No. of Recommendations: 14
intercst,

You wrote, I didn't realize Ric Edelman took over Financial Engines. Edelman was one of the pioneers in high-fee, high-commission financial advising. This can't be good news for Financial Engines advisees.

Old news. This happened like 2017 or 2018.

I work for Microsoft. Microsoft uses Fidelity for its 401(k) services. (As does a lot of companies.) They had also completed a fairly recent (I'm thinking 2015 or 2016) integration of Financial Engines' 401(k) portfolio advisory services with the Fidelity Net Benefits platform not too long after I started working here. You know - the online system they would have you would go through your risk tolerances and recommend a mix of available investment options. It would then project your future growth based on your current elections and their recommendations and give you a target date, etc. as well as suggesting changes to contributions and investment mixes. Before the move to Financial Engines, Fidelity appeared to include some in-house facility that did something similar; but it wasn't as slick and it had some fairly serious issues that made it kind of difficult to use.

Starting early in 2018 Financial Engines mostly pulled the plug on the advice they were giving online (I don't think Microsoft or Fidelity knew this change was in the works) and only offered a stripped down summary of your assets and a growth forecast with none of the "advice" pages that were previously available. Then all Microsoft employees received a snail-mail solicitation from Financial Engines up-selling a robo-advisory service where they wanted to auto-trade your account for some fraction of a percent per year. (I think it was a sliding scale and I would have qualified for 0.25%/year, which was the lowest rate.) This happened right after the Edelman deal, but before it closed - I remember looking into news on Financial Engines at the time and finding this pending purchase by Edelman.

There were a couple of potentially serious problems with their mail solicitation though. The solicitation contained personal details, such as Fidelity account balances, incomes and contribution amounts. This may also have included 3rd party account balances (mine did) if you had gone through the Q&A session some time before the change-over. In particular it included information about non-retirement accounts at Fidelity. Most people weren't aware that they had given Financial Engines permissions to access this information because when it was originally integrated with the Net Benefits site, this detail was buried in the fine print. What's more some people had given Fidelity this information years before the integration and Fidelity had passed the information in bulk to Financial Engines without first asking for permission, so some employees had never even engaged with Financial Engines before this letter arrived.

But even worse *most* employees have *never* gone through any of Fidelity's or Financial Engines "guided assistance" pages and didn't even know they existed. They basically set their 401(k) when they started and forgot about it - after all most new employees are just out of college, so it didn't even occur to them that Fidelity might pass on information to a "partner" about what they make or how much they contribute or what their Fidelity account balances might hold.

Finally the letter from Financial Engines included a set of charts attempting to illustrate a set of hypothetical outcomes that attempted to show how much better having Financial Engines could be for the average employee / investor vs. "going it alone". And yes, the charts were based on real data from each person's accounts and incomes - basically the data Fidelity had on them.

Beyond that in the small print at the bottom of the illustrations there was some wording that basically admitted using Financial Engines would produce results comparable to a Target Date fund. Of course the wording had a lot of spin to it, but it was there in black and white and if you took the trouble to parse what they were saying it was obvious that they were up-selling a product that they themselves admitted probably wouldn't produce results better than the plan's own default fund selection!

Minus their fees, of course.

Anyway there was a pretty big out-cry from a small number of employees that took notice. Many were especially offended by the apparently unauthorized disclosures, despite the fact that the entire company was in the midst of retooling for GDPR compliance! Microsoft promptly terminated their relationship with Financial Engines.

Unfortunately a few months later Fidelity took the absence of Financial Engines as an opportunity to start directly soliciting Microsoft employees for their own set of robo and human advisory services ...

BTW, I heard from a few employees that had signed up when they got the Financial Engines' solicitation. They claimed they did not really understanding what they were agreeing to but figuring Microsoft and Fidelity were endorsing it as part of their benefits. Anyway the biggest complaint I heard was that Financial Engines had liquidated their company (MSFT) stock. The problems with this was two-fold:

1. Microsoft had closed the option to purchase new shares of company stock in the 401(k) plan, but still did not allow for purchases of MSFT in the brokerage link option. This eliminated any potential for a NUA distribution when they retired.

2. They sold MSFT stock in the company ESPP / grant account at Fidelity to re-balance. Many people that have worked here a decade or more are/were sitting on a few thousand shares of MSFT. I'm sure some likely had to pay taxes on 6 figure capital gains as a result.

Anyway ... just my recollection of fairly recent experiences with Financial Engines.

- Joel
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