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I work in the portfolio management software industry and enjoy every second of it. I am truly passionate about economics and following various market industries. I'm also an avid sports fan and follow New York teams. I graduated from Penn State University with a Bachelors of Science in Economics... More
  • The New Age of Financial Advisors is Coming 0 comments
    Oct 4, 2011 10:04 PM | about stocks: INTU, ADVS, MORN, SCHW, BAC, ETFC, AMTD

    With a $25 million dollar investment Personal Capital is on their way to bring an innovative way to give financial advice.  The former CEO of Intuit and Paypal is going lead the way to merge technology and financial advice together. The main goal is to provide an holistic view to an individual's assets by connecting all their bank, brokerage, and loan accounts into one single place on the web. already provides a similar services, but here is the twist. Once you build your portfolio of assets Personal Capital can provide you with an investment advisor to help build a financial plan and make recommendations. With more baby boomers retiring and seeking financial guidance, Personal Capital is hoping to get a piece of the increasing market share.

    Getting a holistic view of all your assets in one place will be a free service that Personal Capital will provide, but to have a financial advisor will cost a percent of assets under management(AUM) starting at a .95% yearly rate. Their target market is between $100,000 - $2 Million. As of now they have about 10 advisors but hoping to have more than 30 by the end of the year.  Personal Capital expects each advisor to handle about 200 accounts.

    Although this may sound like an innovative idea this type of technology has been around for sometime. Register Investment Advisors(RIA)  and other full services brokers have been using third party vendors such as Advent, Morningstar Office, and Schwab Performance Technologies to provide a complete package to their clients.  Third party vendors provide various technologies to allow RIAs to gather all the information and provide an holistic view to their customers. These portfolio management software even allows clients to log in to a personal client portal online to view performance reports, account transactions, position summary and other critical information to provide a holistic view that investors seek.  RIA's usually provide client portals as a value-added service, but Personal Capital is going try to make it a standard within the industry.

    Even though top RIA's and other full service brokers may have a similar technology to compete with Personal Capital, discount brokers seems to be lagging.  According to a recent survey by Corporate Insight, do-it-self investors  are demanding more from their brokers websites such as E*trade, Scottrade, and TD Ameritrade to name a few.

    James McGovern, VP of Corporate Insight, said. "Mediocre account alerts and the lack of performance analysis tools are two of the biggest reasons why firms struggle here. There's no one firm that's doing a superb job." A couple of brokerages are doing a better job than the others: "Merrill Edge has good account performance information, and Fidelity is doing a good job with account aggregation, and its Yodlee tool which allows clients to see information held outside Fidelity. "But there's no one firm that has the perfect package there."

    Even though Personal Capital is ready to bring a new way to provide financial advice,  how many baby boomers are going be comfortable enough to provide all their information over the internet? The main fact is they may never physically sit next to their advisors. For most people money is very personal. However, Personal Capital will be using various other communications methods such as phone, email and video chat, but you still may never physically see your advisor. This type of technology may appeal more to the younger generation that is far more comfortable with sharing information over the web.

    Personal Capital is going be a fun company to watch evolve.  It's going be interesting to see what types of technologies they will use to give them a competitive advantage in the industry. One main complaint about was no being able to pay bills online. One general goal of the whole financial industry is the demand to manage every aspect of someone's finances in one place.  Personal is capital seems to be moving in the right direction to provide a service that people want.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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