Another HR vendor is about to be public which means we have a wealth of great information being made available via the company's S-1 filing with the SEC. Any HR software or services vendor, particularly those that compete in the "retirement" sector of employee benefits, will find great information in this S-1 filing.
Financial Engines was founded in 1996 to address the need for independent investment advice. The company was a pioneer of online investment advice with the launch of the first independent Online Advice platform in 1998 - basically, very sophisticated online calculators. But that was then. There very interesting history is here.
Today, the company is a leading provider of independent, technology-enabled portfolio management services, investment advice and retirement help to participants in employer-sponsored defined contribution retirement plans, such as 401(k) plans.
Their business model is based on workplace delivery of these services. They target three key constituencies in the retirement plan market:
(1) Plan participants (employees)
(2) Plan sponsors (employers)
(3) plan providers (companies providing administrative services to plan sponsors).
The business model is a typical software/services model. Revenue is generated from management fees based on the value of the assets under management (services) and from recurring, subscription-based platform fees for access to the company's web-based financial portal (software).
As of September 30, 2009, Financial Engines had signed contracts to make their services available through 107 Fortune 500 companies and seven Fortune 20 companies.
The company's total revenue for the nine months ended September 30, 2009 was $58.8 million.
The market opportunity? Here are some sound-bytes from the company's S-1 IPO filing with the SEC:
- We believe the United States retirement savings industry is large and growing and that shifting trends within the retirement industry present us with an opportunity to help plan sponsors provide independent portfolio management services, investment advice and retirement help to their employees.
- We believe the following key market trends will continue to drive the growth of our business and increase the value of our service offerings:
(a) Shifting Demographics Drive a Growing Need for Retirement Assistance.
(b) Growing Reliance on Defined Contribution Plans.
( c) Changing Legal and Regulatory Framework
(d) Automatic 401(k) (as a result of the Pension Protection Act of 2006 plan sponsors are actively seeking automatic retirement savings solutions for their employees).
This is a very good case study in building a business - adapting to changing market needs, patience and perseverance.
Good luck Financial Engines. The company hopes to raise $100 million.