Financial Engines

Palo Alto, CA (Bay Area)
$40 million new-the-world 401(k) financial advice software for company employees

Enterprise use of SyncDev as customized by Financial Engines.

Stanford Professor William Sharpe won the Nobel Prize in Finance 1992. He was also a pension consultant to firms like CALPERS, HP, and AT&T. His investment algorithms worked so well that he began codifying them for 401(k)-program participants, founding Financial Engines to bring them to market. His CEO asked, “Who will buy it? What do we build? How do we sell it?”  Though his prestigious co-founders – one, the Venture Law Group founder and two, a former Reagan SEC commissioner – and several blue-chip venture-capital board members had no shortage of answers, he turned to SyncDev to ferret out the best.

Two weeks after the kickoff, they had a Validation Prototype in the form of PowerPoint software-screen look-a-likes. All three company employees met over three days with each of six 401(k) investors, one by one, in their homes or offices. In between each meeting the team adjusted the product and pitch.

The team was learning who will buy and what to build but not how do to sell it. So at each meeting the FE team asked, “Who would you like to get this service from?” “My employer,” most said.
Next wave, FE met with mid-size and large employers one by one on their premises with their HR Compensation and Benefits Managers who expressed strong interest in buying FE’s online service. But they said they would have to collaborate with their 401(k) administrators to decide for sure.

Next wave, FE met with some of them: Vanguard, T. Rowe Price, State Street, and Fidelity. Traveling with Professor Sharpe to see them was like traveling with a rock star. But the dots still weren’t all connected. They further identified consultants as important members of the food chain. Next wave, FE team met with benefits consulting firms including Hewitt, Mercer, and Putnam. 

Still, the business-model labyrinth wasn’t complete. As FE’s product took shape it became clear that its software would recommend specific mutual funds to buy and sell in specific amounts. That required that it become an “SEC registered financial advisor,” a new-to-the-world product, which then required getting the SEC and Department of Labor on board as well to align the entire food chain, a multi-year job.

FE launched their service, selling it mostly to employers and to some consumers. Financial institutions and consultants were quid pro quo partners. Given the complexity and expense of the business model, FE sought new initiatives to improve its return on effort. By then, FE was steeped in SyncDev, “our development DNA,” as Ken Fine, EVP said. On their own, they discovered and implemented refinements to their business model, one of which was a home run, but not without stumbling along the way, getting up and succeeding, and coining a phrase that’s now a cornerstone in SyncDev, “Nail it. Then scale it.”