apparently, I’m not alone.