Financial Engines
FINANCIAL ENGINES REACHES $10 BILLION IN MANAGED ACCOUNTS AS COMPANIES UPDATE 401(K) PLAN DESIGN
Shift to Automatic 401(k) Plans and "Qualified Defaults" Fueling Continued Growth of Managed Accounts
PALO ALTO, Calif., May 2, 2007 – Financial Engines, a leading provider of independent investment advice and managed accounts to 401(k) plans, today announced that it now has more than $10 billion in assets under management (AUM) in managed accounts. More than 125,000 401(k) participants have their 401(k) accounts professionally managed by Financial Engines -- a number that continues to grow as more companies offer managed accounts as a standard part of their retirement plan benefits.
Financial Engines first introduced managed accounts to the market in September 2004, reaching the $10 billion AUM milestone in just over two years. According to data from industry analyst Cerulli Associates, more than $25.24 billion was invested in managed accounts across all providers at the close of the third quarter of 2006*.
Of the $10 billion in assets managed by Financial Engines, 85 percent ($8.5 billion) was originally invested in portfolios that were either at an inappropriate risk level or poorly diversified before enrollment in managed accounts. Once enrolled, Financial Engines begins transitioning managed accounts participants into diversified personalized portfolios at the appropriate risk level.
"In addition to receiving strong demand from plan sponsors and participants, we’ve been able to demonstrate that managed accounts are helping those participants who need it most",explained Jeff Maggioncalda, president and CEO of Financial Engines."We are excited about having the opportunity to have a real impact on participants’ 401(k) portfolios and their ability to reach their retirement goals."
Policy Changes Spur Interest in Managed Accounts
The Pension Protection Act of 2006 provided employers with direction and incentive for automating their 401(k) plans, making it easier for participants to enroll, increase 401(k) savings and invest appropriately for their time horizons. The Department of Labor is currently working on guidance that would specify appropriate investment defaults for 401(k) plans. These are the latest innovations to the 401(k), which has been steadily evolving since its official creation by the IRS in 1981. Across the nation, plan sponsors are currently making sure their plans are up-todate.
"The original assumption behind the 401(k) - that all employees would want to manage their retirement accounts themselves - has turned out to be flawed," explained Jeff Maggioncalda,president and CEO of Financial Engines. "Most people want someone to do it for them, and managed accounts have proven to be an effective way of helping those who need it most. Given the growing success of the combination of automatic enrollment and managed accounts, the majority of 401(k) participants could end up having their accounts professionally managed as plan sponsors adopt the latest 401(k) advancements."
A managed account within a defined contribution plan is a professionally managed investment portfolio in which an independent investment manager allocates the plan participant's account for them. Using the existing investment choices within the plan, managed accounts create diversified personalized portfolios consistent with the participant's risk preferences and retirement horizon.Financial Engines works with large plan sponsors and leading 401(k) recordkeepers to make the managed account program widely available.
About Financial Engines
Financial Engines is a leading provider of independent investment advice and managed accounts to 401(k) plans. Founded by Nobel Prize-winning economist, William F. Sharpe, Financial Engines serves millions of employees at many of America's largest corporations. Patented advice technology and institutional-quality investment methodology allow Financial Engines to offer an array of advisory services to meet the needs of a wide range of investors. For more information, please visit www.financialengines.com.
# # #