What is Personal Capital's competitive advantage and what are the market mechanics that would prove or disprove that advantage?

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What is Personal Capital's competitive advantage and what are the market mechanics that would prove or disprove that advantage?

Hello! Thanks for asking Wonder to detail Personal Capital's competitive advantage and the market mechanics that prove or disprove that position. The short version is that Personal Capital outshines its competitors through its rapidly-scaling performance, simple user platform, and fully-integrated dashboard. However, its comparably high fees and steep account minimum make the service arguably less accessible for a mainstream, mass market constituency. Below you will find an explanation of our methodology and a deep dive of our findings.

METHODOLOGY

After an extensive search through trusted media sites and user forums, we have collected data to help inform your investment decision as it relates to Personal Capital. To provide you with a comprehensive, well-rounded study, we gathered reviews and feedback from the perspective of personal investors as well as industry professionals.

OVERVIEW OF PERSONAL CAPITAL

Personal Capital Advisors Corporation is client-centric investment advisor that artfully interlocks technology and personal wealth management into a user-friendly application. The company's website summarizes its mission statement in simple, eloquent terms: "We believe in the power of technology to change the financial industry, making it more accessible, affordable, and honest. And we believe in the power of people to change the nature of investment advice, making it more transparent, objective, and personal". Built on an "advisor-assisted wealth management" model, Personal Capital serves as a digital hub where clients can manage their personal finances, investment strategies, and asset allocation. Led by an experienced team of industry executives, the company is registered with the SEC (Securities and Exchange Commission) and boasts 1.3 million registered users and $312 billion accounts, a representation of $4.2 billion in managed assets.

In an attempt to tap into the connected, digitally-literate generation, firms like Personal Capital are learning to market themselves to a younger demographic that has been largely overlooked by traditional virtual banking platforms. This direct-to-consumer solution is disrupting the outdated assumption that wealth management tools are only used by "high net worth (HNW) and ultra-high net worth (UHNW) individuals". Rather, the growing population of mainstream "do-it-yourselfers" is emerging as a ripe target market.

With a nod to the future, some of the most recent market trends forecast a strong upswing in the robo-advising sector. Bloomberg forecasts that the industry will see a 68 percent annual increase and will hit about $2.2 trillion in managed assets by 2020. As a leading player in the personal finance management segment, we can safely expect Personal Capital to ride the wave of industry growth as a competitive participant with the potential to hedge out other market giants like Future Advisor and LearnVest. To gain a richer knowledge of the company's competitive stance, let's take a look at some of Personal Capital's most notable competitive advantages and disadvantages.

COMPETITIVE ADVANTAGES

Based on our researching findings, the following features set Personal Capital ahead of its competitors in the personal finance space.
When the company first got its start in 2009, it blazed a trail into the "robo-advisor" wealth management space by employing both digital and human functionalities. Other similar companies (Betterment and Wealthfront) followed suit in early 2017, but Personal Capital was already established with its innovating algorithmic, semi-customized approach to financial consulting.

As mentioned before, Baby Boomers, Gen Xers, and Millennials have proven to be the primary market for robo-advisory services. Incidentally, more than 50 percent of Personal Capital's client base is over 45 years old, representing a tech-savvy generation of well-informed consumers.

According to FinancialSamurai, Personal Capital struck an investment deal with Canadian IGM Financial, whereby it was endowed with a "$50 million Series E" funding and a $25 million contingency deal (provided that Personal Capital reached set performance benchmarks by 2017). The company reached those metrics by the end of 2016, further cementing the company on the road to success.

While the company once required a minimum asset total of $100,000 to become a client, Personal Capital has relaxed those standards. Currently, clients can participate with a $25,000 minimum in investable assets, making the platform available to a broader market.

Personal Capital prides itself in its centralized dashboard that features metrics for net worth, portfolio balances, key holdings, income reports, investment returns, and several other key indicators. User feedback claims that the application "encompasses all of your finances in one easy-to-use service" through an interface where "everything [is] managed in one place".

User feedback from InvestorJunkie speaks to Personal Capital's seamless functionality: "Account setup is brain-dead simple. Their user interface navigation and reporting is well laid out".

COMPETITIVE DISADVANTAGES

Based on our researching findings, the following features set Personal Capital behind its competitors in the personal finance space.

While Personal Capital has reduced its minimum value for investable assets ($25,000), other robo-advisor companies like Betterment, WiseBanyan, and Hedgeable boast either no requirement or a minuscule $1 minimum. According to Business Insider, companies that require a substantial minimum still beat out Personal Capital: "The minimum is on the higher end of the spectrum, as Wealthfront and TradeKing Advisors both have $500 minimums, SigFig requires $2,000, FutureAdvisor requires $3,000, and Schwab Intelligent Portfolios has a $5,000 minimum". User sentiment echoes the concern that there are "cheaper options out there", leaving Personal Capital to contend with its competitively-priced rivals.

Like its competitors, Personal Capital has linked its fee structure to client investment figures. Consequently, the greater the investment, the smaller the fee. For instance, a client investment of less than $1 million requires a 0.89% fee, a client investment of $1 million to $3 million requires a 0.79% fee, a client investment of $3 million to $5 million requires a 0.69% fee, and so on. This fee schedule does not stack up well next to competitors like Schwab Intelligent Portfolio, for instance. Schwab requests "0.08% for conservative portfolios, 0.19% for moderate-risk portfolios, and 0.24% for aggressive portfolios". Wealthfront and SigFig charge a flat 0.25% fee, while Betterment employs a range of 0.15% to 0.35%.

Despite its broadening appeal to the mainstream Millennial generation, Personal Capital's advisory services tend to cater to a relatively affluent demographic, as evidenced by its pricey fee structure. Business Insider observes that its "services come at a rather steep price" and that its offerings are potentially "best suited for high net worth individuals rather than the everyday investor".

While Personal Capital does offer expense tracking, user feedback implies that other applications (like Mint, for example) have a more user-friendly cash flow feature. Furthermore, this spending tracker is limited to the mobile app and is not available on the website.

FURTHER READING

During the course of our research, we came across an insightful article from TheWaysToWealth titled "Personal Capital Review: In-Depth Look At Free Tools, Fees, & Wealth Management Services". We hope this proves to be an interesting read!

CONCLUSION

To sum it up, Personal Capital outshines its competitors through its rapidly-scaling performance, simple user platform, and fully-integrated dashboard. However, its comparably high fees and steep account minimum make the service arguably less accessible for a mainstream, mass market constituency.

As always, thanks for using Wonder. Best of luck in your investment venture! Please let us know if we can help with anything else.
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