Personal Capital cuts fees on high-net-worth digital platform

Online RIA offers robo services, along with advice from CFPs and investment adviser reps

Sep 3, 2014 @ 10:28 am

By Joyce Hanson

The online investment company Personal Capital Corp. is aggressively courting the high-net-worth market by dropping its management fees for $1 million-plus client accounts.

The registered investment advisor, which combines an automated model-portfolio platform with guidance from online advisers and certified financial planners, is launching Private Client, a service for both current and prospective cliens.

Kyle Ryan, Personal Capital's head of advisory service, said the company had told about 100 clients, who have a total of just under $200 million in assets under management, that they qualify for Private Client. Personal Capital has a total of 2,500 investment clients with $763 million in AUM.

“We have had growing success with people with more than $1 million,” Mr. Ryan said. “What we're doing is formalizing what we have already been offering to individuals with more than $1 million in managed assets.”

The biggest change is the lower fees, he said. For example, the first $3 million of investible assets will be managed at a cost of 0.79%, with the fee for those with assets of between $3 million and $5 million at 0.69%. The management fee was previously 0.85% for clients with assets of $500,000 to $1 million and 0.80% for those with $1 million to $5 million. Those not in the Private Client program will now pay 0.89% for assets under $1 million. Previously, they paid 0.95% for the first $250,000, 0.90% for the next $250,000 and 0.85% for $500,000 to $1 million.

Like many so-called “robo-advisers,” Personal Capital offers automated portfolio construction, re-balancing, tax optimization and account aggregation. What differentiates it is that it is one of the few that offers interaction with a human adviser, said Grant Easterbrook, analyst at market research firm Corporate Insight.

“Some are more robo than others,” said Mr. Easterbrook, whose study “Transcending the Human Touch: Onboarding and Product for Automated Investment Advice” was published in August. Personal Capital gives “free automated advice to lure prospective clients, but if you go for the paid service, you work with an adviser who is actually assigned to you,” he added.

Personal Capital offers virtual interactions with advisers via screen sharing and video technology, as well as in-person consultations at its San Francisco and Denver offices, according to Mr. Ryan. The company employs 45 investment adviser representatives who have passed the Series 65 exam and 10 certified financial planners. Ten more advisers are in the process of becoming CFPs, he said.

Private Client offers 12 model portfolio strategies as a starting point. It then customizes them, based on a client's financial data, to invest in stocks, bonds and exchange-traded funds.

Bill Harris, the former chief executive of Intuit Inc. and PayPal Inc., founded Personal Capital in September 2011 after raising $25 million in venture financing. Its investors include Institutional Venture Partners, Venrock, Crosslink Capital and BlackRock Inc.

Charles Goldman, president and CEO of financial adviser consultant AssetMark Inc., is a member of Personal Capital's board. He said its popularity is increasing because the company caters to those who can't afford traditional advisers as well as to the more affluent who want to be actively involved with their investments online.

“The mass-affluent client base is vastly underserved,” Mr. Goldman said. “There are lots of models out there. It's about trying to figure out which clients are best-served by these different models and how they are going to get advice.”

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