CEO BIll Harris says part of the secret is hiring human advisors to stoke referrals.
A decidedly newfangled Personal Capital Corp. is citing an old-fashioned recipe for success after adding a stunning $1 billion of managed assets in just six months — a 50% leap — to hit the $3 billion AUM mark. In the last six months, the RIA, which charges triple the rate of Vanguard’s Personal Advisor Services, and attracts significantly higher AUM clients than Betterment LLC, has seen its average account size head north to $320,000 from $300,000.
It has 3,000 new clients, its client-retention rate has edged up to 96% and the number of its site users who convert to paying customers has risen to more than 6%.Basically, the answer from Bill Harris, CEO of Personal Capital, sounds like the one you’d hear from any successful RIA’s principal — success begetting trust begetting referrals and the consolidation of assets from existing clients. Personal Capital hit the $2-billion mark on his 60th birthday.
“[It] revolve[s] around demand and satisfaction with the service, he says. “If you look from the top of the funnel to the bottom, we’re seeing greater referrals, and greater demand. This word of mouth is really increasing our awareness. Everything is growing and it’s driven by the customer demand for this kind of digital advice service and satisfaction with it once they become a user or client.”
The result, he says is that “we’re getting new assets and new clients. We’re also seeing more contributions from people who are existing clients. They may be giving us about 10% annually but now they’re [consolidating] more on top of that and it’s really running hot.”
The techno — but not robo — approach is indeed proving effective, according to Scott Smith, an analyst at Boston-based Cerulli Associates.
Scott Smith: This is the challenge for traditional advisory firms: not being replaced, but actually having advisors adopt the technology available to them.
“I think overall this does show how digital platforms can be used to leverage the power of personalized advice. Instead of operating as a robo platform, Personal Capital is using technology to connect advisors to clients who may not reside in a neighboring town. I think this is the challenge for traditional advisory firms: not being replaced, but actually having advisors adopt the technology available to them in order to optimize their practices,” he writes in an email.
Personal Capital offers phono-advisors and digital services to an upscale segment of clients and charges them about 90 basis points. Vanguard charges 30.
Granted, despite its impressive growth spurt, Personal Capital is nowhere near to catching up to VPAS’s $41 billion in AUM — a sum which tops Personal Capital’s AUM by a factor of 13. But as the law of big numbers kicks in, Vanguard’s growth rate has leveled off to 33% in the six-month period ended Dec. 31. Vanguard’s assets are also mostly of cannibalized nature with the Malvern, Pa.-based giant winning accounts from existing clients.