The American People’s Stance on The Fiduciary Standard

Financial Engines has been a strong supporter of the U.S. Department of Labor’s (DOL) proposed Conflict of Interest rule, which would require professionals who offer retirement investment advice to serve as fiduciaries to their clients—legally requiring them to put the best interest of their clients ahead of their own. In fact, we’ve been serving as a fiduciary for our clients since our founding 20 years ago.

With the DOL expected to issue its final version of the rule any day now, we surveyed more than 1,000 Americans to learn more about how important conflict-free investment advice is to them, as well as their understanding of the proposed rule. We found that while the general public may be unfamiliar with our industry jargon, they are overwhelmingly supportive of leveling the playing field and requiring financial advisors to work in their clients’ best interests.

Key findings from the survey, “In Whose Best Interest? What Americans know and what they want when it comes to retirement investment advice,” include:

  • A majority of American adults (66%) say they do not know what a “fiduciary” is when it comes to financial advisors.
  • Almost half (46%) of American adults mistakenly believe that all financial advisors are fiduciaries who are legally required to put the best interests of their clients first when it comes to retirement.
  • Among adults who already work with a financial advisor, a large portion (41%) are not sure if their advisor is a fiduciary or not.
  • 93% of Americans said it is important that all financial advisors be legally required to put their clients’ best interest first when providing advice on retirement savings.
  • 77% of American adults said they would support requiring all financial advisors who provide advice on retirement assets to be legally required to put their clients’ best interest first.

While it’s still unclear how the rule will net out, it’s clear that people believe the underlying intent of the conflict of interest rule is important, and support the notion that financial advisors should be legally required to put their clients’ best interest ahead of their own.

Are You Using Target-Date Funds Correctly or Shooting Yourself in the Foot? [infographic]

New Financial Engines Research Shows Why 401(k) Participants Move Away from Target-Date Funds Over Time

Today, we released a new report, (“Not So Simple: Why Target-Date Funds Are Widely Misused by Retirement Investors”) that reveals why 401(k) participants tend to move away from target-date funds as they age and accumulate more assets. Surprisingly, it’s not for lack of understanding about how target-date funds work.

Check out our infographic below for an overview of the key findings and what you can do to make sure you’re not shooting yourself in the foot when investing your 401(k).

What Do 401(k) Investors Want Next? An Advisor on Their Side [infographic]

Technology has helped make investing easier than ever, but it can be frustrating when you just want to talk to someone about your money. Our new research finds that consumers want more than technology: they want a real, human financial advisor in their corner.

We offer that help at Financial Engines.

To learn more about what people had to say, we put together this infographic illustrating some of the findings from our latest research report, “The Human Touch: The Role of financial advisors in a changing advice landscape.”

Take Our Survey: What Does Financial Freedom Mean to You?

As we celebrate Independence Day later this week, we thought it was a good time to stop and think about what freedom might mean to us — especially when it comes to money.

We’ve put together a brief survey to help us understand our collective relationship with money and what it means to be “financially free.”

Take the survey

We’d love to have you take the survey today and we’ll publish the results here, on our blog.

Compelling Research Points Out You Are Not Getting Money That’s Yours to Take

Our company just released a new study (and infographic) that finds regular people – like you and me – are leaving retirement savings money on the table. The numbers are fairly staggering, totaling 24 BILLION(!) dollars a year. What’s this unutilized money I speak of? Your company 401(k) match – the money your company is willing to invest in your future.

Here’s the catch: they will only give it to you if you are willing to invest in your own future.

That means you need to start saving in your 401(k).

I realize saving money can be really hard; especially if you are not making all that much to begin with. And the research bears that out – the people most likely to miss out on this money are those making less than $40,000 per year. Nearly half of those earning $40K or less aren’t saving enough for their retirement to get the full employer match, and as a result, they’re leaving that employer match on the table.

The problem is, not getting that money will end up hurting you a lot more in the long run. It’s money you aren’t getting to invest and you aren’t getting to do what other investors do: put your savings to work. And to those of you 30 and under – nearly half of you are missing out on the company match. What you might not realize, though, is that time is money and you have even more time to invest!

When you start investing, you’re on the right track.

So somehow you have to figure out how to stash away at least enough to grab that full company match. There are lots of ways to do this – and yes, all of them will be painful in the short term if you aren’t earning a lot – but you will really be happy with yourself if you can figure this out. I did a little research and here’s the advice from the experts:

Just start. Get on your company Intranet, call HR or walk to their office and find out how your company’s plan works. Matching schemes can vary (the most common for large employers is  dollar-for -dollar up to 6% of what you put in.). Find out what your employer offers.  Then sign-up. You don’t have to go big right away, just start (here’s why).

Begin investing. Now start paying attention to your 401(k). Sure, retirement might feel like a lifetime away – and just a dream – but that doesn’t matter. Right now, you are going to act like an investing pro. If you have access to Financial Engines, we’ll help you. Once you start, don’t be surprised if you start to have a little fun. It feels good to know you are investing your money!

Bump it up. If you get a pay increase, pay yourself first. That means increase how much you are saving in your 401(k) (for yourself) until you are getting all of your company’s match. Again, your HR team can help you figure this out. It might take a few raises to get to the full match, but you will get there. And because these are pre-tax dollars, you’ll find it really won’t hurt your take home pay that much.

Start smart. When you start your next job at a new company, before you ever see your first paycheck, start contributing to your 401(k) to get as much of the match as you can. That way, your new paycheck will immediately reflect the hit and you’ll automatically adjust to it.

As a working parent, I know how hard it is to juggle it all. It blows my mind to see us – as a country of working people – leave so much money untouched. We’ve worked for it, we need to take it, invest it and use it for our futures.

The challenge is on all of us – how will you respond?


American Employees: Are You Leaving Money On The Table?

If your boss wanted to give you a $1,300 bonus on the spot, you’d take it, right?

A surprising number of Americans actually don’t. Many employees are offered that incentive in the form of a 401(k) match and for whatever reason, end up turning it down. Our new research report estimates that Americans are likely to leave a total of $24 billion in unclaimed 401(k) company matches on the table each year.

We arrived at this startling number by looking at the saving records of 4.4 million retirement plan participants at 553 companies. We found that one in four employees (25%) miss out on receiving their full company 401(k) match by not saving enough on their own. The typical employee who fails to receive the full match leaves $1,336 of potential “money” on the table each year. For the average employee, that’s an extra 2.4% of missed annual income. (See infographic for more.)

With compounding, this could amount to as much as $42,855 over 20 years!

Why do so many employees miss out on potentially receiving thousands of dollars every year?

Employees tend to save more for retirement as they age and earn more money. For example, 42% of plan participants earning less than $40,000 per year do not take full advantage of their employer match. That compares to just 10% of employees who earn more than $100,000 annually. Likewise, employees under age 30 are approximately twice as likely to miss out on their employer match compared to employees over the age of 60 (30% vs. 16%).

For many employees, middle age poses additional savings challenges. We found that the steady decline in employees missing out on their match is interrupted between ages 35 and 45, when the rate of decline flattens out. While we didn’t specifically look at why this savings dip occurs, it may have to do with the growing costs of raising a family, saving to send kids to college or buying a home.

Advisory Services Provide a Helpful Nudge

Our report showed that employees across all ages and income levels who used advisory services were less likely to miss out on any of their employer match compared to those not receiving this help. For example, 25% of employees who earn less than $40,000 and who use professional advisory services missed out on part of their employer match, compared to 44% of people who did not use advisory services.

What can you do to make sure you’re not missing out?

Know your plan.

Find out how much your employer will match your 401(k) contributions and strive to save at least enough to get the full match.

Get professional help.

If you have access to professional investment help (online advice or managed accounts), take advantage of that benefit.

Ask a financial advisor.

Talk with a financial advisor who has a legal commitment as a fiduciary to put their clients’ interests ahead of their own.

Commit to save more when you can.

If you can’t afford to save enough to get the full match today, increase your savings rate when you get your next raise — and each raise thereafter — until you reach your 401(k) contribution limit.

Greg Stein, Financial Engines director of investment technology, had this to say about the report and the importance of saving enough to get the full employer match:

“The 401(k) match is one of the best deals going for employees, providing an immediate 100% return per dollar invested. Maximizing your available 401(k) match is a key way for millions of American employees to improve their retirement security. While many people might feel like they can’t afford to save more, we hope that these numbers help them realize that they can’t afford not to.”

Wall Street Journal Notes a Late Start to Saving Can Cost You Real Money

In a study we released yesterday, we reported the consequences of delaying your retirement savings. The Wall Street Journal picked up the story and author Anne Turgesen does a great job of explaining why this decision can really end up costing you in the long run.

According to the article, “It turns out that making up for lost time isn’t easy. In fact, according to Financial Engines, which provides professional management for 401(k) accounts and individual retirement accounts, someone who saves 6% of a $36,000 salary (that grows by 1.5% a year) starting at age 25 will have close to $500,000 by age 65, assuming a 3% employer matching contribution and a 5% annual return.”
Read the article in the Journal, see our infographic and then go check on your 401(k). If your company offers Financial Engines as a service (ask your Human Resources department), you already have an online account and all you need to do is register. Then log in and see what you need to do to start getting more from your money. Need help? Call us at (800) 601-5957.

Our Christopher Jones Talks Investing: Listen and then Take Our Quiz

Did you know research shows those who get retirement help tend to do better than those who don’t?

Our Chief Investment Officer, Christopher Jones sat down with PLANADVISER & PLANSPONSOR’s Editor-in-Chief, Alison Cooke Mintzer, to discuss Social Security and retirement help. Watch the video and then take our quiz to see how much you know about starting to prepare for retirement.

The Quiz

  1. Christopher talks about ways to invest; what are Target Date Funds?

A) An asset mix (investment) roughly based on your age

B) Stocks that focus exclusively on bulls-eyes

C) An emergency fund

D) None of the above.

  1. Managed accounts are when an advisor works with you to determine your investment goals, your financial profile and your attitudes about risk so your money is invested in a way that’s consistent with your priorities.

A) True

B) False

  1. Often people invest and forget which can have unintended consequences. How does financial planning change with age?

A) You will have to start making the transition converting your savings to income while continuing to manage your investments

B) You’ll need to understand how Social Security affects your financial situation.

C) Your investing strategy may need to change based on your age, plans and health.

D) All of the above

  1. Something as simple as Online Advice can still constitute “help” and could mean saving more in the long run based on getting investment advice.

A) True

B) False

  1. How many possible strategies are there for a married couple thinking about taking Social Security?

A) More than 20

B) More than 500

C) More than 3,000

D)  There’s only one way to take Social Security.

How did you do? The answers are below. You can get even more information by understanding how getting help can make a difference for your financial future.


Answers: 1. A   2. A   3. D   4. A   5. C

How Do You Feel When You Hear the Word “Retirement”?

Relaxed?  Nope. Our informal survey reveals that for many the answer is “old”!

Judging by the advertising produced by financial services firms (including our own), you could get the impression that retirement involves life on a golf course or beach, perpetually tanned, relaxed and secure. But when we asked people how they really feel about retirement, we got a much more complex and nuanced picture.

When we informally asked the readers of our blog how they felt when they heard the word “retirement,” the most popular unaided answer wasn’t “sexy,” “accomplished” or “serene.” It was “old,” with 11 percent of respondents writing that in. In fact, “old” was the number one answer across all age groups between 20 and 65.

We intentionally left the question open-ended so we could let people choose any word(s) they wanted to tell us how they feel when they heard the word retirement. It’s interesting that “old” was the top trend above all of the others. The next trending word written by six percent of the respondents was “excited.” Here are the top ten trending answers to the question:

  1. old
  2. excited
  3. happy
  4. long time away
  5. scared
  6. nervous
  7. anxious
  8. worried
  9. good
  10. sad

While there are clearly some positive feelings associated with retirement for all ages, there is anxiety and fear as well. Financial firms like ours often encourage people to focus on their retirement goals, but if the word “retirement” makes people feel old, scared or sad, they may be subconsciously avoiding the topic. Who likes to feel old?

How our parents handled retirement may provide lessons for our future.

The survey also asked what people would do differently from the way their parents retired. The top three write-in answers were:

  1. Save more money (23 percent);
  2. Travel (11 percent); and
  3. Work longer (6 percent).

Some of the verbatim answers provide insight into what people are thinking:

“Save early and make retirement a high priority, higher than college savings. My parents never retired (75 and 80 years old).” – male in his 40s

“My parents are still working, unfortunately. The one thing I NEED to do, based on their experience, is save for the long term. We enjoyed a lot “in the moment” and now that they are near retirement age without adequate funds to survive, I feel that we could have done without those “in the moment” perks” – male in his 30s

“I’d like to put away more money than they did, but since I make a lot less than them, I don’t see how I can do that.”- female in her 30s

“My parents aren’t yet retired but I wouldn’t do anything differently than they have done. They’ve always taught me to save, save, save and invest along the way.” – female in her 20s

“I hope to be healthy when I retire for at least five or more years which they were not able to do.” – male in his 60s

“Try to maintain better health so retirement is not a struggle to be well.” – male in his 50s

Respondents feel more positive about reaching retirement as they age.

According to the survey, when asked “how on track they were for retirement,” 24 percent said that they  were not at all on track with 34 percent saying not really on track or unsure. Thirty-one percent were mostly on track and 11 percent said they were totally on track with their retirement saving. People aged 60 and older were much more positive about their current state of preparation for retirement (56 percent) than people in their 30s (30 percent) and 20s (23 percent). We didn’t define the term “on track.” We let the respondents decide what that meant to them.

While retirement clearly may not always be as rosy as some advertising would like us to believe, it’s not all doom and gloom either. In the end, your retirement and how you feel about planning for it will be as individual as you are. While these results were generated from an informal blog survey, we plan on conducting more robust research around the emotions involved with saving and investing to shed more light on how we can help people make better-informed decisions to achieve their retirement goals.

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*This informal qualitative survey had 1134 respondents. The questions were open-ended, allowing respondents to write their answers rather than choose from a set. Content analysis was used to evaluate the data.