Financial Engines

FIDUCIARY CONCERNS DRAW MORE CLIENTS TO FINANCIAL ENGINES IN 2003

Investment Advisory and Portfolio Management Services Moving From 'Nice to Have' to 'Must Have'

PALO ALTO, Calif., March 31, 2004 – Financial Engines Inc. announced today that the company grew its client base to 980 plan sponsors and increased the number of participants served by 29 percent to over 3.8 million in 2003. This growth reflects the awareness that advisory services can help employers manage their fiduciary risk by helping participants avoid poor investment decisions.

Plan sponsors who joined the ranks of Financial Engines' clients in 2003 include ABB Inc., Ameren Corporation, the American Chamber of Commerce Executives (ACCE), Boehringer Ingelheim Corporation, CNA Financial Corporation, Commonwealth of Pennsylvania Deferred Compensation Plan, Huntsman LLC and Louisiana Public Employees Deferred Compensation Plan.* Many sponsors cite managing fiduciary risk as a primary reason for hiring Financial Engines.

Industry Experts Suggest Employer Action to Help Participants

According to ERISA lawyer Fred Reish, partner at Reish, Luftman, Reicher & Cohen, plan sponsors may need to take action. "From a practical perspective, there is no difference between deciding not to offer investment advice and simply not addressing the issue at all," says Reish. "From a legal perspective, failing to offer investment advice may pose the greater risk."

David Wray, president of the Profit Sharing/401(k) Council of America, points out that once sponsors decide to offer advice, services should address the reluctant as well as the highly motivated investor. "In the past, employees who did nothing would fail," says Wray. "In the future, we need to help such employees succeed."

Surveys Show Fiduciary Risk Tops List of Employer Concerns

Recent events, such as the Enron case and the mutual fund scandal, have also made companies more aware of their potential liabilities. In the 2003 CRA RogersCasey/IOMA Annual Defined Contribution Survey, plan sponsors listed managing fiduciary responsibility as their top priority over the next three years, and providing investment advice as their second. According to the survey, 31 percent of plans currently offer investment advice.

Jeff Maggioncalda, president and CEO of Financial Engines, sees all of these signs pointing to advice. "Employers are shifting their focus from offering more choice to offering more help," says Maggioncalda. "Driven both by participants who need help and by employers who are seeking allies and experts to help them manage their fiduciary risk, this fundamental shift will characterize our industry over the next 3 to 5 years."

The suite of services from Financial Engines now includes:

• Personal Asset Manager, a portfolio management program that gives employees who lack time or expertise a convenient way to get professional investment management for their plan account and access by phone to a personal advisor;
• Personal Online Advisor, an online service that includes a personalized retirement Forecast, specific fund recommendations across an investor's total portfolio and ongoing monitoring and Progress Reports; and
• Personal Evaluation, a paper-based service that discloses investment risk to every employee and helps them understand where they are with their investments, where they're headed, and what they can do to improve their financial future.

Newest Service Helps Participants Succeed and Lowers Fiduciary Risk

Financial Engines' newest offering, Personal Asset Manager, gives all employees access to personalized, institutional-quality portfolio management for their company sponsored retirement plan account, regardless of their account balances or interest in investing. Personal Asset Manager:

• appeals to reluctant investors who have little time, interest or expertise in investing;
• lowers a plan sponsor's fiduciary risk by helping these participants invest in prudent and diversified portfolios;
• offers to the employer an ongoing process of evaluating, addressing, and monitoring the program; and
• can be added to a plan in the same way as any other service provider under ERISA section 405(c).

Pilots Deliver Results**

In 2003, two Financial Engines clients, Motorola and J.C. Penney, piloted Personal Asset Manager with their existing 401(k) participants. Both companies already offer Personal Online Advisor to their employees, but wanted to offer a managed account solution for employees who were not taking advantage of the online service. Financial Engines validated 10 - 25 percent enrollment rates among current participants over a 1 - 3 month enrollment period, reflecting strong demand for investment management.

Of the participants who enrolled in the pilot program at Motorola:

• Only 7 percent of participants had well-diversified portfolios;
• 45 percent had somewhat high or low risk with moderately diversified portfolios; and
• 48 percent had very high or very low risk with portfolios concentrated in company stock or bonds respectively.

After participating in the program, 100 percent had well-diversified portfolios that would better help them reach their goals.

A combined approach makes the most sense, according to Randy Boldt, director of global rewards benefits at Motorola. "For our employees, one size does not fit all," says Boldt. "With online, managed accounts and personal statements we're reaching all employees with personalized solutions that meet their needs."

Integrated Advice Drives Online Usage

Recognizing that online access will remain an important component of workplace advice, Financial Engines launched an Integrated Advice program in 2003 to make advice more accessible on plan provider web sites. Integrated Advice builds online advice directly into plan provider web sites, making it easy for participants to get help when they need it. Financial Engines worked with three plan providers to implement Integrated Advice programs for 24 plan sponsors in 2003. On average, these sponsors saw a 100 percent increase in new and repeat users per day. By using Integrated Advice together with managed accounts and personal statements, employers can reach and impact more employees.

About Financial Engines

Financial Engines provides investors with honest, personalized advice and portfolio management online, on paper, by phone, and in person. Financial Engines advice technology offers advice to all that is unique to each. Founded by Nobel Prize-winning economist William F. Sharpe, Financial Engines currently serves millions of individuals, over 980 plan sponsors, and many leading financial institutions with a complete advice platform to meet the needs of all investors. For more information visit www.financialengines.com.

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Financial Engines® is a registered trademark of Financial Engines. All other trademarks and service marks are the property of their respective owners. All advisory services are provided by Financial Engines Advisors LLC, a federally registered investment adviser.

* This is a partial listing of Financial Engines' customers added in 2003. These companies, each with more than 1,000 plan participants, have consented to a public announcement of their relationships with Financial Engines. This does not constitute an endorsement or approval of the advisory services provided. All marks are the property of their respective owners.

** All data from the Financial Engines Marketing Database as of December 2003.