Personal Capital is an online Financial advisory and wealth management service founded in 2009 by Bill Harris, Louie Gasparini, Rob Foregger, and Paul Bergholm to streamline and make more transparent wealth management. Personal Capital drives revenue by charging advisory fees to its clients in exchange for managing their capital. The fees are structured based on the portfolio’s weight and whether the client is private or institutional.
| Business Model Element | Analysis | Implications | Examples |
|---|---|---|---|
| Value Proposition | Personal Capital’s value proposition includes: – Digital Wealth Management: Provides automated investment management through robo-advisors. – Financial Planning Tools: Offers tools for tracking, budgeting, and planning financial goals. – Personalized Advice: Combines technology with human advisors for personalized financial advice. – Diverse Investment Options: Offers a range of investment options and strategies. – Accessible to All: Serves a wide range of investors, from beginners to high-net-worth individuals. – Fee Transparency: Provides clear and transparent fee structures. | Offers convenience through automated investment management and financial planning tools. Appeals to users with diverse financial goals and needs. Combines technology and human expertise for personalized advice. Provides accessibility to investors at different wealth levels. Enhances trust through fee transparency. Encourages users to manage investments and finances comprehensively. | – Users utilizing robo-advisors for automated investment management. – Individuals tracking and planning their finances using Personal Capital’s tools. – Clients seeking personalized advice from the company’s financial advisors. – Investors with varying levels of wealth benefiting from its services. – Appreciating the transparent fee structure offered by Personal Capital. – Leveraging the platform to manage their investments and finances. |
| Customer Segments | Personal Capital serves a variety of customer segments, including: 1. Individual Investors: Individuals looking to invest and grow their wealth. 2. High-Net-Worth Individuals: Affluent investors seeking personalized financial advice. 3. Retirement Planners: Users planning for retirement and long-term financial goals. 4. Novice Investors: Beginners looking for guidance in financial planning and investing. Personal Capital caters to a broad range of investors with varying financial goals. | Attracts individual investors looking for wealth management solutions. Appeals to high-net-worth individuals seeking personalized advice. Assists retirement planners with long-term financial strategies. Provides guidance to novice investors navigating the financial landscape. Serves a diverse group of users with distinct financial needs. | – Individual investors utilizing Personal Capital for wealth management. – High-net-worth individuals seeking personalized financial advice. – Users planning and saving for retirement and other long-term goals. – Novice investors relying on the platform for financial guidance. – A diverse range of clients with various financial goals and backgrounds. |
| Distribution Strategy | Personal Capital’s distribution strategy includes: – Online Platform: Offering an online platform and mobile app for users to access its services. – Marketing and Partnerships: Utilizing digital marketing and partnerships to acquire and engage users. – Human Advisors: Providing access to human financial advisors for personalized advice. Personal Capital leverages its online presence, marketing efforts, partnerships, and human expertise to reach and serve its clients. | Provides convenience through an online platform for accessing services. Attracts users through digital marketing campaigns and strategic partnerships. Enhances user engagement by offering access to human financial advisors. Combines technology with personal touchpoints to acquire and retain clients. Utilizes a multi-channel approach for user acquisition and retention. | – Users accessing Personal Capital’s online platform and mobile app for services. – Discovering Personal Capital through digital marketing and partnerships. – Clients seeking personalized financial advice from human advisors. |
| Revenue Streams | Personal Capital generates revenue through the following channels: 1. Asset-Based Fees: Charging fees based on the assets under management (AUM). 2. Subscription Fees: Offering premium services with additional features for a subscription fee. 3. Referral Program: Earning income through referrals by rewarding existing users. Personal Capital diversifies its revenue streams through AUM-based fees, subscription fees, and referrals. | Generates revenue by charging fees based on AUM. Increases revenue through premium services with added features. Expands its user base and income through a referral program. Diversifies its income sources within the financial services industry. | – Users paying fees based on their AUM managed by Personal Capital. – Subscribers to premium services accessing additional features. – Existing users referring friends and family to join Personal Capital and earning referral rewards. |
| Marketing Strategy | Personal Capital’s marketing strategy involves: – Digital Advertising: Running online ads to attract potential investors. – Content Marketing: Providing educational content on finance and investing topics. – Partnerships: Collaborating with financial institutions and influencers to expand reach. – Referral Program: Incentivizing users to refer others to Personal Capital. Personal Capital combines digital advertising, content marketing, partnerships, and referrals to acquire and retain users. | Attracts potential investors through digital advertising campaigns. Educates users with valuable content on finance and investing. Expands its reach through partnerships and collaborations. Stimulates user growth by incentivizing referrals. Implements a comprehensive marketing strategy for user acquisition and engagement. | – Encountering Personal Capital’s online ads promoting its investment and financial planning services. – Accessing educational content on finance and investing topics. – Discovering Personal Capital through partnerships with financial institutions and influencers. – Referring friends and family to join Personal Capital and earning rewards. |
| Competitive Advantage | Personal Capital’s competitive advantage stems from: – Technology and Automation: Utilizing advanced technology for robo-advisory services and financial planning tools. – Human Advisors: Offering personalized advice through human financial advisors. – Diverse Investment Options: Providing a range of investment options and strategies. – Accessible to All: Serving a broad user base with various financial backgrounds. – Fee Transparency: Ensuring clear and transparent fee structures. Personal Capital excels in technology, human expertise, investment options, accessibility, and fee transparency. | Provides efficient and automated investment management through advanced technology. Offers personalized advice through human financial advisors. Appeals to users with diverse investment needs and preferences. Serves a wide range of investors with different wealth levels. Enhances trust and transparency through clear fee structures. Combines technology and human expertise for a competitive edge. | – Users benefiting from automated investment management and financial planning tools. – Clients seeking personalized financial advice from human advisors. – Investors with varying preferences for investment options and strategies. – A broad user base with different financial backgrounds and needs. – Appreciating the transparent fee structure offered by Personal Capital. – Utilizing a combination of technology and human expertise for financial management. |
Origin Story
Personal Capital is an online financial advisory and wealth management service.
The company was founded in 2009 by Bill Harris, Louie Gasparini, Rob Foregger, and Paul Bergholm. After overseeing the merger that saw the creation of PayPal, finance executive Harris looked toward his next project.
He noted that available money management solutions at the time were subpar at best.
Consumers with checking accounts, credit cards, loans, mortgages, and retirement accounts had to access each of these services individually.
Aside from being a major inconvenience, this lack of streamlined access also created a lack of transparency through hidden fees.
Personal Capital was then launched, with $2 million provided by Harris and his co-founders. The team then spent two years refining the product, eventually launching in 2011 to great success.
The company differentiated itself from services like Wealthfront and Betterment by incorporating both human and algorithmic expertise. It also targets more affluent households with over $100,000 in assets.
In 2020, Canadian firm Empower Retirement acquired Personal Capital for $1 billion. Together with Empower, the company now serves 12 million individuals holding over $1 trillion in assets.
Personal Capital revenue generation
Personal Capital drives revenue by charging advisory fees to its clients in exchange for managing their capital.
There are three options, structured loosely around investment amount:
- Investment services – for $100,000 to $200,000 in investment assets. Users here get access to financial planning tools, an advisory team, retirement planning, portfolio monitoring, and rebalancing, and investment in exchange-traded funds.
- Wealth management – for $200,000 to $1 million in investment assets. This option includes extras such as a customized portfolio of individual stocks and tax optimization. There is also access to two dedicated advisors who can provide guidance on insurance, home finance, stock options, and compensation.
- Private client – for over $1 million in investment assets. A premium service affording access to specialists, wealth planning, and private equity and hedge fund review. Capital can also be directed into bonds and private equity investments.
In terms of fee structure, Personal Capital charges a single, all-inclusive management fee annually. True to the company ethos, there are no hidden fees, trailing fees, or trade commissions.
The annual management fee is structured as follows:
Investment Services and Wealth Management clients
For clients of the first two investment options, the fee is a flat 0.89%.
Private clients
For private clients, the fee works on a sliding scale based on capital:
- For the first $3 million, the fee is 0.79%.
- For amounts between $3-5 million, the fee is 0.69%.
- For amounts between $5-10 million, the fee is 0.59%.
- For amounts exceeding $10 million, the fee is 0.49%.
Key takeaways
- Personal Capital is an online wealth management and advisory service founded by Bill Harris, Louie Gasparini, Rob Foregger, and Paul Bergholm. Initially, Harris provided the impetus for the company after noting the inefficiencies and lack of transparency in personal finance management.
- Personal Capital has a simple revenue generation model, charging advisory fees across three management options. In general, advisory fees decrease as the amount of capital invested increases.
- Personal Capital does not charge any hidden fees, trailing fees, or trade commissions. This keeps it in alignment with the company ethos established by former CEO Bill Harris.
Key Highlights
- Online Financial Advisory and Wealth Management: Personal Capital is an online financial advisory and wealth management service founded in 2009 with the goal of streamlining and making wealth management more transparent for individuals.
- Founders and Background: Founded by Bill Harris, Louie Gasparini, Rob Foregger, and Paul Bergholm, the service aimed to address the lack of streamlined access and transparency in money management solutions available at the time.
- Differentiation and Target Audience: Personal Capital differentiated itself by combining human and algorithmic expertise. It focused on serving more affluent households with over $100,000 in assets.
- Acquisition and Partnership: In 2020, Personal Capital was acquired by Empower Retirement for $1 billion. The company now serves 12 million individuals with over $1 trillion in assets.
- Revenue Generation Model:
- Personal Capital generates revenue by charging advisory fees for managing clients’ capital.
- Three Tiers: Investment Services, Wealth Management, and Private Client, each targeting different investment ranges.
- All-inclusive Management Fee: The company charges a single, all-inclusive management fee annually, ensuring transparency without hidden fees, trailing fees, or trade commissions.
- Fee Structure:
- Investment Services and Wealth Management clients: A flat fee of 0.89%.
- Private clients: Fee varies based on the amount of investment, ranging from 0.79% for the first $3 million to 0.49% for amounts exceeding $10 million.
- Simple and Transparent Model: Personal Capital’s revenue generation model is straightforward, charging advisory fees based on the client’s chosen investment tier and the amount of capital invested. The company’s commitment to transparency aligns with its ethos.
Read More: How Does TD Ameritrade Make Money, How Does Dave Make Money, How Does Webull Make Money, How Does Betterment Make Money, How Does Wealthfront Make Money, How Does M1 Finance Make Money, How Does Mint Make Money, How Does NerdWallet Make Money, How Does Acorns Make Money, How Does SoFi Make Money, How Does Stash Make Money, How Does Robinhood Make Money, How Does E-Trade Make Money, How Does Coinbase Make Money, How Does Affirm Make Money, Fintech Companies And Their Business Models.
Related FinTech Business Models
Acorns Business Model
Affirm Business Model
Alipay Business Model
Betterment Business Model
Chime Business Model
Coinbase Business Model
Compass Business Model
Dosh Business Model
E-Trade Business Model
Klarna Business Model
Lemonade Business Model
NerdWallet Business Model
