Personal Capital Builds Self-Service Financial Portal for Mass Affluent

Financial advisory firms often think of their online rivals, personal financial management sites such as Mint.com, as the enemy. But PFM is not a dirty word at Personal Capital Corp. — its founding members owe a lot of their own success to consumer-based financial management dashboards.

The new firm, founded by executives with experience in both finance and technology, such as former Intuit (Mint.com's parent) and PayPal CEO Bob Harris, EverBank co-founder Rob Foregger and former E-Loan CIO Jay Shay, claims to be building a technology engine that combines account aggregation, real-time updates and personalized dashboards with online advisory services. The goal is to take online personal financial management to a deeper level, one in which broad real-time data is sliced and diced by an internal analysis, then married to expert advice on the web, mobile, tablet and phone.

"The PFM operations that are out there are great. But they are software and we're a financial services company that's using technology to drive a better experience," says Foregger, who is Personal Capital's chief strategy officer.

To reach its target audience — "mass affluent" consumers who don't have enough assets to be placed on the high-net-worth bucket but have financial relationships too complex for most discount online tools, Personal Financial is under pressure to provide the sophisticated level of service Foregger is promising, but do so in a scalable and manageable fashion.

To do this, the firm has built its own data management and analysis infrastructure that it is integrating with an account aggregation platform licensed from Yodlee.

"That allows us to control the user interface and the data we are aggregating," says Foregger, who says the internally built data management tools draw on the technology experience of the founders, who have long worked at web-centric financial services firms. "There's a mix of tech pedigrees on our team, and that will be critical to the long-term success that we will have," says Forregger. "When you sit down with a financial advisor for the first time at a traditional firm, a good advisor will put all of your relationships on a spreadsheet. We want to allow clients to pull their entire lives together in one simple place."

The data comes from third party providers, such as banks and mutual funds, and includes information on balances, transactions, and holdings. When run through Personal Capital's engine, the data can be analyzed to produce cross-referenced reports with detail on how different investments are performing individually and in relation to each other.

"For example, we can do a decomposition of a mutual fund and see how much Apple stock is in [the fund]," and how it interacts with the rest of the user's accounts," Forregger says. "Clients will also be able to see what they are paying in fees at other banks on the marketplace."

Consumers and advisors access a dashboard that includes a regularly updated chart on personal spending, investment allocations, one-day change in portfolio, a list of bank accounts, investments, credit cards and loans — whatever financial relationships the user chooses to link to. Other information includes bill reminders and an updated visual chart on real-time changes in the consumer's net worth. There's also a same-page link to the client's personal advisor, with a phone number, chat or email contact option.

Personal Capital, which just launched, employs ten salaried financial advisors who conduct preliminary interviews with prospective clients, oversee accounts and provide advice on risk, rebalancing and tax optimization. The firm contends its internally developed software and minimal brick and mortar presence allow for lower fees; portfolio management fees are less than one percent, a discount over most mutual funds and wealth management firms. Foregger did not share how many customers the firm has signed up thus far, but the new firm is targeting people with assets between $100,000 and a few million dollars, a segment that has about 20 million households.

Personal Capital is mining two areas of marketing opportunity. One is the growing perception that PFM sites don't dig deep enough or provide enough actionable function or advice — a shortfall that Personal Capital and other new niche financial management firms are aggressively targeting.

The other opportunity is the continued growth of consumer demand for more self-directed and web-enabled wealth management, combined with advice when needed. New Aite research says financial advisors to high-net-worth investors estimate that approximately 25% of their clients have a self-directed account. The research also says that of the banks Aite surveyed that currently lack a self-directed offering, approximately half have plans to introduce such a service in the near future. The research also found that an opportunity exists for meeting the needs of younger generations that have grown accustomed to accessing and purchasing products and services both offline and online.

In a statement, Alois Pirker, a research director at Aite Group, said that "over the next decade, we anticipate that wealth management firms will provide investors with several multi-channel offers to appeal to their growing demand for online access to information and tools. Firms that provide a self-directed investing solution will hold an advantage over those that do not, as they will be better positioned to capitalize on the latest consumer technologies and online investing innovations."