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Question for Fidelity Customers about "Financial Engines"
Old 05-01-2008, 09:33 PM   #1
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Question for Fidelity Customers about "Financial Engines"

My 401K is in Fidelity and they have provided us with a link to another website company that we can utilize to help us with asset allocation. The site is "Financial Engines" and the person behind this is Bill Sharpe.
Here is cut and paste from the site:

Founded in 1996 by Nobel Laureate Bill Sharpe, we provide investment advice to individual investors. Headquartered in Palo Alto, California, Financial Engines is trusted by hundreds of organizations to provide advice to over 6.2 million employees*.
Bill founded the company because he wanted to give individual investors access to the same high-quality investment advice he provided to pension fund managers and other investment professionals. To create your personalized advice, we stick to a sound investment philosophy.This service is provided at no charge to you. We are a fee-based financial advisor, which means we are paid a flat fee for our services. Unlike commission-based advisors, we are not paid for transactions you might make based on the investment advice we provide to you.We are a Registered Investment Advisor (RIA) with the Securities and Exchange Commission. We are an independent, privately-held corporation.

I was wondering if other Fidelity customers also have this link to use and what you think of the link and the value of being able to use it to help with your asset allocation.
I like Fidelity and I would think that this is a good addition to their service. I would like to hear from other Fidelity customers about this site and ask if they have looked at it or have used it to help create your asset allocation?
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Old 05-01-2008, 10:18 PM   #2
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Fidelity manages our 401k and we also have access to Financial Engines at no charge. Its just another tool, mainly geared to AA. I think its limited usefulness, but if you're willing to put in some time and effort, it could be a pretty good companion to Firecalc or whatever other planning tools you like. When I ran Financial Engines, it bawked because I had no bonds and recommended xx percentage in bonds and would have re-allocated all my other funds to get the percentage it deemed necessary....with no regard whatsoever to the fact that interest rates were low and due to rise at the time. So I did somewhat follow the advice, but added some timing logic that resulted in a better outcome.

I should add that presumably FE does a more detail analysis of the ingredients of the funds that your k-plan has available than simply going by the fund style (e.g. Large Cap Growth). Fido also has a range of analysis tools built in that breaks down my AA by sector (presumably using M* or some other 3rd party). I particularly like the 'style box' analysis that shows my portfolio vs. a broad index.
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Old 05-01-2008, 11:01 PM   #3
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Vanguard also offers FE for asset allocation and retirement planning. The tool provides an analysis to determine if your savings and asset allocation will be enough to retire. It also makes recommendations on AA.
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Old 05-01-2008, 11:10 PM   #4
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Note that FE is a tool to help you determine the likelihood that you'll reach your savings goal using various asset allocations. Unless they've changed it, it does not model the withdrawal phase of your retirement. That's not necessarily a shortcoming, just a limitation to be aware of. FIRECalc does a good job in helping to analyze the various asset allocation variables during the spending phase.

FE is a good, solid tool for what it is intended to do. I found it useful
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Old 05-03-2008, 01:13 PM   #5
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Thanks for the comments everyone. I was just curious to see if others had some thoughts on it. We are all probably beyond this tool, but for young people just starting their 401K I would recommend they take a look at it to help them get started and stay on track. It looks like something I wish I had when I first got started. There are some new employees here and I was mentioning this to them and they had never looked at it. In fact, they spend too much time "day trading" mutual funds instead of long term investing. Oh well, they'll regret that later perhaps.
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Old 05-03-2008, 01:24 PM   #6
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I have a Fidelity 401K, and I don't see it anywhere on the site. Might it be something your employer has to pay to provide at an additional cost?
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Old 05-03-2008, 01:41 PM   #7
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I used FE when they were a start-up and available to individuals (boy does that date me!). It is designed for investors in the accumulation stage, with maybe 5+ years to go, IMHO. For those of us who like and trust statistical analysis it works well but I found I needed to set aside some 'funny money' it invest using my own feelings about the market.

It is a tool, a pretty good tool, but rarely the end all for most retirement investors. Buying Windsor, Wellington, or Oakmark Balanced would probably work just as well over the long term.
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Old 05-03-2008, 01:44 PM   #8
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I've used FE for years from the VG site and found it extremely useful in the accumulation phase. It uses monte carlo simulation. I don't use it now as I am less than 2 years away from RE. I think it even says on the site that it is best for those more than 5 years out from RE. It simply assumes an annuity when it shows the estimated range of incomes you can expect at your target date.
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Old 05-03-2008, 03:58 PM   #9
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Quote:
Originally Posted by Brat View Post
I used FE when they were a start-up and available to individuals (boy does that date me!).
Welcome to the geezer club. I still get quarterly e-mails inviting me to check up on my free retirement progress report.

FE's biggest value is in making sure you've thought of everything. I like its ability to suggest other funds (especially when FE is part of your 401(k)) and its questions on expenses, taxes, and other retirement aspects.

They're overwhelmed, however, by new ETFs. They used to collect 6-12 months on ETF performance and then add it to their Monte Carlo simulations. But it's been over two years since PowerShares International Dividends (PID) hit the street and I don't think FE is going to bother modeling it.
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Old 05-03-2008, 08:16 PM   #10
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Quote:
Originally Posted by ziggy29 View Post
I have a Fidelity 401K, and I don't see it anywhere on the site. Might it be something your employer has to pay to provide at an additional cost?
Ziggy, I think you might be right. I know another employer who does not offer this site either. I thought that my company must be paying to have us licensed to use it.
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