Personal Capital is lowering account minimums for its online financial advice service to $25,000, a dramatic reduction from the $100,000 minimum it has maintained since launching in 2009.
Lowering the minimum expands Personal Capital’s services, which combines online wealth management with human advisors, to much a larger market. CEO Bill Harris said the change fulfills his company’s mission to “transform the way people understand, manage and grow their net worth.”
“We’re democratizing access for more people to take advantage of our expertise and services to improve their financial lives,” Harris said in a statement. “By decreasing the investment minimum, we’re giving those just entering a complex financial life access to an experienced advisor – a service wealth management firms typically reserve for millionaires.”
That message is a far cry from the company that touted the appeal of its high tech, high touch approach for high net-worth clients just a few years ago. But with $1.8 billion in assets under management and 6,000 investment accounts (a third of which have more than $1 million invested), Harris said Personal Capital has proven its technology infrastructure and process works. Now it’s easy to scale the platform with smaller accounts and still turn a profit.
“It’s quite gratifying for us, having seen this incredible growth,” Harris told WealthManagement.com. “Being able to take this model and move it not only upscale to the ultra-high net worth but also make it available at an affordable basis… it’s a real validation of the digital advice model that we’ve been pioneering.”
Personal Capital also made its personal finance software available for free, attracting 900,000 registered users. With smaller account minimums, Personal Capital can now offer its premium services to a much larger swath of these users.
Ultimately, it will help Personal Capital maintain the explosive growth some research firms say is necessary for direct-to-consumer online advice models to remain independent.
Accounts with less than $100,000 won’t be getting exactly the same service. Portfolios will be built entirely from ETFs rather than a combination of ETFs and individual securities. Smaller accounts will also be assigned to an advisory team instead of an individual advisor. Personal Capital’s fee structure – a flat fee of 89 basis points – will remain consistent with smaller accounts.
We are in a position to be designing and building the future,” Harris said. “The stuff we are doing today is what the industry will look like 10 to 15 years from now.”
