Personal Capital – The Future of Wealth Management
First Published Thursday, 3rd November 2011 02:27 pm from Xand : pcurley
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dir="ltr">Our Customer Spotlight series is intended
to showcase the interesting ways Xignite's clients are using our
financial market data web services.
Xignite would like to introduce you to Personal Capital
( href="http://www.personalcapital.com">www.personalcapital.com),
which was just launched in September, but already has made quite
an impact in the wealth management industry winning "Best in
Show" at Finovate Fall 2011, and being described by Bloomberg
Businessweek as "Wealth Management for the Internet
Age".
Personal Capital's goal is to offer a
simple wealth management solution for the complex lives of their
affluent clients. The firm was founded by some of the leading
financial technology and e-finance executives, and is backed by a
well-known Silicon Valley venture capital firm.
We recently sat down with Bill Harris, Chief Executive
Officer of Personal Capital, who was formerly CEO of PayPal and
Intuit, and Jay Shah, Chief Information Officer of Personal
Capital, who was formerly CIO of E-Loan.
Q:
Why was Personal Capital created?
Bill Harris
- We really created Personal Capital to fill a gap that
most of us feel in our everyday lives, that is how to manage our
financial lives, when everything is so fragmented. Many of us
have brokerage accounts, IRAs, 401ks, checking accounts, credit
cards, mortgages, all strewn across multiple institutions, but
there is no one place to go to make sense of it all. No one place
where we can make a rational decision about our finances and plan
for the future. Personal Capital was formed to allow people to
make sense of their complex lives, in a comprehensive way, so
that they can then take action.
Q: How does
Personal Capital work?
Bill Harris
- It really only takes 15 minutes to understand the
power of Personal Capital. The first 5 minutes you spend linking
all of your accounts to the Personal Capital website. This allows
us to assemble a baseline of your financial situation on at least
a daily basis. The next 5 minutes minutes we present you with an
easy to understand analytic framework that gives you a graphical
representation of your entire financial situation. Finally, in
the last 5 minutes we recommend the ideal asset allocation based
on your financial profile and other factors. All of this is for
free. At this point you can then decide whether you want to work
with one of our advisors so that we can help you manage and
implement your financial plan.
Q: How is Personal Capital different from a more
traditional wealth manager or investment advisor?
Bill Harris - There are a few significant
differences but perhaps the biggest is the mode of interaction.
With a more traditional approach much more face to face
interaction is required, otherwise you don't get very much
visibility into your finances. At most you probably get sent a
statement every quarter or so but that's it. Just establishing
your relationship with a traditional wealth manager can be a
pain. It typically involves three trips to your advisor: (1) You
drive to the advisor's office to decide whether you want to do
business with them. (2) You then get back in your car to go home
to gather all of your financial documents into a shoebox and then
deliver it back to the advisor. (3) Finally you return to the
advisor when they have made sense of your financial situation and
are ready to make recommendations. Obviously, this mode of
interaction just doesn't work for busy people. Personal Capital
is different, we offer multiple ways to interact with us in
real-time. We let our clients decide what works for
them.
Q: Why has the wealth management
industry evolved so slowly?
Jay Shah
- There is no doubt that it has been slow. We have seen
some innovation in the tools used by the wealth manager, but
these are designed for the advisor and do not really impact the
client directly. We've also seen progress on the self-directed
side with online brokerage accounts but essentially the
experience of the traditional wealth manager client has not
changed much over the years.
Bill Harris
- I think it has definitely has been slow. When I look
at the last almost 100 years the two biggest innovations
that come to mind have been the
brokerage account, which was developed in the '20's, and the
mutual fund, which was developed in the '60's. The brokerage
account allowed individuals access to a variety of investments.
They could, for the first time, personalize their investment
choices. It is very much the craftsman model. The mutual fund,
and more recently the ETF, have allowed an efficient way to
access professional investment combined with the ease of buying
and selling. Mutual funds, however, are about mass production,
one size fits all. The next innovation that Personal Capital is a
part of, will combine the personalization of the brokerage
account, with the efficiency of the mutual fund industry. This
mass customization of the wealth management industry is being
made possible by the Internet and other technologies.
Q: How would you describe Personal Capital's investment
philosophy?
Bill Harris - Our
approach is based on today's accepted academic investment theory.
We do not seek to beat or time the market. We are not about
generating alpha. For us the most important long-term decision is
the allocation decision. We are also very focused on risk
management, and are aware of how harmful volatility can be. Once
we understand our client's financial situation and goals, we then
implement their strategic plan, using mainly individual
securities and ETF's. Finally, we are very tax sensitive. Pre-tax
results are not what will help you after retirement.
Q: How has Xignite's on-demand market data helped
Personal Capital?
Bill Harris - I'd
first like to say that we are huge fans of Xignite. Your whole
web services approach to market data is as slick as a whistle.
We've been delighted with our relationship, particularly with
your ability to meet our tight time-lines for our September
launch.
Really a major part of our business is
data management and aggregation. Ultimately, our goal is to
provide our clients with a simple financial dashboard, so that
they can then make an informed decision about the future. Without
Xignite's real-time market data the information presented to our
clients would be stale and not as actionable.
Q: What are Personal Capital's plans for the
future?
Bill Harris - Personal
Capital's future plans are centered around deepening the analysis
of our clients' financial lives, while at the same time
broadening our understanding of their entire financial picture.
Finally, we will continue to extend that mode of interaction with
our clients that we talked about earlier. Our approach is that
our clients should be able interact with us anywhere or anytime,
through multiple touch-points, without ever having to go to a
branch. With this in mind we will be releasing iPad, mobile
phones, and some innovative browser-based apps in the very near
future.
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