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  • Personal Capital financial advisors

    I'm sure a number of us use Personal Capital for an overview of investments and their allocations. Has anyone else listened to the presentation the Personal Capital financial advisors give you?

    The idea is that the S&P 500 is overweight is certain sectors (technology, financials etc.) whole underweight in others. PC states by equal weighting across all sectors, using a bunch of ETFs, we can minimize the risk during a sector's crisis (ie. 1999, 2008) and beat the S&P 500 by cutting losses.

    They claim a gain of 1.2% over the S&P 500 over the last 25 years (of course past returns don't guarantee future results). They have a fancy looking graph where the PC gains start looking substantial.

    However, they charge 0.89% AUM. When you include the expenses for the "custom ETFs", that might add another 0.2%. Why would anyone go out on a limb for a net 0.1% theoretical gain, with plenty of fixed costs?

    I'm planning to politely decline their services, unless someone more knowledgeable can convince me otherwise.

  • #2




    I’m sure a number of us use Personal Capital for an overview of investments and their allocations. Has anyone else listened to the presentation the Personal Capital financial advisors give you?

    The idea is that the S&P 500 is overweight is certain sectors (technology, financials etc.) whole underweight in others. PC states by equal weighting across all sectors, using a bunch of ETFs, we can minimize the risk during a sector’s crisis (ie. 1999, 2008) and beat the S&P 500 by cutting losses.

    They claim a gain of 1.2% over the S&P 500 over the last 25 years (of course past returns don’t guarantee future results). They have a fancy looking graph where the PC gains start looking substantial.

    However, they charge 0.89% AUM. When you include the expenses for the “custom ETFs”, that might add another 0.2%. Why would anyone go out on a limb for a net 0.1% theoretical gain, with plenty of fixed costs?

    I’m planning to politely decline their services, unless someone more knowledgeable can convince me otherwise.
    Click to expand...


    Its easy to produce a graph over weighting some sectors and ignoring others when you know which did better in the past. This is just a bit harder going into the future, though some things make more sense than others. However, the math of their management and etf fees you described above do make me laugh as its basically transferring that out performance to them.

    I have never talked to their advisors and after politely declining the first couple calls have done so not so politely. They have never called back.

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    • #3
      I am currently giving them a shot. I transferred some accounts to them in December. They use individual stocks for the US portion of the portfolio, so my ER is around 0.05. The indexing with individual stocks is supposed to allow for more TLH. Also, the trade fees are included in their fees.

      They are more full service than the other 'robo" advisers and work with you with other financial planning topics. I don't have a ton with them but I figured I would give them a year.

       

       

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      • #4
        I listened to their pitch and said 'thanks but no thanks'.  I'll stick with a low fee KISS portfolio.  Fees are the one thing you can control.

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        • #5
          Thank you for your inputs. I guess my criticism is valid.

          Also, the risk of individual securities does not justify the benefit of tax loss harvesting, in my opinion, so I'll stick with Vanguard ETFs and mutual funds.

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          • #6
            I listened to the talk -- I think it was about a 45-minute conversation. The advisor could tell he was dealing with someone who was unlikely to use their AUM service, but he was professional and friendly throughout.

            If you believe an equal weight portfolio will continue to outperform the index (as a 10-year lookback shows it has), you could buy RSP for a 0.40 expense ratio. Another, EUSA follows the MSCI index, ER 0.15. Neither are equal sector weight, but rather, I believe, equal market cap.

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            • #7
              I was hoping to hear from you PoF! Interesting to learn about RSP. Certainly cheaper than what PC is offering.

              I'm more than happy to enjoy market returns at this time. Beating the market seems to be a more expensive proposition. And "not spending" (low ERs) often beats "earning" (higher returns).

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              • #8
                .89% AUM seems fairly standard for AUM fees.  I've seen .7-1.25 for higher earners.  But I balk at the idea of AUM.  I was originally just DIY through Vanguard, but decided to get a flat fee adviser.  I was lucky and got grandfathered in to his old rates.  But still, once you have enough money, paying a flat fee is nice.  The more you have invested, the lower the rate of the management fee.  I'd personally shop around for a flat fee advisor and find someone you can trust with a fiduciary standard if you choose to go the adviser route.

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                • #9
                  I listened to the pitch but declined.  They quoted me 0.75 AUM.  You would also incur tremendous capital gains to totally realign your portfolio.  They still call me every 6 months or so.  I no longer answer if I see the call originates from the Bay Area.

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                  • #10





                    You would also incur tremendous capital gains to totally realign your portfolio.




                    That's a good point. I wonder how they would justify that. Perhaps they would balance things within their "custom ETFs" so that the customer would not incur any gains.


                    Your lower AUM may perhaps have been because of a larger amount invested.


                    In any case, I did decline their services. They seemed disappointed but very polite. It's a bit creepy to think that they can see exactly how things go for my portfolio, and maybe send me an email saying "I told you so"! :P

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