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Written by Jason Dolan on March 17, 2020
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Personal Capital vs Betterment 2020: Which Is Better?

Personal Capital vs Betterment

When it comes to investing in the stock market, you primarily have two choices.

You can follow an active investing strategy, where you pick and choose stocks and ETFs on your own to invest in.

Or, you can follow a passive strategy where you let someone else do the leg work for you.

In the past, your only option for following a passive investing strategy was to work with an in person financial advisor. You would set up a meeting with them, build a portfolio based on your goals and pay your advisor an annual asset management fee.

Now, there are countless robo-advisors that streamline this process. Instead of meeting with an advisor, you fill out an online questionnaire.

In addition, the fees for these robo's are often a lot less than a traditional financial advisor.

In this article, we will be comparing two popular platforms offering this service known as Betterment and Personal Capital. 

Summary

  • Personal Capital has free financial planning tools available to anyone. 
  • Betterment seems to have a better investment platform for smaller investors with a $0 minimum. 
  • Personal capital has more of a traditional financial advisor approach.
  • Betterment is cheaper than Personal Capital by nearly half.
  • Personal Capital does not have a minimum balance for the free financial planning tools offered. 
  • Personal Capital has a minimum $100,000 balance for investment features.
  • Both offer socially responsible investing and other useful features. 
  • Personal Capital is designed for higher net worth investors with over $100k to invest while Betterment is designed for beginners just getting started.
  • Betterment also offers unique features for high net worth investors called Betterment Premium which also has a $100,000 minimum.

Click Here to Sign Up For Betterment!

Click Here to Sign Up For Personal Capital!

What Is Personal Capital?

Personal Capital is one of the top platforms that offers completely free financial planning tools.

It comes with a wide array of features to support this goal on their free plan. Personal Capital has more advanced features for investors with a minimum of $100,000 to invest. They aim to be a one-stop-shop to manage your financial life.

Their investment services have a bit of a mix between a robo-advisor and a traditional investment platform through human-assisted investing. Although, their investing features are more aimed at higher net worth investors.

Personal Capital

How Does Personal Capital Work?

The Personal Capital sign up process is pretty simple and does not require you to make a minimum deposit to use free financial planning tools. 

For higher net worth investors, Personal Capital offers investment management and financial planning. 

Personal Capital's investment management approach is a bit of a hybrid between new and old. They still use a more traditional brokerage style for managing your assets and relying heavily on human advisors to keep you updated.

Depending on how much you invest with them, you may have access to two advisors on your account available 24/7.

They use modern portfolio theory when designing portfolios and some robo advisor features to assist you with your investing goals and managing your financial future.

Features

Free Financial Analysis Tools

Personal Capital offers a variety of financial tools within the free tier. They want to make it an easy place for you to see and manage all your accounts.

In addition to your personal account, you can add in your employee-sponsored retirement accounts if you have them.

Personal Capital’s budgeting feature allows you to track your spending habits and see where you are using your money throughout your month. This can help you identify areas where you should be spending less money.

The Cash Flow Analyzer feature is for people who want to keep track of their income and expenses. It works as the name suggests and analyzes your spending from accounts you have linked with Personal Capital.

They have a slew of other tools for you to use here as well including a retirement planner, net worth calculator, investment checkup and more.

Check out the free tools available here!

Savings Account

Personal Capital offers a savings account with a high APY. This account has no minimum balance and offers mobile access with unlimited withdrawals.

Investment and Financial Planning Services

While Personal Capital’s free platform is for financial planning tools their upgraded tier, Personal Wealth is designed for investing, financial planning, and wealth management.

This is where the combination of robo-advisor and traditional brokerage features comes into play. They offer access to two financial advisors at this tier that are available 24 hours a day.

This offers things like tax-loss harvesting and Tactical Weighing which aims to provide a more balanced structure of your investments.

Something that is gaining more momentum in recent years is socially responsible investing. This means you will be investing in companies that adhere to a certain set of socially responsible rules which you will select. This is offered as well!

Personal Capital Plans And Fees

As stated above there are two tiers to the Personal Capital platform; Financial Planning and Wealth Management.

Their free version, Financial Planning, has no minimum deposit.

There are also no fees associated with this so you will have access to all of their planning features for no cost.

Wealth Management, on the other hand, is another matter entirely. This is where you get access to their investment platform and you must have a minimum balance of $100,000.

There is also a fee of 0.89% up to the first million you invest with them.

This is much higher than the vast majority of their competitors at this amount. If you invest more than a million you will have decreased costs down to 0.49%.

The fees for Wealth Management by Personal Capital are as follows:

  • First $1 million – 0.89%
  • $1 million to $3 million – 0.79%
  • $3 million to $5 million – 0.69%
  • $5 million to $10 million – 0.59%
  • Over $10 million – 0.49%

Personal Capital Pros

  • Great financial planning features and free tools.
  • Access to real financial advisors.
  • 24/7 Customer support.
  • Socially responsible investing (SRI).

Personal Capital Cons

  • Expensive management fees.
  • Minimum of $100,000 to invest.
  • Not optimized for low net worth investors.

What Is Betterment?

Betterment is one of the largest robo-advisors out there with $14 billion in assets under management. And it’s not hard to see why with the robust set of features they offer and a wide array of options for investors.

Betterment has been building their system to be completely autonomous from their inception in 2008 and have only grown in this capacity.

They focus around saving you money and retirement accounts but offer a lot of other options as well.

Betterment also tends to be great for beginner investors with a great user interface setup and an easy to use feel.

Betterment review

How Does Betterment Work?

Betterment relies heavily on automation and a step by step process to accomplish your goals. You’ll sign up for the platform like any other by putting in your personal information such as your name, social security number, address, etc. 

They will then dive deeper into your needs by asking you questions in order to tailor your experience to best fit you. They even go so far as advising you on your initial investment to get the ball rolling.

Betterments plan will assist you in setting up a deposit schedule in order to get to where you want to be in terms of retirement and other forms of investing.

Want to find the best robo-advisor for you?

We put together a free comparison table that analyzes all of the top robo-advisors available today. This guide will help you compare the features and benefits of each side by side.
Get The Guide

Features

Smart Deposit/ Two-Way Sweep

These features are incredible for account automation and take a lot of the thinking process out of your investment. It also saves you a lot of time when it comes to adding money.

With Smart Deposit you link your bank account with your Betterment account and supply them with a threshold. This threshold is the amount of money you want to remain in your checking account. Say $2,000 for example.

Betterment then monitors your bank account and anything over that amount is transferred to your investment accounts. You are able to set where you want this money to go inside a specific Betterment account.

Two-Way Sweep works in tandem with the Betterment Savings account that we’ll discuss in a moment. It works in much the same way as Smart Deposit.

You enter a threshold amount and anything over that will be transferred to the Betterment Savings account. It also works the other way and should your checking account ever dip below the amount money will be transferred back.

Betterment Cash Reserve Savings Account

As mentioned above Betterment offers a savings account. This comes with a higher than average APY. It also features $1,000,000 of FDIC Insurance coverage.

*$1,000,000 in FDIC insurance is a goal and not a guarantee. Betterment uses 4 member banks to hold cash deposits. Each bank covers $250,000 in FDIC insurance, but it is not guaranteed your account will be spread across these 4 banks proportionately.

There is a minimum $10 deposit in order to have access to their high-yield savings account. Check the current yield here.

RateAs Of
0.40%9/10/2020

Financial Planning

Betterment Premium offers the option to speak with a CERTIFIED FINANCIAL PLANNER®. This is an individual who is highly specialized in topics such as investments, retirement, taxes, estate planning, insurance, and a variety of other financial topics.

You will have access to a financial planner who will be able to answer many of your financial questions. 

If you do not have a Betterment Premium account, there are packages that you can buy to get access to these advisors. There are a few different packages such as retirement planning, marriage planning, college planning, or getting started which costs $199.

Preset Portfolio Options

This is another feature that highlights Betterment’s automated system. There are a few options you can select and Betterment will customize your portfolio to fit those criteria.

For instance, an income portfolio consists only of bonds and nothing else and their Smart Beta option is aimed at higher returns.

Similar to Personal Capital, they offer a Social Responsibility Portfolio to invest in companies that conform with your social views.

Betterment Plans And Fees

There are two different plans with Betterment; Digital and Premium.

Betterment Digital is their base plan and gives you access to all of their basic features. This does not include financial advisors unless you purchase a package. This plan has a fee of 0.25% of your total managed assets.

Betterment Premium is a plan for those that have $100,000 dollars as a minimum in their account and gives you access to a CERTIFIED FINANCIAL PLANNER®. Using this tier will cost you 0.40% in management fees per year.

Betterment Pros

  • Great for beginning to intermediate investors.
  • Excellent goal-setting options.
  • Social Responsibility Portfolio.
  • No minimum deposit to invest.

Betterment Cons

  • Limited to stocks and bonds.
  • No direct indexing.
  • Digital plan charges for financial planning advice.

Personal Capital vs Betterment: Verdict

If you are a small to a medium-sized investor with less than $100,000, Betterment is your only option of these two for investing. Personal Capital does not offer to invest for those under the $100,000 threshold.

In addition to this point, if you are worried about the cost of your investment platform, Betterment is going to win out here as well with about half the cost of Personal Capital's fees. This plus their automation makes them the clear winner for a lot of investors out there.

Personal Capital is going to win out for you in the case that you want the most access to human advisors. Or, if you want a more traditional investment approach in comparison to a more automated robo advisor approach.

However, if you are just looking to take advantage of some free financial planning tools that is available to everyone on Personal Capital.

Click Here to Sign Up For Betterment!

Click Here to Sign Up For Personal Capital!

Keep Reading:

Personal capital vs betterment
Article written by Jason Dolan
Jason has worked for over 7 years in sales and marketing, along with a background in web development. During his free time, Jason enjoys learning and educating others about investing and personal finance.

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