Financial Engines Review – Better Manage Your Retirement

Advertising Disclosure This article/post contains references to products or services from one or more of our advertisers or partners. We may receive compensation when you click on links to those products or services

Financial Engines bills itself as your very own financial team, and they do this by providing customers with assistance in retirement planning through an unlikely source: employer sponsored defined contribution retirement plans. If you're thinking about trying out Financial Engines, read our review first.

What Is Financial Engines?

Founded in 1996, Financial Engines is a retirement plan advisory service for employees of participating employer retirement plans.

One of the co-founders is Professor William F. Sharpe, winner of the 1990 Nobel Prize in Economic Sciences for his work on the theory of financial economics. He studied how prices of financial assets are determined, as well as the link between risk and return. A second co-founder is former SEC commissioner, Professor Joseph A. Grundfest.

In 1998 the firm became the first independent online advice platform, and they have worked to remain in the forefront of how people plan, save and invest for retirement ever since. They are now the nation’s largest defined contribution managed account provider. According to their 2015 Annual report, they serve 9.3 million plan participants across 670 employers, with more than $113 billion under management.

Financial Engines describes themselves as,

“an independent investment adviser hired by some of the biggest companies in the US to provide personalized advice for retirement.”

They provide advisory services for employee/employer benefit packages, working primarily in preparing employees for retirement. They also work with both employers and individual employees themselves.

The list of companies they work within the retirement arena is impressive and includes Delta Airlines, Ford, IBM, Kraft Foods and Microsoft, to name just a few.

They also partner with retirement plan providers, and the list of companies is just as impressive here. Fidelity Investments, J.P. Morgan, T. Rowe Price and Vanguard are just some of the investment companies they’re partnered with. We Recommend considering Blooom or Betterment to maximize your retirement plans.

How Does Financial Engines Work?

Though Financial Engines offers their services to both employers and employees, we’re going to focus on the employee.

They provide professional management to employees participating in company-sponsored, defined contribution plans, such as 401(k) plans. They provide management services and advice and can either manage your plan or arm you with information and input so you can manage your plan better.

The service is made available through your employer plan, which is to say it’s offered as an additional benefit — a benefit within a benefit.

Features and Pricing

The website doesn’t offer information on what Financial Engines costs to an employee, but I was able to contact Mike Jurs, a spokesperson for the company. He said the cost to the employee will depend upon the arrangement the employer has with Financial Engines.

A very few employers make the service available to their staff free of charge, but the range is between 0.20% and 0.60% of the value of your retirement portfolio, with the average being “just below 0.40%.” Based on the average, the cost on a $100,000 401(k) plan would be just below $400 per year.

This is the fee you will pay to Financial Engines while using their service. It does not include administrative fees paid to your account administrator or transaction costs to trade and maintain securities and funds.

There are no account minimums. The service is available as long as you have a retirement plan with your employer.

As noted above, Financial Engines provides professional management of your company-sponsored retirement plan. There are numerous tools and features they use to provide this service.

Professional Management. They provide ongoing monitoring and care of your account, which will:

  • Provide you with an investment advisor.
  • Analyze your retirement plan saving options.
  • Consider expense ratios, sales loads, asset turnover, transaction costs and management style of individual fund investments, among other services.
  • Provide you with a progress report showing your account balance, the potential value of your account when you retire and the adjustments they’ve made to reflect your situation and market conditions.
  • Provide detailed retirement checkups with expert advisor representatives who can help you stay on track as you approach retirement.

Personalized Plans: Income+. Financial Engines provides a complete retirement plan designed to help make the most of your money. This includes Income+ a program to help you transition your 401(k) from retirement savings to steady payouts in retirement. It’s the first service of its kind, created for a generation of workers who have built their retirement entirely on a 401(k). Income+ is designed to provide steady income payouts from age 65 to 85. It allocates your portfolio to balance between growth and safety and rebalances your 401(k) to help keep you in a safe zone.

Retirement Readiness. This includes their Social Security Planner, a tool that can show you how to maximize your income from that source.

Online Advice. They can provide specific fund recommendations across your total portfolio, helping you decide which investments to make and how much to invest in each.

Financial Engines

How Does Financial Engines Compare to Related Services?

The process of providing employer-sponsored retirement plan investment advice is complicated by the fact that plans are ultimately under the domain of the plan trustee. Unless an advisory service is working with both the employer and the plan trustee, control over the investment selections and allocations is generally not possible. Financial Engines is able to offer this service because they have exactly that arrangement with well over 500 employer retirement plans.

Many robo advisor services exclude employer-sponsored retirement plans entirely or can do nothing more than offer independent advice, which you can then act upon. Financial Engines handles all of that for you by working on the inside of your plan.

There are other providers available that can provide similar services, but they can be expensive to work with, may choose to work only with high-dollar-value plans, and face the same limitation as robo advisors in that they don’t have direct control over your plan. Many others will work with you only if you are rolling over your employer-sponsored plan to a self-directed plan, such as an IRA.

Pros & Cons

[table “proscons” not found /]

Summary

Participant investment management is a glaring weak spot in most employer-provided plans. Though investment information is often made available to the participants, most have little or no direct investment support.

Considering that many of the people who participate in employer-sponsored retirement plans have little or no investment experience at all, Financial Engines is filling a badly neglected role in the investing world.

Kevin Mercadante

Kevin Mercadante is professional personal finance blogger, and the owner of his own personal finance blog, OutOfYourRut.com. He has backgrounds in both accounting and the mortgage industry. He lives in Atlanta with his wife and two teenage kids.

Related Articles

22 Comments

  1. FE sold someone at our corp on their services. I have multiple IRA accounts and after discussing with the FE rep how they worked, and fees, I thought it would be nice to have them watching over my 401K. It gets the most of my money and the least amount of my attention. BAD IDEA. In year one I put in $24000 and their investment algorithm lost me $26,000. When I asked for explanation, all they told me was that this was all driven by their software, so the software was to blame. So I asked to speak to the software… Needless to say, I do not recommend FE.

    1. Years ago, Fidelity tried to sell me the FE service (over and over again. Even offering a free month of service). I have had a Financial Advisor for many years so I did not need to go with this service. However, I did review the paperwork in detail and it convinced me not only to run away, but run away fast.

      First, was their disclaimer that, as you have have noted, it is all driven by software and they are not responsible for bad decisions made by the software. (Strike 1)

      Second, their fee structure is based on a percentage of the portfolio, not a fixed fee. If it were a human doing the work, I could understand it. But this is a piece of software that spends perhaps 500 milliseconds of CPU compute time on your account and would have collected thousands of dollars from my account for that. (Strike 2)

      Finally, it was difficult to understand exactly who was responsible for the account with FE running things. FE’s language as noted above absolved them of any responsibility and it looked like Fidelity put the onus on me for signing up in the first place. (Strike 3)

      As it is, my account is still managed by me with periodic advice from my advisor but he does not actually manage the account.

  2. Based on my experience with FE I will certainly avoid them. I received a marketing call from them. I told the marketing person that I have a high 7 figures portfolio which is primarily outsourced to professional management, but that I was looking to change around 25% of my portfolio for better tax efficiency and to create some better potential downside protection. I was very specific in stating my needs and said I doubted that FE would have the solution. I was assured that sophisticated tax strategies and portfolio structure was their expertise. I agreed to a meeting with them in their Northbrook, IL office. I prepared a descrption of my portfolio, my cash flow needs, a break down of my current portfolio and my longer term goals. I also filled out their two page questionaire to the best of my ability, although I found the questions extremely vague and ill- worded. My preparation for the meeting took me about an hour. I showed up for the meeting and the investment professional was prompt – the meeting stated on time. But that is about the only good thing I could say about the meeting. The investment guy was a terrible combination of arrogant, and ignorant. After some short preliminaries I tried to talk about my needs, and reviewed where I was personally. He did not look at my write up – tossed it back at me, told me I was day trader that I was bound to loose money and that the words I used were too big. Some of the words that he didn’t understand was Wold Bank, Fed Put and equities. I kid you not. I explained to him that it would be hard for me to be considered a day trader as 90% of my portfolio is professionally managed. He said he didn’t care – he knows one when he sees one. I then told him I hadn’t changed any of my investment managers in years , so I was not chasing the hot new thing. He said “I really don’t care how much will you commit to investment with FE today?” I was noncommital on that question, but did tell him how much I was looking to invest with an advisor. He then got out his pitch book – and went throught the 15 pages in about three minutes. There was a section how to think about investments. He said ” “Well obviously I don’t have to go over this because you think you know everything and use big words like World Bank”. I think we both wanted to wrap up the meeting at that point – but I did try to ask him a few questions I use to get an idea about his thinking. These are questions I have used with service provdiers in the past to get get an idea of their thinking process and character. I asked him what he was reading these days and what his outside interests are. Simple generic questions to get an idea about the guy. It appears based on his answers that he does not read and has no outide interests- doesn’t serve on any boards- does nothing charitable. He then said he wouln’t tell me anything else about himself and that his biography was on the web site, if I cared. That was the end of the meeting. I said “Thanks for the time”. He grunted and walked off. Didn’t see me off at the door.

    Susequently I called his manager, who was polite and listened to my concerns. I told the manager that I was invited to the meeting by them and how the meeting went. The manager was apologetic.

    Another positive – the coffee at the meeting was nice.

  3. I talked to a FE adviser. he looks very professional and nice. but after I read all reviews I don’t know if I should go with FE for my retirement adviser or not? could anyone give me a suggestion?

  4. Very Disappointed: FE is focused on commissions and not their clients. Very disappointed that they moved allocations of my funds without first consulting with me; I provided them with no assessment on my risk tolerance, and explicitly informed them to NOT make any changes without first consulting me. I will be dropping Financial Engines very shortly. I would never recommend FE to anyone.

    1. Amen to that. In the boom years of 2015-17 it seemed that my return wasn’t very impressive considering I was paying FE .35% to “professionally manage” my 401K. Since 1998, it seemed like I did better on my own with a couple of asset allocated funds and an index fund. Needless to say, I went back to investing on my own in early 2017. For as often as they moved my money around in different stocks/bonds, it seemed that I should have been doing better with a “professional money manager”. If I would have stayed with them after I lost my job, the fee would have gone to a much higher…I believe 1%. I got the whole speech about “we do better than the average person during a bear market” but 2015-17 wasnt exactly a bear market.

  5. They quoted me a fee of 1.5% to manage my account. That’s a lot higher than stated in the article.

  6. I was introduced to FE at a former employer about 15 years ago and I really liked the service. After leaving that employer, I signed up for a retail FE account and things were good until about a year ago when I opened a managed account with them. Since then, if there’s a bug in their software or limitation, I seem to find it. And forget about getting a quick resolution to a technical problem. First you have to go through their Advisor level which has been beyond painful. It’s been so bad that they have offered me the service at no charge. What good is free if it doesn’t work correctly?

    It’s been so frustrating for the last 9 months that I’m looking at moving my money somewhere else. How sad.

  7. A company like FE doesn’t guarantee a rate of return on investments. My portfolio gains and loses with market fluctuations. Overall, having professionals with an understanding of the market rebalance my portfolio is well worth the fee. I’m paying for peace of mind.

  8. The only engine they start is their own. In 8 years of having a portion of my 401K with them I never received a call to discuss my portfolio, to understand me. The communication was none existent, I was never assigned an advisor who reached out to get to know me and what I wanted. I rate them high on arrogance, as I went to cancel and got a one and done 800 number phone call. Never a second call.

    Run don’t let them touch your money

    1. I just transferred my money out of their control and placed it into Vanguard. Fidelity charges 0.20% and 0.60%, Vanguard charges .11%

  9. worst experience of my life discussing my retirement with financial engines. I told them I would no longer and never allow them to handle my money. It was like talking to a used care salesman speaking with even the manager.

  10. Most of the services that you mention are available at no additional cost through a relationship with a major brokerage such as Fidelity. Comprehensive planning , projection, budgeting and other tools can be used from the convenience of your laptop. The only lack is that you will need to originate any transactions to re-balance your portfolio, but if that is scary, then you should put your money in an annuity or CDs and be done with it.

  11. I tried to use Financial engines calculator that they supply to their customers. It’s deceptive and not explained very well. e.g. I was told by one support person that the projected retirement income was in today’s dollars but was projected to grow with inflation. Another told me that that was wrong – the income shown was a fixed annuity amount that my investments could buy today, based on the current value of my investments – A big difference! Also the projected income does not appear to take into account the fact that my wife is much younger then I when projecting the length of time the income is projected to last, even though the calculator takes in all the pertinent information about my wife (age, her income, her retirement date, etc.). There are other short comings too – I think Financial engines could have provided a better calculator to people who are paying for their services. You can find better and free calculators on the internet.

  12. I was laid off my job last year and called Financial Engines to cancel their services they agreed to not charge me until I was back on a job that I could continue to contribute to my 401k. They not only charged me anyway, but lied about charging me. IT’S RIGHT ON THE STATEMENTS!!! I guess they think everyone is stupid.

  13. 0.1% rate of return year to date for my portfolio. I’d be better off in a savings account. With their fees I’m losing money in a rising market. They’re so fired.

  14. I signed up in July. Have lost $4k with them already, even though I asked to play it safe given my retirement age. They pushed the stocks, and if they kept with bonds, I would not have lost. And these guys are supposedly professional? Like pro at putting money into their own pockets.

  15. I has been with FE since 2012. After I retired, I do not put extra money in my 401K anymore. So, it is easy to trace performance on my account.
    The performance is worse than 2% every year in my case (compared the account balances in the same SP500 index in recent and old). This means that my account distribution (cash, bond & stock portion) handled by them is not totally correct. Otherwise, my account value should be even or better.

  16. I’ve used Financial Engines since 2002, most of that time paying about $150 per year to have access as an individual investor after I left my employer where I was introduced to FE.

    I use FE to determine where to direct my investments across 4 IRAs. They don’t move my money for me.

    I like that I can set my own risk profile and that I’m using the underlying statistical model and not my emotions to know what moves to make. A couple of times I disregarded the advice and always regretted it.

    Overall, I’m really pleased with FE. They’ve served me well!

    1. I agree with Kip. My opinion is many do not like FE because they must monitor themselves and make the changes. Look at the big picture ! Do you think Vanguard with Trillions in their funds would have FE as an option for managing your account if did not have validity ! How smart do you have to be ? Do need A PHD in Investing to outperform the market.They why have not Hedge Funds done so ?

  17. I was with them for quite a while.. Because of my age they insisted that had to have 25% of my investments in bonds. From January to August 2015 they “managed” to loose 6.8% of my portfolios value. Anyone that thinks that’s good go ahead and give them your money.
    As “professionals” they could sure do a lot better.

Leave a Reply

Your email address will not be published.

Back to top button