Last week's initial public offering by the Palo Alto, Calif., company, a retirement plan advisor co-founded by a Nobel Prize winner, affirmed investor belief in a business model offering low-cost sophisticated retirement advice to individual investors.

In its debut, Financial Engines' shares were originally offered at $9 to $11 each, but priced at $12, and closed Monday more than three times their initial estimate at $18.55. "The market is looking for quality," said Bill Buhr, an IPO strategist at Morningstar.

Similar to Morningstar, Financial Engines offers retirement planning and investment advice to investors enrolled in company-sponsored 401(k)s and other defined contribution retirement plans. Launched in 1996, it uses an automated, web-based platform to collect information from investors and assess their retirement income needs. It then uses mathematical algorithms to make recommendations.

"There is a growing market for financial advice, specifically for defined contribution plans," Buhr said.

In its registration statement filed with the Securities and Exchange Commission in December, Financial Engines said shifting retirement-industry trends would allow it to provide independent and customized portfolio management, investment advice and retirement advice to investors who are not affluent and would not be able to afford personalized services.

Much is said in the financial planning professions these days about how Americans are not preparing for retirement adequately. Evidently, a 14-year-old company that offers respected web-based advice has finally convinced the capital markets that its business model offers a viable way to address that issue.

Financial Engines provides easy-to-understand retirement advice, said Katharine Wolf, a senior analyst at Cerulli Associates in Boston. "What sets them apart is their ability to provide something that is not so much investment-focused as it is outlook-focused," Wolf said, adding she has heard from broker/dealers who have implemented some of the Financial Engines solutions for their employer-sponsored retirement plan advisory services.

Financial Engines generates revenue by signing contracts with employers and plan providers like the Valley Forge, Pa., mutual fund company Vanguard Group, which has been using Financial Engines' computer-based advice program since 2001. "We thought highly of their methodology, as a low-cost provider," said Linda Wolohan, a Vanguard spokeswoman. "It made more sense to use a third-party provider for their computer-based model."

Financial Engines is appealing mostly to investors who want to be actively involved in their retirement planning and are comfortable using web-based financial services, she said.

The company offers two levels of service: Online Advice allows investors to take Financial Engines' recommendations, and its Professional Management service is the managed account function that allows Financial Engines to carry out its recommendations. The managed account service charges a fee of about $60 a year, Wolohan said.

But there are caveats to Financial Engines' success. It has had net income losses every year since 2006, which Buhr attributes to its cost structure, which has not allowed the firm to generate enough scale to be profitable. In addition, its revenue structure depends on three- to five-year contracts, which can be canceled at any time for fiduciary reasons or breach of contract.

At Sept. 30, Financial Engines had signed contracts with 107 Fortune 500 companies, and had $23.5 billion of assets under management from 383,000 plan participants. It plans to increase enrollment in managed accounts by converting plans from active enrollment, which requires the employee to opt in, to passive enrollment, which signs them up automatically.

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