A Very personal, Personal Capital Story

Congratulations to the entire Personal Capital team! Today the company announced it is being acquired by its strategic partner and investor, Empower Retirement. The very attractive price makes us not only financially happy, but grateful that a sophisticated global financial services firm recognizes the innovative way in which Personal Capital is revolutionizing wealth management, and the special care and value we deliver to our customers. This is only a waypoint on Personal Capital’s journey, and there is so much more they will accomplish, especially with the reach, resources, and power of our new owners.

My personal story regarding Personal Capital began in early 1997. I was a Product Manager for Intuit’s Quicken product, which at the time was still burned on discs and shipped in boxes. The Internet was gaining steam however, and I wanted to be part of it, so I asked to work on Intuit’s fledgling personal finance portal (remember that word?), known as the Quicken Financial Network. The executive sponsor for QFN was Bill Harris, and I distinctly remember the first meeting in which I encountered Bill. There were a group of us already in a conference room when Bill came bursting into the room with the energy of Sonic the Hedgehog and the wisecracking confidence of Jon Stewart, flinging ideas at the whiteboard like Jackson Pollock. I knew then and there that this was not your typical big company executive, but an entrepreneurial executive, the likes I had never seen.

After another year or so, I finished my time at Intuit and joined Venrock as a Kauffman Fellow. Bill went on to be CEO of Intuit and PayPal after that. Bill then went into an entrepreneurial phase, mostly outside of fintech, during which I made it a point to invite him out for burritos every six months or so at Bravo Taqueria on Woodside Road. Many of his business ideas were beyond my coverage zone, but in late 2009 he started talking about a return to personal finance. His idea was to offer best-in-class digital tools for managing personal investment portfolios (from my Quicken days I knew firsthand how hard this was), while also offering investment management services under an RIA model for those that wanted help managing their nest eggs. This was in stark contrast to the way the PFM category, pioneered and dominated by Intuit, had operated–build great software but leave financial services to traditional financial institutions. The phrase Bill used was combining “high tech with high touch”. At the time the fledgling startup was called SafeBank, and I was immediately intrigued, especially by the strategy of using highly sticky free digital tools to establish a large base of customer prospects, and converting some percentage of them to paid clients of the services business over time.

In July of 2011 Venrock led the Series B in what by that time had been renamed Personal Capital. The company was still in Alpha, and would first launch to the public a few months later. I distinctly remember the issues we wrestled with while making our investment decision:

1. Would affluent clients fork over sizable accounts to an advisory firm whom they had not met in person?
2. Will customers react positively to our global multi-asset-class allocation strategy, which sought to control risk and optimize taxes through passive trading with continuous rebalancing, or did they want superstar stock pickers like Ken Fisher or the top wirehouses to generate Alpha?
3. Would the customer acquisition costs and the economics of staffing live advisors be viable?

Within the first year or two of launch, the answers to questions 1 and 2 became clearly “yes”. It seems almost quaint in these days of COVID, where so much of our daily routine and heretofore IRL services have moved online, that there was a time when investment advisors met almost all of their prospective clients in person. From day zero Personal Capital’s model was phone and interactive video based, and our customers have always preferred it that way. Likewise, with global assets in ETFs (a classically passive, albeit mass produced, strategy) now surpassing $6 trillion, it is important to remember that this represents 6x growth since the year that Personal Capital was started. It turns out that Personal Capital’s highly personalized, tax efficient, Smart Weighting strategy was exactly in line with what customers wanted. 

Question three, however, took many years of hard work and fine tuning to get the business model humming. Affluent and High Net Worth households are a small percentage of the population and neither easy to reach, nor inexpensive to win as clients for such an important and considered purchase. It takes patience, human interaction, and demonstration of value to land clients of the size that Personal Capital does. RoboAdvisors (a term that barely existed when Personal Capital started) tend to go after young, digitally native clients with small accounts, and simple financial lives, and thus can acquire customers with no human interaction. Personal Capital has always offered a hybrid model of expert human advisors, combined with world class digital tools, which is not the cheapest operating model, though we’ve always believed it is the right model. It is validating to see that the industry (Robos included) has realised that wealth management is the type of service that truly benefits from skilled advice from a highly trained human who takes the time to understand a client’s needs and answer their myriad of questions. Through tireless iteration, massive investments in digital tools, and economies of scale (our investment tools are now used by over 2.5M users and we provide advisory services to over 24,000 households), Personal Capital has achieved a business model that is both efficient and highly scalable.

There was one more challenge which Personal Capital faced and nailed. CEO transitions are never easy. Founders are iconic and integral, and Bill Harris was both of these. But Bill is an entrepreneur and firestarter at his core–a one man idea factory that never rests. After nearly 8 years of leading Personal Capital, he himself realized that the company was now in rigorous execution mode, and needed a CEO whose core was disciplined and thoughtful execution. Jay Shah joined Personal Capital in October 2009, nearly two years before the public launch. He was Personal Capital’s COO for almost 5 years, and in 2017 when Bill decided to step down as CEO, Jay was the perfect choice to take the baton and lead the company through its next phase. It was as seamless a transition as I have ever seen, and I have tremendous respect for both of them for the way they handled this changing of the guard. Jay has done a phenomenal job scaling the company, sweating every detail, metric, and strategy, and has matured into a phenomenal Chief Executive. He is smart, hard working, and a truly good person. He is also lucky to have, and deserving of, the world class team that works with him 24×7 to serve our clients, building a business to be proud of. 

And on that point, beyond achieving a terrific exit, everyone at Personal Capital is proudest of the way we put our clients’ needs first, the award winning technology, and the incredibly high ethical standards which guide every decision. Thank you Personal Capital for letting me be a part of the journey.