Financial Engines is planning to expand the services it offers 401(k) participants in its managed account offering, through more comprehensive financial planning that includes advice and guidance on items such as insurance, health care and estate planning.
The firm, which manages $113.4 billion, is making the move following its acquisition of registered investment adviser The Mutual Fund Store. The deal, which was
announced last year and
closed in early February, is aimed at providing participants
more access to human advisers and the ability to deliver clients a more holistic financial plan, executives said.
“More of our clients, particularly those with higher balances and more sophisticated situations, were asking for a broader, more holistic type of advice than we'd been able to offer them historically, so we're responding to those requests,” said Christopher Jones, executive vice president of investment management and chief investment officer.
That type of advice to 401(k) participants will include “multiple goal planning, the ability to look at health care expenses, long-term-care insurance, life insurance, those kinds of topics,” Mr. Jones said, adding that basic estate planning will also be part of the package.
Pre-retirees tend to be the ones asking most for these types of services, he said.
“I think it would be a tremendous value, if it's properly applied,” said Anthony Domino, Jr., managing principal at Associated Benefit Consultants. “I would caution the end user to make sure it's tailored to their specific needs.”
These plans fit in among a
broader uptake by plan sponsors of financial wellness programs in the workplace, with growing recognition that poor financial health of employees could lead to
delayed retirements and less productivity at work.
Morningstar Inc., another popular managed account provider in 401(k) plans, in 2014
acquired HelloWallet Holdings Inc. and incorporated its managed account and investment capabilities with HelloWallet's financial wellness services for participants.
Financial Engines has taken other steps toward broader financial planning capabilities, having
debuted personalized Social Security planning for pre-retirees almost two years ago.
Mr. Jones declined to offer a timeline for the integration of the new services into Financial Engines' model, but CEO Lawrence Raffone hinted at a time frame during a recent investor call announcing fourth quarter earnings.
“We'll be kind of testing and learning over the course of this year, all synergies that we're thinking about will be 2017 and beyond,” Mr. Raffone said, according to a transcript of the earnings call.
“[The Mutual Fund Store has] taxable account management. They have a very scalable financial plan, so we're rationalizing that across kind of a lightweight multi-goal financial plan all the way up to a more sophisticated one,” Mr. Raffone said.
The new services could encompass a sort of multi-tier pricing model participants could choose from, the chief executive added.
“There is a chance to have a higher fee product out there as well,” he said. “And so, that's part of the other thing we're hoping is that, we could put a higher tier out there with much more service, maybe a dedicated adviser, a financial plan, multiple account advice.”
