This company is profitable, has a proven business model and one of its founders is a Nobel laureate. Financial Engines (FNGN) priced its IPO at $12 per share in March of this year and currently trades about 11% above its IPO price at $13.42. The company has a disruptive yet proven business model where it uses technology to offer portfolio management services and investment advice. Given the importance of asset allocation to portfolio returns as discussed in our October 2008 newsletter, William Sharpe, Professor of Finance, Emeritus at Stanford University and winner of the 1990 Noble Prize in Economics decided to start Financial Engines in 1996 and use technology to offer sophisticated investment advice to individuals regardless of their wealth or investment experience.
While the average client balance for the top 100 traditional Registered Investment Advisors (RIAs) is over $1 million, the average size of a portfolio managed by Financial Engines is $72,000. In fact 43% of the portfolios managed by the company have less than $20,000 in them. Despite the low average portfolio size, Financial Engines has almost $30 billion in assets under management (AUM) as of the first quarter of 2010. Their technology based solution and partnerships with several large employers to offer advice to 401K participants has helped the company scale AUM effectively from $6 billion in 2006 to $30 billion now. The company has partnerships with 115 of the Fortune 500 companies and has signed up over 360 employers in total.