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Fifteen years ago, when Financial Engines began delivering personalized retirement strategies to 401(k) investors, the idea was considered visionary, said Kelly O'Donnell, who was recently promoted to head Edelman Financial Engines' workplace unit.
But now that the 401(k) has become the primary retirement savings vehicle for most Americans, more sponsors are realizing the need for more holistic advice beyond the retirement plan.
That bodes well for the Edelman Financial Engines model, and it also means that sponsors' reluctance to tap managed accounts as the default investment will change, thinks O'Donnell.
"The future is personalization," O'Donnell said.
"We may still be in the early innings of managed accounts, but I think we are in an evolution," she said. "I don't think people will be talking about low managed account adoption levels for much longer, if they still are."
O'Donnell, who began her career at Financial Engines in its workplace unit before advancing to chief risk officer, will be responsible for running and growing the division that already serves 150 of the largest Fortune 500 firms. About 1.1 million retirement savers access Edelman Financial Engines managed account platform through the workplace.
The announcement that she would head Edelman Financial Engines' workplace unit comes 15 months after the merger of Edelman Financial Services, one of the country's largest retail RIAs, and Financial Engines, the largest provider of managed accounts to defined contribution plans.
Already, the merger is delivering value for the firm's 401(k) clients, says O'Donnell.
"This was really a marriage made in heaven," she said. "Edelman's focus was on high touch financial planning for the average American. We're now able to leverage a library of Edelman education tools in the workplace. Ric [Edelman] was a big proponent of financial education. We're able to take his content, add it to what we already have—that's where you are seeing the immediate enhanced capabilities of the merger."
What the merger is not about, insists O'Donnell, is capturing rollover money.
In fact, she says the merger will lead to more participants keeping savings in defined contribution plans, and says there is data to back that.
"A lot of plans have really low fees, and in those cases it can be a great choice to stay in plan. We found that when a participant talks to an Edelman Financial Engines adviser, they were twice as likely to keep money in plan as those that did not. There will always be times when someone wants a rollover and it's in their best interest. What we want to do is show the options," said O'Donnell.
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Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
