Press Article

GuidedChoiceTM Touts Price, Slams Competition
By Jason Park
From Institutional Investor, April 9th, 2002

GuidedChoice, the latest player to enter the investment advice industry, has come out swinging as CEO Sherrie Grabot said the firm has entered the market because she "didn't believe the best solution was out there." Grabot told DCN that, "others, such as mPower and Financial Engines, didn't have the vision to meet the marketplace." GuidedChoice, which refers to its service as the "second generation of advice tools," differs from other advice firms because it offers a three-step process, said Grabot, explaining that it gets the participants signed up, executes the service and manages advice. "Others just give answers," she said, adding that GuidedChoice is also cheaper than other advice shops. "If participants elect to use us, they pay 45 basis points of their assets under advice," said Grabot, adding that other firms that offer similar product charge 150-300 basis points.

Bill Cummings, marketing v.p. for mPower, defended mPower's pricing model by stating that its average cost per participant is between $10-30 per year. He added that exclusivity, enhanced integration, customized/non-standard tools, captive client base, captive participant base and average client size, all play a role in determining the per-head fee. "If you do the math, 45 basis points of $44,000 [an average account size] is about $198. And even if the median is about $13,000, 45 basis points of that is about $58," he said. Cummings noted that it charges an up-front fee to all participants.

Chris Jones, executive v.p. of financial research and strategy at Financial Engines, said the average participant cost to use its service is $15 per year. "It's vastly cheaper than GuidedChoice," he said. Jones added that unlike GuidedChoice, the sponsors--not the participants--pay for its service. "Our experience is when you ask a participant to pay out of their own pocket, the adoption rate is lower." Jones also said that the service that GuidedChoice offers is a lot like a managed account so the pricing comparison Grabot offers is for a managed-account-type product, which Financial Engines does not offer directly to participants. Grabot agreed that it's not like comparing apples to apples because the firm does manage separate accounts, but she maintains that GuidedChoice is cheaper than the market price because it shops around for the lowest expense ratio of funds.

GuidedChoice is seeking to hire up to 10 salespeople throughout the U.S. in addition to the two the firm already employs. Grabot said the vendor wants to increase the number of sales representatives as it makes a stronger push into the investment advice market. The new hires will report to David Peck, v.p. of sales, who was traveling and unavailable for comment. Grabot said the vendor would consider candidates with 401(k) experience "and a nice Rolodex."

Copyright Institutional Investor, Inc. 2002