Financial Engines

Financial Engines

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Re-engineer Your Investment Portfolio, with Financial Engines

Oct 13, 2003
Review by  
Rated a Very Helpful Review
  • User Rating: Excellent

  • Customer Service:
  • Content Timeliness:
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Pros:Personalized and effective

Cons:Setting up account takes time; fees involved for individual use of most services

The Bottom Line: Very useful financial web site that will help you grow a nice, fat retirement nest egg.


Financial Engines is a personal finance web service that is designed to help investors achieve financial goals. This service was founded by William Sharpe, a Nobel Prize- winning economist who wanted to start a web site that would help make personalized investment advice a reality for all individuals, regardless of personal wealth.

Features of This Service:

This web service was created to give financial advice to the public on saving for retirement through 401K, IRA, etc. Here are some of the services you will find in Financial Engines:

Personal Financial Statements- This statement is sent out to members and like its title suggests, it provides a summary of investments. The total dollar value of your personal portfolio is shown, along with a pie graph that indicates the categorical breakdown of your personal investments (cash, small- cap stocks, large- cap stocks, bonds, etc) by percentage. Then, the statement shows you what your account will likely be worth at age 65, along with a worse- case and best case scenario, using standard deviation, indicating the highest and lowest likely portfolio values in the future. The statement then shows you how much more your portfolio could be worth in the future if just a little bit more money was invested.

On- Line Advisor- This is designed to help investors make better decisions by choosing the best investments to meet their individualized goals. The idea behind the on- line advisor is to tailor the advice to meet an individual’s needs rather than provide just a generalized recommendation. This service is available around the clock, every day of the year.

Professional Advisor- This is a personalized service that offers advice to individuals pertaining to asset allocation, IRA rollover, borrowing, changing investment funds, etc. This service is offered to financial institutions (like mutual fund companies), which then offer the personalized service to their customers. You can also sign up for this, as an individual investor.

Costs for This Service:

If you decide to try Financial Engines, it will cost you $39.95 per quarter or $149.95 per year to get advice on multiple accounts. This includes personal forecasting, portfolio monitoring, newsletters, advice on tax- deferred investments, stock options, and forecasting on non- retirement investments.

If you want to move to the next level, you can choose the total portfolio advice option. This includes added features like advice on taxable accounts and advice on non- retirement financial goals (rather than just forecasting, like the first option). The price of this service is presently set at $300 per year. These rates are subject to change at any time, so you need to check the site before you establish an account.

If you’re already a participant in a retirement plan that uses Financial Engines, consider yourself lucky- you won’t have to pay any out of pocket fees to use this service.

Customer Service:

If you need to contact Financial Engines with general questions about the site or the service itself, you can call toll- free, 866-692-3847. You can also call one of the regional offices around the country. There are locations in California, Connecticut, Georgia, Illinois, Massachusetts, and Pennsylvania.

Final Thoughts:

Financial Engines is one of the better services offered through the internet to help investors maximize their investment returns. I have an account through American Century mutual funds, which happens to be one of the many mutual fund businesses that uses Financial Engines to help its clients meet their financial goals. Access to this service is usually provided free of charge to retirement plan participants. You just logon, access your account, and enjoy the personalized service.

Financial Engines goes a step beyond what most other financial services offer. With the on- line advisor, for example, you get much more personalized investment guidance. This feature attempts to match your investments to your personal needs. Instead of providing a blanket portfolio that advises investors by placing them into general groups (typically, by age groups), this service advises you as a person. It takes into account your martial status, ages of kids, outstanding debts, and all sorts of other criteria. With most other financial web services, you are given sample portfolios but there are usually only a few of them and they don’t take special considerations into an account. If you have a 401K, you probably know what I’m talking about. The samples are scarce and they are broad in scope, with headings like “sample portfolio for ages 18 to 25” or “sample portfolio for those seeking income- producing securities”. These general guidelines are better than nothing, but they are not very useful to most of the public.

The financial statements summary is the area that appeals most to myself and to others, especially when first using this service. You can logon and quickly see what your portfolio is worth today and what it will likely be worth in the future if you continue to invest at your present pace. Often, the growth over time is astonishing to people, especially those who are new to investing. My current retirement portfolio, for example, is forecasting a future value at age 65 of about $1.6 million dollars, with a 5 percent chance that it will be worth about $2.6 million (the upper- end estimate) and a 5 percent chance it will be worth $850,000 (the lower- end estimate). These amounts, of course, are not guaranteed and they are based on the assumption that you will continue to invest at the same pace all the way to the age of 65.

Monte Carlo simulation is used to make the financial forecasting predictions in this site. Monte Carlo simulation involves using a computer to calculate thousands of different combinations of investments and economic conditions and then combining the rates of return together to compute averages. This is considered superior to other methods of forecasting, like scenario analysis, because it takes into account several thousand different possibilities. With other forecasting models, only a handful of different scenarios are used and the averages weighted.

Financial Institutions, employers, and individual investors can all use Financial Engines. Most people are aware of this service via their employer- sponsored retirement plan. Employers, mutual find companies, banks, etc., will purchase the services of Financial Engines and then setup accounts for all the participants in the plan. But you do not have to be in a plan like this to use Financial Engines. Anyone can logon to the site and setup an individual account. And keep in mind that while this site specializes in tracking retirement accounts, it can also keep track of other investments.

Overall, this is one of the better financial services available on the internet. The web site itself isn’t necessarily designed the best way it could be. But it provides very good, very personalized advice that helps you to meet your financial goals and better manage your investment portfolio. If you’re already involved in a retirement plan, consult your management to see if they are using Financial Engines. It can come in very handy as your personal financial advisor.



Recommend this product? Yes


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