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Updated on Friday, May 15, 2020
Edelman Financial Engines provides investment management, financial planning and retirement income solutions both in person and online to individuals, high net worth families and institutions. The firm provides its services directly to clients as well as through employer-sponsored retirement plans at workplaces. The firm’s team of more than 470 advisory employees is spread across 170 offices nationwide and oversees $229 billion in assets under management (AUM).
All information included in this profile is accurate as of May 15, 2020. For more information, please consult Edelman Financial Engines’ website.
|Assets under management: $229,000,000,000|
|Minimum investment: At least $5,000 to work directly with an advisor|
|Fee structure: Typically a percentage of AUM for portfolio management; a flat fee for a financial plan and for online advice|
|Headquarters:||3315 Scott Blvd, 4th floor|
Santa Clara, CA 95054
- Overview of Edelman Financial Engines
- What types of clients does Edelman Financial Engines serve?
- Services offered by Edelman Financial Engines
- How Edelman Financial Engines invests your money
- Fees Edelman Financial Engines charges for its services
- Edelman Financial Engines’ highlights
- Edelman Financial Engines’ downsides
- Edelman Financial Engines disciplinary disclosures
- Edelman Financial Engines onboarding process
- Is Edelman Financial Engines right for you?
Overview of Edelman Financial Engines
Edelman Financial Engines is the product of the 2018 merger between the independent financial planning and investment management firm Edelman Financial Services and the tech-savvy investment advisory group Financial Engines. Today, private equity firm Hellman & Friedman holds the majority interest of this merged powerhouse.
Separately, both firms have a storied history. Ric and Jean Edelman founded their namesake financial services firm in 1986. Since then, Ric Edelman has launched a successful personal finance radio show and authored 10 personal finance books, including the bestseller, “The Truth About Money.” In 2019, he was inducted into Barron’s Hall of Fame and was named by InvestmentNews as one of 20 most influential people who shaped the financial planning industry.
Financial Engines was founded by Nobel laureate William F. Sharpe in 1996. By the time of the merger, the firm had been enlisted by more than 750 firms nationwide to provide professional financial help to their more than 10 million employees.
Today, the combined entity has 1,530 employees, 470 of whom serve in investment advisory and research roles. It has offices across 36 states. The business now operates under the name Edelman Financial Engines, although it’s registered as an investment advisor under Financial Engines Advisors.
What types of clients does Edelman Financial Engines serve?
Individuals, families and high net worth investors can enlist Edelman Financial Engines for guidance. The SEC defines high net worth as having at least $750,000 in assets under management or a net worth of more than $1.5 million. Certain products and services offered by the firm specifically target retirees, such as Income+, which helps clients manage their portfolio and set up payouts that last into their early 90s.
The firm also serves many participants in employer-sponsored retirement plans, such as 401(k) plans, as well as other investment advisors. Rounding out the client list include groups such as pension and profit-sharing plans, charitable organizations, foundations, associations, institutions, corporations, small- to mid-sized businesses and other business entities.
To start a relationship directly with one of the firm’s financial planners, households typically need a minimum of $5,000 to invest, although certain account types require a higher investment. The minimum can be waived at the firm’s discretion. For employees to work with the firm through their workplace, clients usually need only $5.
Services offered by Edelman Financial Engines
When clients work with Edelman Financial Engines directly, the advisors typically focus on managing their portfolios, helping them plan for their financial future and generating retirement income. Typically, clients open what’s known as a wrap fee account, where the advisor handles the day-to-day trading in the account and the client pays one fee that covers the advisory, brokerage and custodian charges.
Financial planning topics addressed include retirement, education, spending, insurance and taxes. Advisors typically prepare a written financial plan for prospective clients prior to beginning any advisory services. When focusing on retirement in particular, clients can choose certain programs that assist them in setting up recurring payments in retirement.
Clients also can choose an online advice program, where an online tool provides education and guidance to help achieve goals. For example, clients can get a forecast of their potential future account value or annual retirement income, recommendations for specific mutual funds or ETFs to invest in and scorecards looking at the performance and riskiness of their available investments. Clients in this program also have phone access to an investment advisor. This is a non-discretionary account option, meaning the client decides whether to implement the recommendations and what investments they ultimately purchase.
Other clients end up working with Edelman Financial Engines through their workplaces or other institutions. In this case, clients have access to the same online services described above. Clients also may choose to have the firm professionally manage their retirement accounts through a discretionary relationship, meaning the client does not sign off on each trade, and can receive a comprehensive retirement evaluation. In some cases, clients may even hire the firm to advise and manage nonretirement accounts, or those not offered through the workplace.
To recap, here is a full list of services offered through Edelman Financial Engines:
- Portfolio management (wrap fee accounts; discretionary)
- Financial planning
- Retirement planning
- Estate planning
- College planning
- Income planning
- Tax optimization strategies
- Spending analysis and budgeting
- Life transitions planning
- Career growth and advancement guidance
- Charitable planning
- Succession and legacy planning
- Long-term care planning
- Insurance/risk management (though clients are directed to third parties for purchasing)
- Employee benefit plan fiduciary services; 401(k) and pension consulting
- Workshops and seminars
- Newsletters and publications
How Edelman Financial Engines invests your money
For clients working with Edelman Financial Engines directly, their accounts are typically invested in a diversified model portfolio, including active and passive investments, based on their individual circumstances. Specific investments typically include mutual funds, exchange-traded funds (ETFs) and cash equivalent products, such as CDs. To determine which model is most appropriate for a client, planners and clients discuss factors such as objectives, risk tolerance, time horizon, liquidity needs, age, health, income and expenses. Clients also have the option to request a personalized portfolio taking into consideration other relevant factors, such as the household’s outside assets.
As for workplace clients, the employer or plan provider shares information about the client and Edelman Financial Engines decides on an investment strategy and allocation target. Factors that go into the decision include, among others, a client’s age, assumed retirement age and any pension plan information provided. Clients who choose professional management of their workplace accounts may supplement that information with additional details, such as a preference for growth or income, risk preference, desired retirement age or desired retention of company stock.
In general, when making investment decisions, the firm aims for diversified portfolios with many asset classes and sectors that can be held long term. It strikes a balance between cost-effective investments and those that the team forecasts may offer added return. The team periodically rebalances as needed and strategically reallocates investments as conditions change.
Fees Edelman Financial Engines charges for its services
Edelman Financial Engines is a fee-only firm, meaning its planners don’t earn money based on the products clients buy.
When employers offer the online advice program to employees, the employer typically pays the fee, not the worker. In some cases, the employer may also cover the cost for an advisor to manage the employer-sponsored account. Otherwise, clients will owe an annual fee of up to 0.60% for Edelman to manage an employer-sponsored retirement account (or 0.75% for an IRA) on balances greater than $100,000. The fee declines for larger balances. When the firm manages outside accounts as well, beyond the employer-sponsored plan, the fee climbs to a maximum of 1.20%, and a minimum annual fee of $900 may apply.
When clients work directly with the firm’s planners, the fee is an annual percentage of assets under management based on a tiered schedule, ranging from 1.75% down to 0.50% or even less, although the exact rate is negotiable. Clients referred by the firm’s National Advisor Center can get a discount, generally up to 0.40% on the first $400,000 invested. The minimum annual fee for retail clients is $100, although that also can be waived at the firm’s discretion. Most fees are automatically deducted from the client’s account quarterly.
|The first $400,000||1.75%|
|The next $350,000||1.25%|
|The next $250,000||1.00%|
|The next $2 million||0.75%|
|The next $7 million||0.60%|
|The next $15 million||0.50%|
|Above $25 million||Negotiable|
The above fees cover advisory, trading and custodian costs when clients use one of the program’s custodians, which includes E*TRADE Advisor Services, TD Ameritrade, Fidelity and Schwab. Transactions executed at other firms will come with a fee. Clients are also responsible for paying internal mutual fund and ETF fees as well as annuity fees.
For online advice, clients pay $149.95 to $300 per year, depending on the service. Financial planning, including the development and presentation of a one-time plan, typically runs $800, although the fee can be waived. Workers in certain industries, as well as members of specific professional associations, can get that fee waived. The firm also may waive the financial planning fee when clients make a pledge, or other philanthropic donation, to unaffiliated nonprofits, such as PBS. The value of these pledges may or may not cover the $800 charge.
Non-clients looking for personal finance education can subscribe to “Ric Edelman’s Inside Personal Finance” newsletter for $439.95 a year. The newsletter is free to clients.
Edelman Financial Engines’ highlights
- A fee-only, independent advisory firm: Edelman Financial Engines advisors have no financial incentive to recommend a certain product, service or affiliated brokerage firm. Unlike some other advisors, the compensation they receive is based solely on a client’s assets under management. They are not representatives of broker-dealers. This eliminates potential conflicts of interest that may arise when advisors are financially incentivized to make certain product or service recommendations.
- Often offered as a workplace perk: Many employers pay Edelman Financial Engines to dole out online advice to workers about their 401(k) plans or other retirement accounts at no cost to the worker. In addition, workers can often pay for additional services, such as an in-person advisor for their 401(k) and even IRAs or other accounts, for a lower cost than they’d owe if they worked directly with the firm.
- Online offering: Financial Engines’ roots are in the fintech space, and it’s arguably the original robo-advisor. Today, the firm offers clients an online advice tool for $149.95 to $300 a year to provide guidance on retirement and other investment goals. Other clients can enjoy the tech-savvy platform along with a personal advisor.
- Awards and accolades: As previously mentioned, Ric Edelman has received national recognition for his impact on the financial planning profession. The firm has also received many awards. In 2019, Edelman Financial Engines was named the best independent advisory firm for the second year in a row by Barron’s, which looked at both quantitative and qualitative factors, such as the size and experience of the team and its regulatory record. The firm also tops the list of independent advisors from InvestmentNews.
Edelman Financial Engines’ downsides
- Not available in every state: While the firm has more than 170 offices around the country, clients won’t find an office in every state. Learn if there is an office in your area by using the firm’s search tool. If you aren’t concerned about meeting in-person with your advisor though, the firm is registered in all 50 states.
- No do-it-yourself option: Most clients, with the exception of the online advice, have a discretionary relationship with the firm, meaning advisors make trading decisions without the need for client approval. Clients who want guidance from a dedicated professional advisor but who prefer to make the final decisions themselves, may want to look for a non-discretionary account elsewhere.
- Focuses primarily on mutual funds and ETFs: At times, the firm can provide some guidance on individual securities or annuities, but its focus is on mutual funds and ETFs. Clients looking for individual stocks and bonds as well as access to alternatives, such as real estate or hedge funds, or access to a specific third-party portfolio manager, won’t find those options available at Edelman Financial Engines.
- Pays for referrals: The firm pays an ongoing fee to certain third parties including TD Ameritrade and E*TRADE when they refer a client who begins working with Edelman. Thus, when someone recommends the firm to you, make sure to ask why exactly they are making the recommendation. Client fees do not change whether they were referred in or not.
Edelman Financial Engines disciplinary disclosures
In Form ADV paperwork filed with the SEC, all registered investment advisors are required to disclose any legal, regulatory or criminal action over the last 10 years that is material to a client’s evaluation of the advisory business or the integrity of the management team.
Edelman Financial Engines discloses only one such event, detailed further on firm founder Ric Edelman’s individual SEC profile, related to a failure to register as an investment advisor in the state of Illinois. The problem arose after a client of the firm moved to Illinois without the firm’s knowledge, bringing its total tally of clients in the state above the threshold at which a firm is required to register. The firm paid a fine, and later, Ric Edelman was individually assessed an additional fine related to the event after a firm employee failed to disclose the prior fine on paperwork.
Edelman Financial Engines onboarding process
To reach out to Edelman Financial Engines, potential clients can call the firm directly at 888-PLAN-RIC or fill out the Contact Us form on the top right of their website.
After clients begin working with an advisor, they can expect to be contacted annually to make sure no changes to their financial or personal information have occurred that impact their investment choices. Anytime changes occur, clients should proactively reach out to the firm. Clients using the online advice services are in charge of monitoring their own accounts.
Is Edelman Financial Engines right for you?
Employees should take advantage of any Edelman Financial Engines services offered through their workplaces at no cost to workers. Beyond that, modest- and high-income investors looking for a fee-only advisor to dole out unbiased financial guidance can consider Edelman. Investors seeking low-cost investment guidance, or those not in close proximity to one of the 170 office locations, can consider the online advice tool. Retirees may consider the firm’s specialized services that help retirees create regular income streams.
That said, investors looking for a lot of exposure to products beyond mutual funds and ETFs may want to look elsewhere, since the firm focuses primarily on these two products.