Financial Engines made a big move in my investments

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AussieDad
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Financial Engines made a big move in my investments

Post by AussieDad » Fri Jun 03, 2016 1:47 am

I'm 50 years old and they moved me totally out of bonds. I only had a small percentage of bonds in my 401k, but now I have none. Everything is in equities, with a small percentage in a REIT and emerging markets. I was using my inherited IRA and Wife's old IRA to up my total portfolio bond percentage. I know this probably doesn't make sense, but I just fired my FA that was handling my taxable acct. and I've been making some slow moves trying not to totally screw everything up. I hadn't quite gotten the nerve up to fire FE and go totally on my own. I had moved from about 15% bonds to closer to 30%. Now I'm back down to 17%. :-)

I guess I'm wondering what their logic is for doing this.

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celia
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Re: Financial Engines made a big move in my investments

Post by celia » Fri Jun 03, 2016 2:44 am

Did you ask them? What did they say?
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.

AussieDad
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Re: Financial Engines made a big move in my investments

Post by AussieDad » Fri Jun 03, 2016 2:47 am

celia wrote:Did you ask them? What did they say?

Good question. I did not, but I just noticed it tonight. I think they moved it Wednesday

Call_Me_Op
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Re: Financial Engines made a big move in my investments

Post by Call_Me_Op » Fri Jun 03, 2016 6:27 am

Well, it appears that you have placed your trust in them or you wouldn't have asked them to manage your money. If you can question their wisdom, perhaps you do not trust them fully.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

shakenbake
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Re: Financial Engines made a big move in my investments

Post by shakenbake » Fri Jun 03, 2016 6:51 am

I'm questioning the logic of a lot of things these so called experts did. I have to chalk it up to peer pressure. If they are working with a company I imagine round table meetings where it is suggested to them what investments to make which funds are good versus bad and if they don't follow protocol they get harassed. So it might take one big dummy in the right position to bully all the rest into making hair brained decisions.
I have 3 funds right now that have lost money but it isn't a recent thing. They've been this low since last year came up a little only to go back down again. Why would they leave the money there? I don't get it. As well as the market is performing they are still tanking and I can only imagine it would take a year or more of superb market performance for them to increase in value. Why do they do what they do? I would like to call and ask but since he is no longer managing the fund it seems like it would be like harassment at this point. I would be curious to know what his rationale was for that action.
If it's oh well we know they are going to go down but the money is stable there you shouldn't get as big of swings. Then what is the point? I would have been better with the money in a money market account making incremental interest where I would have taken no loss.
Just had IRA transfered over to Vanguard from Metlife. | Newbie to the investment world.

Lafder
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Re: Financial Engines made a big move in my investments

Post by Lafder » Fri Jun 03, 2016 7:12 am

At age 50, a range of 30-50% bonds seems reasonable to me. 17% is too low for my comfort (I am 48 and we are at 35% bonds, well about 32-33 right now but not worth rebalancing to our goal of 35)

If you want more control of your % bonds, it sounds like you need to take control of your holdings.

Folks here can help!

You can post all of your holdings like this viewtopic.php?f=1&t=6212

and then we can talk through some simple options that you control.

lafder

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jhfenton
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Re: Financial Engines made a big move in my investments

Post by jhfenton » Fri Jun 03, 2016 8:57 am

I don't have any idea why they would make such a move, but I would personally be averse to anyone else making those kind of changes without my approval. That is a large and sudden change.

For what it's worth, I think both 30% and 17% are reasonable bond allocations for a 50-year-old, depending on circumstances. We're 46 and at 3.4% fixed income as of today, on track for 4% at year end, adding 2% per year. Our target is 88/12 by the end of age 50.

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ogd
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Re: Financial Engines made a big move in my investments

Post by ogd » Fri Jun 03, 2016 10:19 am

AussieDad wrote:I'm 50 years old and they moved me totally out of bonds. I only had a small percentage of bonds in my 401k, but now I have none. Everything is in equities, with a small percentage in a REIT and emerging markets. I was using my inherited IRA and Wife's old IRA to up my total portfolio bond percentage. I know this probably doesn't make sense, but I just fired my FA that was handling my taxable acct. and I've been making some slow moves trying not to totally screw everything up. I hadn't quite gotten the nerve up to fire FE and go totally on my own. I had moved from about 15% bonds to closer to 30%. Now I'm back down to 17%. :-)

I guess I'm wondering what their logic is for doing this.
This seems like tactical asset allocation, i.e. they decided that such and such stocks are a better value than bonds or other stocks. The record of funds that attempt to do this (some much more reputable and compensated than Financial Engines) is terrible, and they underperform a static allocation in practice. It's just a bad idea. For example, Vanguard's LifeStrategy funds had a tactical allocation component (which made them disliked at the time on this board) that misbehaved badly in 2008-2011 before it was shut down. 8 years later, we're still explaining to investors why LifeStrategy funds underperformed in the period.

I would say call them, clarify, and if that's what they do fire them.

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Christine_NM
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Re: Financial Engines made a big move in my investments

Post by Christine_NM » Fri Jun 03, 2016 10:44 am

One problem might be that FE looks only at your IRAs. If this is so, it has no interest in your total portfolio nor in the total risk you are taking. Do it all yourself. Don't wait to be confident because it will never happen, or at least not until you have enough to be out of the game. A little fear is a good thing.
17% cash 47% stock 36% bond. Retired, w/d rate 2.85%

AussieDad
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Re: Financial Engines made a big move in my investments

Post by AussieDad » Fri Jun 03, 2016 5:41 pm

As of today, it looks like that was a terrible move. Obviously that could change Monday, but I think this may have been the straw that broke the camel's back. I'm pretty sure I am going to fire them now.

Thanks for the replies

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in_reality
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Re: Financial Engines made a big move in my investments

Post by in_reality » Fri Jun 03, 2016 6:38 pm

Prior to the recent employment figures, wasn't it looking very possible there'd be a rate hike soon. Maybe they were positioning for that -- and a possible over reaction by the market.

I am really curious if they will explain the rationale to you. Try to find out and post back. Not just for your own curiosity, but also for others who use or might use them.

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celia
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Re: Financial Engines made a big move in my investments

Post by celia » Fri Jun 03, 2016 11:25 pm

Aussie, Are you in the US stock and bond markets primarily, Australian ones, or other? The stock markets for each country don't all go up and down at the same time.
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.

SpaceCowboy
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Re: Financial Engines made a big move in my investments

Post by SpaceCowboy » Fri Jun 03, 2016 11:34 pm

I'd contact them. Some sort of system glitch.
Sounds to me like either your risk tolerance setting got changed or their account aggregation system got delinked from one or more of your accounts.
They're not tactical asset allocators. They are firm believers in low expense, low turnover funds that provide asset diversification.

dbr
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Re: Financial Engines made a big move in my investments

Post by dbr » Sat Jun 04, 2016 8:49 am

I would think FE is using their mean variance optimizing software to continually adjust asset allocations, though I do not actually know that is what they routinely do with all customer accounts. The result of that software is sometimes, maybe often, strange changes in the asset allocation.

How often have you noticed other allocation changes in the time they have had your money? Do they provide notifications every time they reallocate?

I don't think I would choose to leave money with authority to trade at will with anyone. Certainly I would not do it without a clear understanding of what might provoke trading of various sorts.

Levett
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Re: Financial Engines made a big move in my investments

Post by Levett » Sat Jun 04, 2016 10:34 am

dbr wrote:

"I don't think I would choose to leave money with authority to trade at will with anyone. Certainly I would not do it without a clear understanding of what might provoke trading of various sorts."

Much as I agree with Christine about the usefulness of "a little fear," dbr has noted what I would consider a great BIG fear. :annoyed

Lev

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Electron
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Re: Financial Engines made a big move in my investments

Post by Electron » Sat Jun 04, 2016 12:40 pm

I had access to Financial Engines for quite a few years. Their recommendations are based on your inputs and the portfolio recommendations will vary accordingly. I would check your inputs and see if anything changed.

In my case, it was possible to modify my inputs and see how the recommendations changed. That provided valuable insight on how they selected funds and defined a recommended asset allocation.

Financial Engines typically comes as a no cost tool where the user provides input and manually implements their recommendations as desired. In later years they offered a managed account option for a fee which provided full active management of the account based on their recommendations.
Electron

NMJack
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Re: Financial Engines made a big move in my investments

Post by NMJack » Sat Jun 04, 2016 2:49 pm

OP - based upon your post, and the fact that you are on this forum, I think it is highly likely that you are wasting your money with FE and should just manage a simple portfolio on your own. :moneybag

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SeeMoe
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Re: Financial Engines made a big move in my investments

Post by SeeMoe » Sat Jun 04, 2016 5:48 pm

Q. Is why have a financial advisor, free or for a fee, if you don't like what they suggest or recommend? Experts say this is common and very few clients who receive " how to" instructions follow the advice. Some do by picking what they like or agree with, but personal bias reins supreme in most cases..
SeeMoe.. :oops:
"By gnawing through a dike, even a Rat can destroy a nation ." {Edmund Burke}

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Re: Financial Engines made a big move in my investments

Post by Grt2bOutdoors » Sat Jun 04, 2016 7:16 pm

As noted, the major issue with Financial Engines portfolio optimization program is the equivalent of a tinkerer who doesn't know when or how to stop, believing that a better mousetrap design will yield in more return capture. My own experience with their modeling tool in my retirement plan shows they take more risk on the beta side for slightly higher (<5%) projections of increased wealth and income come retirement time. No thanks.

The OP would be better off developing their own IPS and asset allocation plan, posting it on the forum for a review and them implementing it themselves. Financial Engines could become an engine of financial destruction to one's wealth if something were to go wrong with their magic crystal ball. Right now, the forecast is quite cloudy.

As an aside, what I'd really like to see is a comparison of Financial Engines and other robo-advisers side by side given a beginning portfolio value of say $100K for 5 years vs. a standard 60/40 portfolio (Balanced Index) and see who significantly outperforms the benchmark after fees and expenses. My bet is on the Vanguard Balanced Index fund being a winner after expenses.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Jbryant0016
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Re: Financial Engines made a big move in my investments

Post by Jbryant0016 » Sat Jun 04, 2016 11:25 pm

I've had a similar problem with them before. Can you please list all the funds (along with tickers) that they've allocated you into?

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nedsaid
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Re: Financial Engines made a big move in my investments

Post by nedsaid » Sun Jun 05, 2016 5:27 am

AussieDad wrote:I'm 50 years old and they moved me totally out of bonds. I only had a small percentage of bonds in my 401k, but now I have none. Everything is in equities, with a small percentage in a REIT and emerging markets. I was using my inherited IRA and Wife's old IRA to up my total portfolio bond percentage. I know this probably doesn't make sense, but I just fired my FA that was handling my taxable acct. and I've been making some slow moves trying not to totally screw everything up. I hadn't quite gotten the nerve up to fire FE and go totally on my own. I had moved from about 15% bonds to closer to 30%. Now I'm back down to 17%. :-)

I guess I'm wondering what their logic is for doing this.
This is why I like dealing with people and not robots. My suspicion is that there is some kind of mistake.

It seemed when I used Financial Engines to evaluate the mutual fund portfolio at my favorite mutual fund company that FE tended to put me in cheaper funds (good), tilt my portfolio towards US large-caps (to decrease volatility), and heavily tilt towards US Stocks vs. International. It wanted to go in a direction I didn't want to go so I ignored its suggestions. It was a useful exercise though.

Perhaps they are doing tactical asset allocation, which I agree with to a point. But they did a radical move, moving a 50 year old totally out of bonds in his 401k. Perhaps they feel that bonds are overvalued but they significantly increased the risk for a client's portfolio. They way overdid it.

If there is somebody to call, I would call and see if there was a mistake. If it wasn't a mistake, I think I would fire them. That seems to be a pretty dramatic move.
A fool and his money are good for business.

AussieDad
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Re: Financial Engines made a big move in my investments

Post by AussieDad » Mon Jun 06, 2016 3:04 am

in_reality wrote: Try to find out and post back. Not just for your own curiosity, but also for others who use or might use them.
I'll try to call them this week. I'm pretty busy this week and I have a habit of forgetting to make my phone calls during business hours, but I'm going to try.
celia wrote:Aussie, Are you in the US stock and bond markets primarily, Australian ones, or other? The stock markets for each country don't all go up and down at the same time.
Right now, I'm 58% domestic and 39% foreign. The rest is "other". I own 2 Australian Shepherds, that's where the Aussidad comes in :D I didn't want to use my usual forum name on this board because of all the financial info. being discussed.
dbr wrote:
How often have you noticed other allocation changes in the time they have had your money? Do they provide notifications every time they reallocate?
It seems like every few months. I'm not exactly sure to be honest. I get a notice from Fidelity, or my workplace savings plan when they reallocate.
Levett wrote:dbr wrote:

"I don't think I would choose to leave money with authority to trade at will with anyone. Certainly I would not do it without a clear understanding of what might provoke trading of various sorts."


Much as I agree with Christine about the usefulness of "a little fear," dbr has noted what I would consider a great BIG fear. :annoyed

Lev
All good points. Ones I intend to address.
Electron wrote: In later years they offered a managed account option for a fee which provided full active management of the account based on their recommendations.
I am using the active management for a fee. Right now it works out to about .3% It's on a sliding scale, depending on how much is invested.
NMJack wrote:OP - based upon your post, and the fact that you are on this forum, I think it is highly likely that you are wasting your money with FE and should just manage a simple portfolio on your own. :moneybag
I agree. I've just been a bit chicken. I'm slowing trying to take control of our portfolio, a bit at a time. Right now I have been allocating my taxable account and my Wife's old 401k and IRA. My 401k is about 40% of our portfolio, and I just haven't made that jump yet.
Jbryant0016 wrote:I've had a similar problem with them before. Can you please list all the funds (along with tickers) that they've allocated you into?
I work for a very large corporation. I don't totally understand the way the funds are set up, but they call it a collective investment trust. It is managed by Blackrock. I don't have ticker symbols that would help (except for a REIT). I do have access to other funds, should I choose to do this on my own, but the ER's on these funds are very low.

35% International Eq Index
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AussieDad
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Re: Financial Engines made a big move in my investments

Post by AussieDad » Mon Jun 06, 2016 3:12 am

One thing I forgot to mention, is that I did elect to invest "aggressive for my age" when I originally signed up with FE. I'm sure that would explain the low percentage of bonds that I had, but it still seems odd to up and take me completely out of bonds.

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stratton
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Re: Financial Engines made a big move in my investments

Post by stratton » Mon Jun 06, 2016 3:22 am

AussieDad wrote:One thing I forgot to mention, is that I did elect to invest "aggressive for my age" when I originally signed up with FE.
The expected return of stocks is more than bonds over a long period of time. The best predictor of bond returns is their current yield which is really low right now.

If FE has an expected return of X% for a portfolio the decreased bond returns will require more stock to meet the goal.

Paul
...and then Buffy staked Edward. The end.

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