Profile: Financial Engines Inc (FNGN.OQ)
24 May 2013
Financial Engines, Inc. (Financial Engines), incorporated on May 13, 1996, is a provider of portfolio management services, investment advice and retirement income services to participants in employer-sponsored defined contribution plans, such as 401(k) plans. Financial Engines helps investors plan for retirement by offering personalized plans for saving and investing, as well as by providing assessments of retirement income needs. Financial Engines Income+, a feature of the Company’s portfolio management service, is designed to prepare a portfolio to generate income in retirement, and calculates and facilitates the payment of steady recurring payouts throughout retirement. It derives its revenue from Financial Engines Advisors L.L.C.’s investment advisory and management services through its contracts with plan providers, plan sponsors and plan participants. It derives its platform revenue from recurring, annual subscription-based fees for access to the services, including Professional Management, Online Advice and Retirement Evaluations.
Financial Engines’s Professional Management service, a managed account service is designed for 401(k) participants, who want professional portfolio management, investment advice and retirement income services from an independent investment advisor. With this service, plan participants delegate investment decision-making and trading authority to the Company, which is referred to as discretionary authority. When plan participants enroll in its Professional Management service, the Company uses its Advice Engines to create personalized, diversified portfolios and provide ongoing Professional Management. Its investment recommendations are limited to the investment alternatives available in a 401(k) plan. During the year ended December 31, 2011, it expanded Professional Management to include non-discretionary advice on non-managed tax deferred retirement accounts.
Members enrolled in the Professional Management service receive a Retirement Plan, which analyzes their investments, contribution rate and projected retirement income. The Retirement Plan provides advice on their annual contribution amount, shows how the Company proposes to allocate their investments, and forecasts their retirement income relative to a retirement goal. Member portfolios are reviewed every three months and transactions are executed, if necessary, to reallocate the investments. Members also receive a quarterly Retirement Update that shows how they are progressing towards their retirement goals and describes any changes that the Company has made to their investment allocations. Members can, at any time, call one of its Advisor Center employees, who are registered in various states through the Investment Adviser Registration Depository as Investment Advisor Representatives, or log in to a Website to check their progress or further tailor their portfolio to their personal circumstances.
Financial Engines Investment Advisor Representatives, and certain call center personnel of the plan providers with whom the Company work, have access to the Financial Engines Professional Advisor, its client relationship management application, enabling the advisor to change or add to the personal information used to manage the member’s account and explain to the member the impact of any changes on the member’s projected future 401(k) balance. Registered Investment Advisor Representatives can modify member inputs but not Advice Engine outputs and recommendations. As members approach retirement, they are offered a Retirement Checkup, which is a phone-based consultation with an Investment Advisor Representative. During the Retirement Checkup, the Investment Advisor Representative confirms the member’s retirement goal, reviews the member’s retirement income forecast and helps the member close the gap, if any.
The Company designed Income+ to provide portfolio management and to provide participants with steady monthly payouts from their 401(k) accounts during retirement. Early in retirement, Income+ provides payouts from the 401(k) assets. Later in retirement, it is designed to enable participants to obtain a lifetime income guarantee by drawing upon the 401(k) assets to make an optional annuity purchase outside of the plan. The Company do not provide the annuity. With Income+, members can contact an Investment Advisor Representative to start payouts, stop payouts, or make additional withdrawals from their 401(k) accounts so they have access to their savings as needed. With Income+, members receive Retirement Plans that show how the Company plans to allocate their investments, as well as quarterly Retirement Updates that show any changes it has made to their investment allocations. If the member has requested payouts, the Retirement Plan also shows the current payout amount and the planned payout schedule, and the Retirement Update presents the history of recent payouts. If the member has not requested payouts, the statements will show the member’s estimated total income at retirement, considering various income sources such as Social Security, defined benefit, or other 401(k) plan accounts. Members with Income+ can also discuss their total retirement income picture with an Investment Advisor Representative. As of December 31, 2011, the Company does not charge Professional Management members or sponsors any additional fees for the Income+ feature. As of December 31, 2011, the Company do not issue, sell, distribute, or solicit the sale of annuities or other insurance products or services, nor does it receive, accept or charge fees, payments or commissions related to any purchases of insurance products or services.
Financial Engines’s Online Advice service is an Internet-based service. With this service, plan participants may elect to follow the online advice without delegating investment decision-making and trading authority to the Company. This Internet-based service includes interactive access to simulation and portfolio optimization technologies through its Advice Engines. Plan participants see a forecast that shows how likely they are to reach their desired retirement goals, get recommendations on which investments to buy or sell and simulate how their portfolios might perform under a range of economic scenarios. They can also explore different levels of investment risk, savings amounts and retirement horizons, as well as get tax-efficient advice on accounts other than their 401(k) accounts. The service offers investment advice on the fund options available in a 401(k) plan and also offer advice on the investment options available in other non-plan sponsored accounts. The Online Advice service is integrated with single sign-on to the plan provider’s 401(k) Website, which enables data pre-population and the ability to initiate transactions directly from the Online Advice service. A version of the service is also available to retail investors directly through the Company’s Website.
Financial Engines, when Professional Management is being offered in a plan, send each eligible plan participant a Retirement Evaluation or similar retirement readiness assessment upon rollout and annually thereafter, together with Professional Management enrollment materials. Retirement Evaluations highlight specific risks in a plan participant’s retirement account, provide guidance on how to reduce those risks. Retirement Evaluations are based on data provided by the plan provider and include an evaluation of how well the plan participant is investing and saving in the retirement plan. Specifically, the evaluation considers the individual plan participant is using the 401(k) account, including investment decisions (risk, diversification, employer stock concentration) and contribution rate. During the year ended December 31, 2011, it continued to implement the integration of personalized online assessments of certain types of investing risks into plan providers’ Websites. This integration allows participants who log onto the provider Website to view personalized assessments of their portfolio online and to learn more about the Company’s services.
The Company competes with Morningstar, GuidedChoice, ProManage, BlackRock, T. Rowe Price, Fidelity, Vanguard and Merrill Lynch.
Financial Engines Inc
1804 Embarcadero Road
PALO ALTO CA 94303