Personal Capital Shows the Affluent All Their Money in One Place

Personal Capital, an online financial advisory company, came out of the gate with a big mission. “We’re looking to tear up the financial services world,” says company CEO Bill Harris, former CEO of PayPal .

The startup’s Web-based service has been described as “Mint for rich people,” but it’s more than that. In addition to showing dashboards that help users visualize where their money is and where it’s going, the Redwood City, CA-based company offers actual management services, for a fee.

That’s a lot for a startup to bite off—but with some deep-pocketed investors buying into the vision, Harris says he’s confident the multipronged approach can work.

Back in 2010, Harris and co-founders Rob Foregger and Louie Gasparini saw a huge problem in the financial services market: fragmentation. A lot of affluent households had plenty of money, but no one was helping them take control of it. With various checking, savings and investment accounts at all different institutions, consumers had to make big financial decisions on an ad hoc, tactical basis, instead of in the context of a strategic plan.

A Personal Capital graphic illustrating the distribution of stocks in a portfolio.

“If you believe that is the big problem, then the opportunity to try to take an integrative approach, to try to give households with complex finances a single place where they can view and do everything that’s required, is in many ways the ultimate goal, the Holy Grail,” Harris says. “If we can pull it off, I’ll regard it as culmination of my career.”

The company set out to create a financial services platform that could aggregate all user accounts in one place, analyze a financial position, offer objective advice and even manage users’ assets. The three co-founders convened a “dream team,” Harris says, with decades of experience from other financial services companies like Intuit, Fidelity and E-LOAN, and a bevy of expertise in financial security. Together, the team began to build out a company they hoped could rival brick and mortar financial advisory services.

Part of that meant making sure that the managed assets and information are secure. There were two main goals here: one, lock up the information, and two, design a secure remote authentication scheme. The first piece was doable with good practices like firewalls, penetration testing and encryption of personal data“It’s a pretty well-known art,” Harris says. “A good chunk of our team has grown up in the security business, and I think we’re pretty darn good.” For the second, the team decided to rely on two-factor identification, which requires both something a user knows, like a password, and something a user has, like an ATM card, or in this case, an electronic device like a computer or iPad or smartphone. The State Department uses three-factor authentication, which adds on a biometric identifier, like a fingerprint or an iris scan, but “for what you and I would do in the financial world, two-factor is quite sufficient,” Harris says.

At this point, Personal Capital offers that aggregation and analysis of accounts—even specific breakdowns of assets —and will soon introduce a service that will allow users to move money between accounts from all different institutions through Personal Capital’s interface. On the deposit side, the service can guide users to high-yield accounts, and help manage the process to move money into them.

All the services—including aggregation of accounts and analytics—are free to Personal Capital customers, with the exception of the financial management service, which costs users one percent, a fee Harris calls “substantially less expensive than a typical management relationship.” But since so much of what Personal Capital does is automated, the company doesn’t have to worry about covering the overhead that a standard financial services company does, Harris says.

Personal Capital currently has ten full-time financial advisors on staff. Down the road, the company plans to add on more premium services.

So far, 10,000 users are tracking $2 billion worth of assets through Personal Capital. Harris declined to state how many users were having the company’s advisers manage their money.

Harris and a couple other employees put up the initial $2 million dollars to fund the operation. Being able to bootstrap the company was hugely helpful, he says, because the team was able to spend time building their services without a lot of pressure from outside investors. “In the early life stage of any startup, there’s a reasonable amount of flopping around. We had the luxury of not having to set our direction too soon.”

In its Series A round, led by Institutional Venture Partners, Personal Capital brought in $10 million; in its Series B, it raised another $15 million from IVP and Venrock. The company had brought in all $25 million before it launched last November, and close to half of it is still in the bank.

Personal Capital dashboard on the iPad

Harris was pleased that IVP was willing to invest at such an early stage. “They’re typically a later stage firm, but they made an exception, partly because they’re intrigued with the size of this opportunity,” Harris says.

And the size of the opportunity is staggering. Finance makes up 16 percent of the U.S. GDP, and the consumer piece of it has to be close to ten percent, he says.

Though Personal Capital definitely has its fair share of competitors, from E*Trade to Charles Schwab to Mint to the online services provided by any of the consumer banks, Harris hasn’t seen another company that has provided all these services, or that isn’t tied to a brick and mortar store.

“I think what’s really unique about what we’re doing is the integration,” he says. “It’s one place to see and do all of your financial activity.”

But, then again, there’s a reason that no one else has integrated all of those services, from financial planning to straight banking to credit. “We’re breaking the cardinal rule of startups: focus,” Harris says. “The bet is that despite our multiple focuses we will be able to pull it off that we can build a business. So far, I’m very pleased at our ability to do it.”

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