Personal Capital wealth management (0.89%) vs. Betterment (0.25% fee) vs. ???

[drobots]

I probably need a face punch for this but please hear me out... I've done a ton of reading about FIRE, have been using YNAB for ~8 years, etc. etc. and use Personal Capital as a dashboard to track my net worth. I recently saw their $200 cash offer so had a couple calls with them. Their fee is 0.89%, which isn't great but 98% of my non-employer plan investing is through Betterment, and their fee is 0.25%. They guy made a lot of good points on the calls and I do like the idea of having someone that can always see all my accounts up to date helping make investing decisions (and they do that on accounts they can't even manage directly, like my current employer plan and my kid's 529 account). It looks like just their comprehensive tax loss harvesting alone would likely make up for the 0.64% difference in fees so might be worth it. Thoughts? Of course the other option is to ignore Personal Capital, take my money out of Betterment, and put it all in ETFs/index funds with no management fee at all.

[EvenSteven]

I probably need a face punch for this but please hear me out... I've done a ton of reading about FIRE, have been using YNAB for ~8 years, etc. etc. and use Personal Capital as a dashboard to track my net worth. I recently saw their $200 cash offer so had a couple calls with them. Their fee is 0.89%, which isn't great but 98% of my non-employer plan investing is through Betterment, and their fee is 0.25%. They guy made a lot of good points on the calls and I do like the idea of having someone that can always see all my accounts up to date helping make investing decisions (and they do that on accounts they can't even manage directly, like my current employer plan and my kid's 529 account). It looks like just their comprehensive tax loss harvesting alone would likely make up for the 0.64% difference in fees so might be worth it. Thoughts? Of course the other option is to ignore Personal Capital, take my money out of Betterment, and put it all in ETFs/index funds with no management fee at all.

The bolded is probably going to be the best way to go, but if you feel you absolutely must pay someone a AUM fee, .25 < .89

[dandarc]

+1 to what EvenSteven wrote. Manage your own investments, but if you can't or won't do that, then AUM fees are just like any other investment expense - the goal should be to minimize.

[bacchi]

I'm surprised anyone has any TLH left to do, except for very recent investments.

A 0.89% fee is very high when a couch or bogleheads portfolio works fine. If you're in ETFs already, I'm also skeptical that they could get enough TLH to cover that fee (and, remember, the fee has to be lower than the taxes reduced, not just be lower than the capital losses).

https://www.bogleheads.org/wiki/Lazy_portfolios

[drobots]

Thanks all. The Bogleheads lazy portfolio is an interesting option. For those of you who don't use Personal Capital, Betterment, or any other robo-advsisor, is that what you do? Just pick a few index funds and/or ETFs and set it and forget it?

[EvenSteven]

Thanks all. The Bogleheads lazy portfolio is an interesting option. For those of you who don't use Personal Capital, Betterment, or any other robo-advsisor, is that what you do? Just pick a few index funds and/or ETFs and set it and forget it?

Yes. I keep things as simple as I think reasonable. I have chosen an asset allocation that I can live with and not fret or fiddle over it. I chose 10% fixed income (bonds), 60% domestic equities (US), and 30% international equities. There are lots of other percentages that are very reasonable also.

50% bonds, 25% US, 25% international? Sure!
25% bonds, 75% US, 0% international? Sure!

This can be accomplished very easily and cheaply with only 3 funds. I rebalance to my target AA once per year, if I remember. Less frequently if I forget.

[Michael in ABQ]

Thanks all. The Bogleheads lazy portfolio is an interesting option. For those of you who don't use Personal Capital, Betterment, or any other robo-advsisor, is that what you do? Just pick a few index funds and/or ETFs and set it and forget it?

Yes.

My 401k is 75% S&P 500 - 15% small cap and 10% international
My Roth IRA is just in the Vanguard Total Stock fund (VTSAX).

Maybe in a decade or so I'll look at adding some small amount of bonds. But I'm young and won't touch this money for years so I'm 100% stocks. Plus I'll have a small pension so that basically makes up for the lack of any bonds in my portfolio.

[RWD]

Do a little reading and manage it yourself.
https://jlcollinsnh.com/stock-series/

[Sanitary Stache]

0.89% of 100,000 is $890 - Personal Capital fee
0.04% of 100,000 is $40. This is what is costs to invest in VTSAX through Vanguard.

Is it worth $850 to pay someone to earn you less than you can investing in the market index?

[roomtempmayo]

Thanks all. The Bogleheads lazy portfolio is an interesting option. For those of you who don't use Personal Capital, Betterment, or any other robo-advsisor, is that what you do? Just pick a few index funds and/or ETFs and set it and forget it?

Yes.  I'm not going to pay someone to underperform the market.

[Telecaster]

It looks like just their comprehensive tax loss harvesting alone would likely make up for the 0.64% difference in fees so might be worth it.

Except that tax loss harvesting is over rated.  You can only deduct $3,000 per year if married filing jointly.  It is dead easy to realize $3000 in losses if your portfolio is of any size.  And then you are decreasing your basis, so that results higher taxes down the road. 

[Mr. Green]

It looks like just their comprehensive tax loss harvesting alone would likely make up for the 0.64% difference in fees so might be worth it.

Except that tax loss harvesting is over rated.  You can only deduct $3,000 per year if married filing jointly.  It is dead easy to realize $3000 in losses if your portfolio is of any size.  And then you are decreasing your basis, so that results higher taxes down the road.

This is especially true once you FIRE if your "income" results in no federal income tax. It's almost pointless.

[cool7hand]

+1 to the people who have picked a simple portfolio and use a spreadsheet to manage when to rebalance and tax-loss harvest our own investments. I won't lie, tax loss harvesting your own investments is work, but every dollar saved doubles in 10 years.

[MustacheAndaHalf]

Thanks all. The Bogleheads lazy portfolio is an interesting option. For those of you who don't use Personal Capital, Betterment, or any other robo-advsisor, is that what you do? Just pick a few index funds and/or ETFs and set it and forget it?

Have you looked at Schwab, Fidelity or Vanguard?

There's a classic book in it's 12th or 13th edition called "A Random Walk Down Wall Street".  You can also see SPIVA data showing most active funds trail index funds most of the time.  The longer the time frame, the fewer funds beat the index.  Warren Buffet bet that the S&P 500 would beat a mix of hedge funds over 10 years, and he was right (the bet was ended early because the hedge funds were so hopelessly behind).  So there's an argument to be made that 100% total stock market will beat whatever choices your robo-advisor picks.

Hedge funds charge 2% of assets and 20% of profits.  That's much more lucrative than working for Betterment.  If the hedge funds lose against the S&P 500, what are Betterment's chances of beating it?

I think you'd do better at Vanguard than Betterment.  You can buy 100% Vanguard Total Stock Market (fund: VTSAX, ETF: VTI) with an expense ratio of 0.03% per year.  Diversification would be better, but it's still a solid choice.

[reeshau]

Someday you will have a $1 million portfolio.  And you will figure out that Personal Capital is costing you $8,900 a year, and doesn't seem worth that much.  But you will be too intimidated to take on managing your own large portfolio.  Or you may feel the same way about Betterment's $2,500 A year, so you take the plunge but end up following some fad, and lose a lot of money.

Managing your own portfolio is building a skill.  Do it as early as you can, while your portfolio is small, so that your early mistakes will also be small.  Then, over time when your portfolio is large, you will make fewer mistakes and will be a confident custodian of your wealth and whatever you want to do accomplish with it.