PEOPLE / OLENA BERG: JOB IS DIFFERENT, GOAL THE SAME

Olena Berg spent much of her five years as assistant secretary of the Pension and Welfare Benefits Administration trying to persuade 401(k) plan sponsors to help educate their employees about investments.

She began working toward a similar end last week — as a board member and adviser with Financial Engines Inc. of Palo Alto, Calif., the firm started by Nobel laureate William Sharpe. It offers clients an Internet-based computer program to help them determine if the investments in their 401(k) plans are likely to meet their goals.

Ms. Berg, 48, left the Labor Department June 26 to move to Milwaukee to get married. She will work there for Financial Engines.

“A lot of my interest and work from the regulatory standpoint was in how do you get 401(k) and other investors the tools they need to make the financial decisions that they’re responsible for in these kind of programs,” she says. With Financial Engines, “Tools that normally are available (only) to large benefit investors are available to average 401(k) investors.”

Financial Engines acquired the client base of William F. Sharpe Associates last May, including the defined benefit plans of AT&T, CalPers, Hewlett-Packard Co., Philip Morris and United Technologies. It is also testing its 401(k) software product with Netscape Communications, Clorox Co., Alza Corp. and the Gap.

In both its defined benefit consulting business and its 401(k) work, Financial Engines uses modern portfolio theory, for which Mr. Sharpe, a professor at Stanford University, received the Nobel prize in 1990. The method combines many variables to analyze investments and come up with a prediction of their effectiveness.

In Washington, Ms. Berg launched a retirement savings campaign which culminated in June with the White House-sponsored retirement savings summit. The agency oversees some 700,000 pension plans with assets of more than $3 trillion.

Ms. Berg also was responsible for enforcing the federal law that regulates pensions and other job benefit plans.

“I have a lot of respect for Olena Berg and I am pleased she has found a way to stay involved with the 401(k) industry,” says David Wray, president of the Profit Sharing/401(k) Council of America, a Chicago-based organization representing sponsors of 401(k) plans.

Concerning the company’s new 401(k) business, Ms. Berg says she will work on “How do you get the product out, how do you make people aware of it, how do you structure the program.”

Last February the company, which provides consulting services for more than $200 billion in defined benefit pension assets, announced plans to offer its computerized investment advice program to 401(k) participants over the Internet.

Financial Engines’ software makes specific recommendations for funds that are included in 401(k) programs, taking into account a client’s other investments. It makes a mathematical prediction of whether the client’s investments will achieve his goals.

“Individuals would rather buy outcomes than products,” says CEO Jeff Maggioncalda. “We recommend the investments to produce those outcomes.”

As at the Department of Labor, a key part of Ms. Berg’s role will be helping convince 401(k) plan administrators that they should use Financial Engines to offer investment advice to plan participants.

“Until very recently the majority of (401(k)) plan sponsors have believed it is illegal to offer investment advice to their plan participants,” Mr. Maggioncalda says.

“This is simply untrue. The issue is using an impartial fiduciary to do that.

“We believe, as does Olena, that offering specific investment advice from an independent company that does not have any conflict of interest and that acts as a fiduciary, could enhance not only the rights of the plan sponsor, but deliver some substantial benefit in the way their participants are able to utilize the 401(k) plan.”