Financial Engines through Vanguard

[Dude]

Hello,
I'm using the Financial Engines Investment Advisor Service through my account at Vanguard.* Is there a way to change your life expectancy in the software if you don't want to use the default actuarial table?* I can't seem to find a way to do this.

Anybody on this board use Financial Engines advice as the basis for your portfolio?* If so, have your investment results been good?* It's putting about 1/3 of our retirement assets in actively managed funds and the remaining 2/3 in Vangaurd index funds (not surprisingly).* Thanks.

[Dude]

The Financial Engines tool offered free through Vanguard (for accounts of $100k or more) seems to be the "Total Portfolio Advice" ($300/year) option offered directly at the Financial Engines web site because it will give advice on "non-retirement" goals also (the cheaper version only does retirement goals and gives no advice for taxable accounts).

I wonder if there are any differences between the Vanguard version of this tool and the version you can buy directly from Financial Engines.* Comments?* Thanks.

[Brat]

I used Financial Engines when they served retail customers and we were in the accumulation phase- a few years ago. *Remember that this system is designed for index funds, I found they recommended few actively managed stock funds. *

The way to cheat the actuarial table is to shave a couple years off your age.

You can look at the funds they recommend and then search for similar funds if you don't like their suggestion. *Be sure to look at the StD and Beta of their suggestion as you search for comparables. *Were I looking for suggestions for specific comparables I would look on FundAlarm for 'no-alarm' funds and then ask on their discussion board.

The one area that I tended to replace was in bond funds. *IMHO that is one product area where expertise pays off.

[LOL!]

Hey Dude,

I want to give you my personal thanks for starting this thread. We have accounts at Vanguard that are on autopilot and that we never look at, so I did not realize that FinancialEngines was free through their site. I also found that Vanguard does a portfolio analysis that shows one's asset allocation in a way that is much better than Morningstar IMHO.

Anyways, thanks to you, I discovered some free tools for me to use going forward. Muchas gracias! - LOL!

[Dude]

Thanks Brat, and you're welcome LOL!

[km4hr]

I "use" Financial Engines (FE) at Vanguard; at least I look at what it has to say. I haven't put its recommendations into action yet.

FE has some problems. One big one is that FE doesn't know what bonds are. So if you have any bonds to include in your analysis, it's a problem. FE does handle bond funds however. So unless you're only using funds you won't get an accurate analysis from FE.

In addition to having access to FE at Vanguard I also have access through my 401k account a JP Morgan. JP Morgan only gives me the basic version of FE however. I have to pay $200 for the upgraded version if I want my whole porfolio included in the recommendations.

As someone noted, you get the "full" FE version through Vanguard. But It only recommends Vanguard funds. What's strange is that when I access FE through Vanguard it doesn't know anything about JP Morgan funds. I have to access FE through JP Morgan to include their funds in the analysis.

There's also a problem with the way linked accounts are handled using FE on Vanguard's site. Linked accounts are those outside Vanguard. I have several. FE refers to them all by one generic name, something like "Linked Acoount...". So when I'm looking at the analysis created by FE I can't easily tell one linked account from another. I asked Vanguard technical support to fix this. They said the problem is FE's fault. They also said they weren't getting enough complaints to justify fixing it. I also asked FE technical support about the same issue. Guess what they said.

In summary, FE is a pretty powerful tool, but it's also pretty limited. It's interesting to see what it has to say but if you can't put your entire portfolio into it then it's not all that great.

[Brat]

I used FE as an independent retail customer, but that was a while ago. Is anyone using the independent version today?

Hey, Brewer... where are thee?

[Retire Soon]

You can get a free one year subscription to Financial Engines at www.terrysavage.com.*I believe this is the "full version."

[LOL!]

I was quite a bit frustrated with FE at Vanguard this past weekend.

On Vanguard web site, I entered all our non-Vanguard accounts.* The Vanguard web site was able to handle most of it.* A couple of mutual funds it could not classify as to asset class.* Sometimes there was a reason: new fund less than 6 month old.* Sometimes there was no reason TWEIX was classified as "Other".* For the unknown fund, I substituted similar funds. OTOH, FE could classify TWEIX without problem.

You should be careful with what you enter at Vanguard because it will be transfered over to FE intact.* You should enter the cost basis of your non-Vanguard assets, for example, because FE will take into account capital gains taxes when making recommendations.

Over at FE, I was able to add more accounts and funds if I wished to.* I was able to edit account names as well, so I could tell where things came from.* I was able to enter fixed income assets with the rate they were paying..

When I let FE check whether I was on track for retirement,* it gave useful advice ... up to a point.* When I asked it to improve on our current portfolio and asset allocation it completely fell apart.*

By "fell apart" I mean the following:* it recommended selling most of our international funds and replace them with Vanguard Tax Exempt Intermediate Bond fund, the V GNMA fund and the V Tax Exempt MM fund.* The new asset allocation was completely wacko inconsistent with many other sources such as Bernstein, Merriman, et al.

FE also has a fund rating from 1 - 10.* Of course, all index funds and ETFs get a rating of 10.* The Dodge & Cox funds get a rating of 10 as well.* Some other funds which have done extremely well in the last 5 years did not get such high ratings.* As far as I could tell, the higher the turnover in the fund, the lower the rating.

In the end, FE was limited in what it could do.* And I felt I had to take any advice with a huge grain of salt.* I can see where a gullible DIY person would be completely disserviced by FE. I can see where FE would help a financial advisor really snow others.

[unclemick]

Hmmm

Strictly speaking - I can't put my entire portfolio into anything either.

The 15% belonging to the Norwegian widow (utes, tel, oils, fianancial, other div players) march to their own drummer as a group.

However - handgrenade wise - FireCalc and ORP seem to give me enough 'feel' to keep me in the ballpark.

As a Vanguard customer - perhaps someday I'll putz with Financial Engines. But not in any hurry. Plain vanilla lifecyle - aka roughly 60/40 balanced index have been carrying the load so far in ER.

If I do something 'dramatic' like switch from Lifestrategy to Target Retirement Series - may consider putzing with Financial Engine calc - or not.

heh heh heh heh

[LOL!]

Quote:

Originally Posted by unclemick2 However - handgrenade wise - FireCalc and ORP seem to give me enough 'feel' to keep me in the ballpark.

As a retiree with some years experience, FE is completely useless to you.

FE is really for the folks in the accumulation phase.

BTW, I had no problem putting individual stocks in Vanguard and FE understood them as well.

[unclemick]

LOL!

Perhaps so. Perhaps so. I'm trying to cure myself of that pesky accumulation phase - I don't call them 'hobby stocks' as much anymore.

And ? isn't FE geared more toward the 'true blue' slice and dicer - more so than a run of the mill Boglehead balanced index oriented guy

[LOL!]

Quote:

Originally Posted by unclemick2 And ? isn't FE geared more toward the 'true blue' slice and dicer - more so than a run of the mill Boglehead balanced index oriented guy

No, I don't think so. FE easily breakdowns a balanced fund in to asset classes, bonds, stock, foreign, etc. You can also restrict the funds it uses for its advice. This restriction is required because most folks are limited in their employer-sponsored plans to a couple handfuls of funds.

[km4hr]

LOL!,

You said,
>Over at FE, I was able to add more accounts and funds if I wished to. I was able to edit account >names as well, so I could tell where things came from. I was able to enter fixed income assets with >the rate they were paying..

What happened with your edited account names after you logged out of FE? Have you logged back into FE yet? Unless something changed in the past couple of months, I think all your edited changes got discarded when you logged out. That was one of the frustrations I pointed out to Vanguard. But Vanguard said it was FE's fault. FE said it was Vanguard's fault. Neither took responsibility for fixing it. I'm left with the impression that there aren't many people using FE at Vanguard. Otherwise Vanguard would be motivated to fix it.

You are correct about entering fixed income assets and the rate they are paying. But you can't specify a duration. For example, you can enter a bond paying say 5%. But you can't specify that the bond has a life of say 5 years. FE apparently assumes you're going to make 5% forever. That leaves me doubtful about the value of the overall analysis.

FE has lots of funds in its database. But not all. So if you have funds that FE doesn't know about then what value is your analysis? (I does allow you to specify generic funds.)

I find FE's fund rating system interesting. But if you compare FE's ratings to to Morningstar, fundalarm.com, or other rating agencies they are often at odds with each other. Where does that leave you?

With all it's faults you have to take FE's advice with a grain of salt.

[Brat]

Quote:

Originally Posted by km4hr I find FE's fund rating system interesting. But if you compare FE's ratings to to Morningstar, fundalarm.com, or other rating agencies they are often at odds with each other. Where does that leave you? With all it's faults you have to take FE's advice with a grain of salt.

I don't know of any financial advise resource that I would accept without salt.* Each has their strengths and weaknesses.* At least with FE I know that fund selection is math driven, not commission driven, and I can play with the options to see the impact.*

[cute fuzzy bunny]

I had the opposite problem of having info discarded...I used FE about 2 years ago and when I went back to have another look it still had all that old stuff, and merged my new stuff with it. I had to manually pick out all the old stuff.

After tweaking it a while I came up with the same conclusions I did the last time I tried it. An interesting exercise but I wouldnt do anything it suggested for a variety of reasons.

Its *really* not made for an early retiree.

It suggested I change my rollover IRA and Roth from stocks to all bonds. Not too great of an idea considering I told it I was 20 years from 'real' retirement.

Seems VERY hung up on the developed market indexes and tax managed small cap. Almost every run I did it suggested I take money away from broader holdings to get into these funds. Honestly, I dont think i've even given either of these funds a first glance, let alone a second. Maybe I should?

When I turned up the 'risk' knob, it had me jump out of everything I was in in exchange for almost all growth stocks in large/mid/small cap funds. Unless I missed something, value trumps growth for both risk and return over most periods.

I'm of the same opinion I was before. You could do better by reading a few books and picking your own stuff unless you just cant grasp investing concepts. What it tells you is probably on par with the typical mill-producted fee-only rookie financial advisor.

[tlg501]

I spent about 90 minutes playing with FE, most of it's monte carlo simulations are gibberish. I find it easier to make an assumption something like, inflation will be about 3% and my rate of return will be about 5% i.e. a low risk rate of return will be about 2% above inflation or slightly more than what TIPS are paying,

[LOL!]

Quote:

Originally Posted by km4hr What happened with your edited account names after you logged out of FE? Have you logged back into FE yet?

Yes, my edits were sticky and still there.

I also tried FE via the TerrySavage web site.* It is a direct use and for its suggestions selects from a wider set of mutual fund families than the Vanguard site does.* As you can imagine, the Vanguard site restricts FE's advice to Vanguard funds or their fund access funds.

I would recommend to use the Savage link for those who wish to try it. Your account via that link is free for a year. I would not pay for use of FE.

[Brat]

Quote:

Originally Posted by () ... Seems VERY hung up on the developed market indexes and tax managed small cap.* Almost every run I did it suggested I take money away from broader holdings to get into these funds.* Honestly, I dont think i've even given either of these funds a first glance, let alone a second.* Maybe I should? When I turned up the 'risk' knob, it had me jump out of everything I was in in exchange for almost all growth stocks in large/mid/small cap funds.* Unless I missed something, value trumps growth for both risk and return over most periods. ...

The reason it behaves this way is that it is completely statistical research driven.* The only data available is from countries with developed markets.* Whether or not value trumps growth is a statistical question and FE's selections may depend on your years to retirement vs cyclical market movements.

This type of tool is what financial advisors are using.* I think it has a place for a portion of an retirement portfolio, the 'look back' to predict the future segment.* The other part of the portfolio should be the 'look forward' to find new economic opportunities.

What I appreciate is that I know the advisor's bias and the basis upon which recomendations are made.

[cute fuzzy bunny]

I meant it recommends the "Vanguard Developed Market Index" fund. I thought there was plenty of data on emerging market and other funds. I suppose if there isnt (and maybe there isnt), then a tool that only makes fund recommendations on old funds which supply enough data isnt super useful.

I looked at the 'developed market index' and 'tax managed small cap'. I dont think i'd really want to own either. In particular, I would hold the regular small cap or small cap value in my ira rather than the tax managed small cap in my taxable fund. I'd get a better return, pay less, and not suffer ANY tax implications.