Personal Capital Roth IRA review

About Personal Capital

Personal Capital is a hybrid digital investment platform and financial planning service. Like some other digital investment platforms, Personal Capital allows you to sign up online and access investing planning tools such as ones that determine how much you might need for retirement. Personal Capital, on the other hand, also offers access to a team of financial advisors that its clients can work with virtually. Personal Capital charges a fee that’s a percentage of your investments, also known as assets under management (AUM), for managing your investments.

You can set up different investment accounts through Personal Capital, including individual retirement accounts (IRAs) and non-retirement brokerage accounts. Among the retirement accounts are Roth IRAs.

Personal Capital is a Registered Investment Advisor. It is not a broker-dealer (aka brokerage) and custodian of its clients’ assets. It partners with Pershing, a broker that buys and sells securities for Personal Capital’s clients.

What are the benefits of Personal Capital’s Roth IRAs?

Access to financial advisors

If you invest between $100,000 to $200,000 with Personal Capital, you’ll have virtual access to a team of financial advisors. Note: a team of financial planners here means you might not have a single, dedicated financial advisor. If you invest at least $200,000, you get two dedicated financial advisors. Access to financial advisors is all virtual (i.e. over email, phone, or video). In this respect, Personal Capital is different from a traditional financial advisor, which often also provides in-person meetings.

If you’re looking for human interactions and are comfortable with interacting with your financial advisors virtually, then Personal Capital is a good choice, as its advisory fee is lower than the 1% median fee traditional financial advisors charge; however, if you must have in-person interactions with your financial advisor, then Personal Capital is probably not for you.

Investment plan developed by an Investment Committee

An Investment Committee at Personal Capital takes information about your financial situation currently, and might be in the future, and your goals to develop an investment plan for you to reach your goals. The Investment Committee provides pre-selected investment portfolios that they’ve researched, meaning that if you don’t want to figure out the specifics of what to invest in, you don’t have to. This also means that if you want to have greater control of what you want to invest in, Personal Capital might not be right for you.

Portfolios include specific stocks and not just ETFs (minimum of $200,000 in investments)

For those that have a minimum of $200,000 invested through Personal Capital, your portfolios will also include specific stocks and not just ETFs. This means Personal Capital clients invest directly in specific stocks that Personal Capital has pre-selected. Not all online investment platforms have portfolios that include specific stocks. Personal Capital says it invests in specific stocks because this’d allow its clients to save on fund fees and increase their investment income.

Automated rebalancing

Personal Capital provides automated rebalancing management of your Roth IRA so that you don’t have to do much management of your own. Automated rebalancing keeps your investments aligned with reaching your retirement goal. This automated management along with your financial advisory team means that Personal Capital is good for those that want to be more hands-off with managing their Roth IRAs.

Robust online retirement planning tools

Its retirement planning tool is one of the most robust available online and allows you to play with different scenarios. You can also connect and sync your external accounts that you have with other companies onto the Personal Capital platform. This allows you to use its various tools, including a Fee Analyzer tool to determine how much you’re paying in fees on your current investments. This also enables you to see all of your retirement investments in one place and track how you’re doing towards your retirement savings. If this is all you’re interested in and you don’t need support from financial advisors, these tools can be accessed for free without being a Personal Capital client.

Who are Personal Capital Roth IRAs good for?

• Those that want to work with financial advisors and are comfortable with working with ones virtually
• Those that are comfortable with investing in portfolios recommended by an investment team
• Those that want to see and manage all of their retirement accounts, including their non-Personal Capital accounts in one place

Who is Personal Capital not for?

• Investors that don’t have $100,000 to invest or don’t want to invest such an amount with one service
• Investors that don’t need or want the hands-on support of financial advisors or at least don’t want to pay Personal Capital’s fee for the service
• Investors that want to pick their own investments or invest in specific stocks
• Investors who don’t want to pay a management fee or one based on AUM
• Investors that want to work with financial advisors in person

Drilling into Personal Capital’s fees

Advisory fees

Personal Capital charges a 0.89% advisory fee for managing your investments. They require an account minimum of $100,000. The fee decreases to 0.79% if you invest more than $1 million with them and even further after $2 millions. Fees are calculated daily and charged on a monthly basis. Fees are removed directly from your investment account.

Fund fees

Your Personal Capital investment portfolios are made up of exchange-traded funds (ETFs). (For those that have at least $200,000 invested with Personal Capital, your portfolios will include specific stocks as well.) ETFs also have management fees in addition to the advisory fee. The weighted average fee is 0.08% of the fund’s AUM per year. For a $100,000 investment, a 0.08% fee is $80.

Trade or transaction fees

Personal Capital doesn’t charge a fee for trades or transactions.

Withdrawal fees

Personal Capital doesn’t charge a withdrawal fee. See the Withdrawal section below for additional details about withdrawals from Betterment. Note: withdrawing from a Roth IRA could have tax implications, such as a penalty for when you take money out of your Roth IRA early. See IRS distribution rules and consult a tax advisor if you have questions.

Rollover or transfer fees

Personal Capital does not charge a fee for you to roll over or transfer into or out of a Personal Capital IRA account.

What goes into Personal Capital’s investments?

At Personal Capital, how your money will be invested is determined based on the strategies an Investment Committee supported by research staff will determine for you. During the signup process when you’re considering using Personal Capital, Personal Capital will ask a series of questions that’ll be used to determine your investment strategy based on your personal circumstances, age, retirement goals and time horizon, risk tolerance, and more.

How easy is it to do things at Personal Capital?

Because Personal Capital provides a team of financial advisors to its clients, in general, while some transactions might be able to be done online, you have the support of an advisor who you could reach out to and assist with what you want to do.

Signing up with Personal Capital

During the signup process, you’ll be asked to provide answers to some questions that’ll provide a picture of your current investments and your goals. This information is used to help provide an investment plan. If you decide to work with Personal Capital, then, your advisor will work with you to open investment accounts or transfer your current investments over to Personal Capital. Given the comprehensive approach, if you’re just looking to just simply open a Roth IRA, Personal capital, might not be right for you.

Withdrawing or distributing from a Personal Capital Roth IRA

You can initiate a Roth IRA distribution directly on the Personal Capital site. Withdrawals take about a few business days to process. Funds will automatically be sold and sent to your linked bank account. There is no Personal Capital transaction fee for withdrawals. There may be tax implications for withdrawals, e.g. withdrawing from your Roth IRA early has penalty implications. Do consult a tax advisor if you have questions.

There are no limits on the number withdrawals you can make. The individual withdrawal limit per day is a total of $25,000 unless your account was opened and funded more than 60 days before the withdrawal, in which case the limit is $100,000 per day.

Personal Capital supports wire withdrawals over $10,000. They don’t charge a fee for wires, but the bank you’re sending the wire to might. To initiate a wire withdrawal, you’ll have to call Personal Capital.

How is your money protected at Personal Capital

Asset protection

Personal Capital is not a broker-dealer and therefore cannot hold, buy, and sell your investments. Thus, its partners with Pershing Advisor Solutions (Pershing), a Bank of New York Mellon Company. Pershing is the custodian and broker-dealer for accounts you’d open through Personal Capital. Through Pershing, your investments are insured by the Securities Investor Protection Corporation (SIPC) and protected up to $500,000 per account.

If Pershing must liquidate its assets, your Roth IRA investments are insured by the Securities Investor Protection Corporation (SIPC). Each “separate capacity” account is protected up to $500,000 with a limit of $250,000 for uninvested cash. For more details on what’s a “separate capacity” account, visit the SIPC site. The SIPC is a U.S. government creation but not an agency of the U.S. and insures all brokerage accounts up to $500,000. SIPC is funded by all of its member brokers/dealers. In some cases, it also protects against unauthorized trading or theft in the account. Market losses and promises of investment performance are not covered.

Pershing, like other broker-dealers in the United States, is also a member of the Financial Industry Regulatory Authority (FINRA), an independent non-governmental organization that writes and enforces rules that control registered brokers and broker-dealer firms in the United States.

Other protections

Personal Capital is a Registered Investment Advisor (RIA) with the Securities and Exchange Commission (SEC), an independent agency of the United States federal government that enforces and proposes federal securities laws and rules and regulates the securities industry. RIAs have a fiduciary (i.e legal) responsibility to act in the client’s best interest.