Is Financial Engines right for you?

financial enginesDear Mr. Market:

If you were asked to list two or three of the largest Registered Investment Advisory (RIA) firms in the country which ones would come to mind first? You’d definitely hear many of the names associated with Wall Street and the investment industry. Names like: Merrill Lynch, Charles Schwab, Fidelity and Wells Fargo – while these are certainly large firms none of them are RIA’s. We’ve written on several occasions what an RIA is and how they are driven by their fiduciary responsibility to their clients. A simple online search of RIA’s will show that the largest firm is nearly 40% larger than any its closest competitor. It specializes in assisting individuals in managing their company retirement accounts and has become a behemoth in the investment industry. Financial Engines, Inc. has risen out of relative obscurity and is quickly becoming a household name.

Financial Engines is based out of Sunnyvale, CA, is publicly traded under the ticker symbol FNGN, and currently manages over $90 billion in assets! To put this in perspective the second largest RIA firm is Fisher Investments with assets under management of just over $50 billion. Fisher Investments is a marketing machine and if you have a portfolio over $500,000 in value, you’ve most likely received one of their post card mailings or solicitation emails.

Financial Engines, on the other hand, is a relatively young company and is the creation of some of the brightest minds in the industry that made their mark in the late 1990’s. The founders of the firm are Nobel Prize winning economist William Sharpe, Stanford Law Professor Joseph Grundfest, Attorney Craig Johnson and Jeff Maggioncalda. While the firm went through some minor growing pains, they have certainly found their target market – working with individuals and managing the investments in their company retirement plans. Continue reading

What’s my number?? – Making sense of Financial Planning

Financial Plan #2Dear Mr. Market:

Let’s be honest… the vast majority of hard working Americans have one question in common – Will I be able to retire?  The circumstances pertaining to each individual are as different and unique as the individual themselves. The one connecting point we all have however, is to know if we are going to be able to reach our goals, whatever they might be.

Have you seen some of the commercials where an actor asks you if you know how much you need to retire? Other commercials have people carrying around a huge cut-out of a random numbers …like $1,456,298 around with them.  What’s your magic retirement number? Where should an individual go to get their many questions answered?  With few guarantees how is anyone to know if they are on track to reach their goals?

There is certainly not a lack of financial planning services and products available to consumers today.  It can actually be a bit overwhelming and frustrating for the average person.  Any Financial Plan should be viewed as a guide or a benchmark, serving as a road map to the ultimate destination.  As with other financial service offerings there are many different elements that need to be taken into consideration. Let’s take a moment to look at some of the more important ones and put it in plain English using some common phrases we are all familiar with….. Continue reading

The New “MyRA” … A Direct Route To Retirement Or A Bad Detour?

Dear Mr. Market:

MyRA#7

If you ask the average hard working American what their top financial concerns is, it’s that that they won’t be able to retire.  We could certainly go on and on about different solutions and how people can get on track to make their dreams a reality but today we will focus on a new program offered from the government.  On January 29th President Obama delivered his State of the Union address.  One of the takeaways from this speech was a new retirement account called MyRA (short for My Retirement Account).

Currently over half of the U.S. workforce is not covered by a retirement plan through their employer.  MyRA is targeted at low to middle-income workers, encouraging them to save for their own retirement.  Contributions will be funded through automatic payroll deductions where individuals can start with as little as $25 and contribute amounts as small as $5.  Individuals would be guaranteed that their account would never go down and they will not pay any fees on the accounts.  Sounds like a great product doesn’t it?!  Well let’s take a step back and dig a bit deeper to really explore what the MyRA is all about….

The MyRA can essentially be viewed as a way to introduce individuals that have not saved or funded a retirement account to the many long-term benefits of doing so. At this point companies are not required to be involved in the program, if President Obama wants to force employers to participate a vote from Congress would be required.  The accounts would be funded with after tax dollars much like a Roth IRA.  While it will be funded with payroll deductions individuals will be able to keep their accounts when they change jobs.  MyRA is subject to Roth IRA income and contributions limits.  Individuals can invest up to $5.500 per year (or $6,500 for investors 50 or older); once the owner reaches the age of 59 ½ they can make withdrawals tax-free.  There are also no required minimum distributions (R.M.D.’s). Continue reading

Looking Under the Hood of your Company Retirement Plan

Dear Mr. Market:

401k under the hoodIf you ask any hard working American what their goal is the answer will usually have some something to do with retirement.  While this common goal should be attainable through focus and discipline the market has certainly thrown its fair share of setbacks at investors.  For most Americans their home is their largest asset and second is their retirement plan (401(k), 403(b), Simple IRA, SEP IRA, etc).  You have a limited amount of control on the value of your home but how can you manage and monitor your retirement plan to help make your retirement goals a reality?  In this article we will take a step back to the basics and look at factors that will have a profound impact on the performance of your retirement accounts and what you can do to control them.

Last fall legislation was passed requiring 401(k) providers to completely disclose their entire fee structure to participants. Investors will now be able to see what fees are associated with the various funds in the plan and what they are paying to participate in their employers retirement plan. According to CNN Money, a working couple will see nearly a third of their investment reduced by these fees over their careers– that amounts to nearly $155,000!! Schwab reported that nearly 30% of investors had absolutely no idea that they paid any fees for their retirement plan. Continue reading