Personal Capital latest digital adviser to offer high-yield cash accounts

Consumers can open an account that has no minimum and provides FDIC insurance up to $1.25 million even if they don't invest with Personal Capital

Jun 11, 2019 @ 2:14 pm

By Ryan W. Neal

Personal Capital is the latest digital adviser offering to help investors with cash management.

The hybrid firm, which combines traditional advisers and technology to serve more affluent clients than those handled by purely digital robo-advisers, announced Tuesday that it is launching a high-yield cash account called Personal Capital Cash.

Accounts are insured by the Federal Deposit Insurance Corp. up to $1.25 million, have no minimums and offer an unlimited number of withdrawals. Consumers don't need to invest with Personal Capital to open a cash account, though advisory clients will earn a 2.35% annual percentage yield on the cash while nonadvisory clients will get 2.3%.

Personal Capital is also launching new technology to help customers navigate savings. The Savings Planner tool will help them plan for an emergency fund, pay down debt and save for retirement.

In a statement, Personal Capital CEO Jay Shah said the new tools are aimed at the 2 million registered Personal Capital users who hold a combined $41 billion in cash or money market accounts.

"If those folks are earning the national rate on that cash, that amounts to more than $900 million in lost interest annually," Mr. Shah said. "We saw that and immediately knew we had to do something."

Personal Capital's registered investment adviser manages $8.5 billion in assets, according to its most recently filed Form ADV. The company is launching Personal Capital Cash in partnership with UMB Bank.

Cash management accounts have recently become popular features among many digital advice providers. Wealthfront started offering high-yield savings accounts in February and Betterment launched Smart Saver in August.

(More: The robo-advice market is growing, but changing)

Social Finance Inc., M1 Finance and Acorns all have versions of cash management offerings, and nonadvisory fintech companies are looking to get in on the action as well. Robinhood made a well-publicized attempt to launch checking and savings that backfired, and it is now reportedly seeking a bank charter.

"As these platforms seek new ways to accumulate AUM, diversify revenue, attract new types of customers and differentiate themselves from established industry competitors, they have turned to high-earning savings vehicles," David Goldstone, research analyst at Backend Benchmarking, said in an emailed statement.

Even some of the more traditional RIAs see banking as an area of opportunity. In May, Carson Group announced a partnership with a fintech firm to offer clients mobile bank accounts.

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