Summary
IBM’s recently announced offering of a “comprehensive” financial planning tool to its employees, in conjunction with its further retreat from a defined benefit pension plan, is a charade. There is nothing particularly significant here from a product offering perspective. The implications of IBM’s product launch is more about a face-saving gesture of offering apparent value while joining the wave of large corporate America retreating from defined benefit plans.
Analysis
-There are a variety of companies providing excellent computer-based financial planning tool and advice engines:
o Financial Engines (created by a Nobel Prize winner)
o Morningstar
o And a couple of others
-Plus all the brokerages have in-house tools, as do the insurance companies, and the pension consulting firms
-Virtually all these firms have found that the tools themselves are not a panacea. Availability for self-service does not drive use, nor does it drive wise decision making.
-There was a trend towards adding ever more bells and whistles to these tools to make them more comprehensive and broader in their planning capabilities. However ultimately, these firms have all retreated from the tools business and instead try to make money from the asset management business and offering packaged product solutions. Further encouraged by the recent Pension Protection Act.
-IBM’s launch in conjunction with Fidelity and Goldman’s software company is unlikely to change the realities of financial planning. It is a product that is sold, but bought; that is to say, it is generally not well suited to self-service.
