Confirming the rumors that have been circulating around the industry for months, Standard & Poor's, a subsidiary of McGraw-Hill (MHP) has acquired Rational Investors, an advice firm based out of Boston.

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This announcement coincides with S&P's launching of 401(k) Advisor, an Internet service designed to provide 401(k) advice services to participants, sponsors, and vendors. Terms of the transaction were not disclosed.

"S&P owns 100% of Rational Investors. We will be incorporating their web-based product into our business line. Rational Investors brings superior technology that is easy to use. Together, we can give 401(k) plan providers, sponsors, and participants the most comprehensive, detailed, and objective investment advice available," said Jack Zwingli, group vice president at S&P.

Francois Gadenne, the president of Rational Investors will remain with the firm in the same position. S&P will work with its clients in the 401(k) service arena to market the advice product to sponsors.

"We are targeting all areas of the market. We can provide services to the smaller plans as well as larger and jumbo plans," added Gadenne.

"This is the perfect time to do this. The advice business is really heating up right now. This acquisition will be one of the significant announcements in the advice business. We respect the competition. We view this as an increasingly competitive field, which is one of the main reasons we decided to do this," Zwingli continued.

"The market is ready for the kind of service this combination brings to the table," Gadenne agreed.

S&P contends that it is raising the bar of what will be required from advice firms in the marketplace. Zwingli believes that Rational Investors's software is superior.

"But you still need the analytical advice," he said. "This service has been designed with the participant in mind. It has to be incredibly easy to understand. There is an education component. People need to understand how to invest. They need to know about their individual plan. The need to know about their individual account. All that leads to offering the participant good sound advice."

One of the strengths of the product in the minds of the team at S&P is that it is a complete product. The participant can not only access advice information but can also act on that advice. Also, according to Gadenne, the system is designed for the reluctant investor rather than the proactive one.

Another concern for Gadenne is security. "We can configure the system to meet the security needs of the client. The data can go through an MIS system and not an external third party site. This allows the system to meet the security compliance needs of the client," he explained.

"The word here is impact. S&P will bring a terrific impact to the advice market," Gadenne concluded. 

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