HARTFORD, Conn. - United Technologies Corp. executives wanted to improve their communication and education program by including investment advice in their $8 billion 401(k) plan. But first, they decided to check it out.
"We conducted extensive due diligence over the course of several years," said Michele Frost, benefits manager at Hartford-based UTC. "We were looking at the market of advice and education providers."
Fidelity Investments is the unbundled plan's new record keeper. Fidelity manages a single investment option.
UTC wanted a service that not only offered its 35,000 participants education, but also specific advice, Ms. Frost said. Eventually, UTC hired Financial Engines, Palo Alto, Calif., an online investment advice provider.
"We thought something that could give them (participants) the ability to have specific fund allocations would be the most useful," Ms. Frost said.
Executives introduced Financial Engines' investment advice and guidance in November, around the same time they added three new funds to the 401(k) plan. The plan now has 19 investment options, including company stock, she said. The plan does not have a self-directed brokerage account. The new funds, all managed passively by Deutsche Asset Management, are large-cap growth, large-cap value and midcap blend, Ms. Frost said.
As of Jan. 2, about 7% of UTC's participants visited the Financial Engines website, including participants who both sampled or took the advice, she said. (The plan itself has an 85% participation rate.) The site does not provide advice on specific stocks.
"I'd like to see an increase in usage," Ms. Frost said.
As an incentive to use Financial Engines' services, UTC has elected to pay for the service for the plan. Employees interested in upgrading to overall financial planning pay the difference, she explained. There too, UTC executives did their homework.
"It seems to make sense," Ms. Frost said. "We did some benchmarking with other companies who had rolled out advice. When employees have to pay, there's low usage.
"People find it (investment advice) very useful," Ms. Frost said. "They have to adjust to the fact that it's a bit of a time commitment. It takes a good hour to put in IRAs, mutual funds, savings and other sources of income ...
"Our only goal was to make sure employees would understand better how to allocate and if needed, contribute more to the plan."