Financial Engines is evolving into a hybrid robo-advisor
Veteran retirement plan robo-advisor, Financial Engines, with $104bn AUM, has revealed plans to give clients more access to people. The firm, which is responding to demand from customers and plan sponsors, said that over time it has come to recognise the important role that advisers play. The move highlights a growing trend from pure robo to hybrid advisors similar to the Vanguard model. In the past few weeks, both Blackrock and Aberdeen Asset Management have reported news of acquisitions in the space as reported in previous briefings.

Financial Engines, a retirement plan robo-adviser that has been in the industry for almost two decades, will be giving its clients more access to human advisers, the company said Wednesday.

The service, which is free for all 401(k) participants with access to Financial Engines, will be similar to a hybrid robo model, such as Vanguard Personal Advisor Services or Personal Capital, where clients can call in and ask about their accounts. Although the company has had an adviser call center since 2001, vice president Kelly O’Donnell said it is expanding that service because of a greater overall need for living, breathing advisers.

“We recognized over time the important role advisers play,” Ms. O’Donnell said. “Based on customer demand, based on demand from plan sponsors, we wanted to be more formal and make this offer more available.”

“We just see the benefits to the end customer, for making good decisions about retirement, when financial advisers are involved,” she said.

All of the advisers at Financial Engines, which has $104 billion in assets under management according to its latest ADV filing, have at least a Series 65 certification, and some have other designations such as the certified financial planner or Social Security credentials, Ms. O’Donnell said. She declined to disclose how many advisers the company employs.

TAKING QUESTIONS

Clients will be able to call with specific questions on their retirement and outside accounts, savings rate recommendations or Social Security claiming strategies, or more general questions about weathering market volatility, budgeting their assets or using target date funds appropriately.

Callers can ask for the same financial adviser they’ve spoken with in the past, though that same adviser may not always be available.

The move highlights a shift from robo to human, though perhaps not a shocking one, said Matt Fronczke, an analyst and engagement manager at kasina. Other robo platforms such as Betterment, Hedgeable and Schwab, all of which have institutional sides to their businesses, have already jumped on this trend. BlackRock Inc. recently acquired robo-adviser FutureAdvisor, and plans to switch it from a business-to-consumer model to a business-to-business model. Even Capital One has jumped in with its own hybrid robo platform, to help clients navigate their investments.

“Digital advice platforms are beginning to realize a human element is a piece of the overall servicing,” Mr. Fronczke said.

The use of human advisers for these robo-advisers will continue to grow as their clients begin to experience more complex financial situations.

COMMODITIZATION

Other platforms have been competing with each other for features like tax-loss harvesting or lower fees, which some argue put the spotlight on the commoditization of the robo-adviser. . By offering advice from a traditional adviser — and doing it for free — Financial Engines is flexing its muscle, suggesting it can do anything others can do — maybe even better, he said.

“It is one way to differentiate the platform,” Mr. Fronczke said.

And it turns out that a lot of people seek professional financial advice from humans. According to an Oliver Wyman study from July, 58% of households with under $100,000 in investible assets and 75% of those with more than $100,000 in investible assets seek professional finance advice outside of their workplace for financial planning. It stated individuals most value adviser’s input on financial planning, monitoring and trusted advice.

The study also found that investors with advisers had a minimum of 25% more assets than non-advised individuals. For individuals aged 35 to 54 with $100,000 or less in annual income, those with advisers had an average of 51% more assets than those without.

But it doesn’t have to be one or the other. Laura Varas, principal of research firm Hearts and Wallets, said for clients, it isn’t about nice technology or a human adviser. Financial Engines shouldn’t forget that.

“I think they are responding to the pressures to have this,” Ms. Varas said. “People want their cake and to eat it too. They want a great interface and want someone to talk to them about the content in that interface.”