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Updated on Monday, August 16, 2021
Edelman Financial Engines is a massive merger-created firm that 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 bottom line: Edelman Financial Engines is a huge firm with over 150 locations across the United States that offers portfolio management and financial planning services.
- Low minimum investment requirement
- Services offered through many workplace plans
- Has an online financial advisory tool
|Assets under management: $260,100,000,000|
|Minimum investment: $5,000|
|Individual investor to advisor ratio: 903:1|
|Fee structure: A percentage of AUM, hourly charges, subscription fees, fixed fees, other fees (setup fees and related services, reimbursements for printed materials)|
|Headquarters: 3315 Scott Blvd, 4th Floor|
Santa Clara, California 95054
All information included in this profile is accurate as of August 12, 2021. For more information, please consult Edelman Financial Engines’ website.
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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, the combined company provides services including portfolio management and financial planning, and is primarily owned by Edelman Financial Engines, LLC.
Currently, Edelman Financial Engines has close to 1,500 employees, almost 500 of whom serve in investment advisory and research roles. It has over 150 offices across the U.S. The business now operates under the name Edelman Financial Engines, although it’s registered as an investment advisor under the name Financial Engines Advisors.
A look at the founders of Edelman Financial Engines
Both firms that make up the Edelman Financial Engines merged entity have a storied history.
Ric and Jean Edelman founded their namesake financial services firm, Edelman Financial Services, in 1987. 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.” He also hosts the radio program “The Ric Edelman Show,” which has been on the air for over 25 years. In 2020, Edelman was named among the top 100 radio talk shows hosts by TALKERS magazine, the sixth mention from this publication. 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. Edelman announced in 2021 that he was stepping back from the firm after three decades.
Financial Engines was founded by Nobel laureate William F. Sharpe in 1996. The famed economist won the Nobel Prize in Economic Sciences in 1990. His Sharpe Ratio, created in 1966, is one of the most referenced risk/return measurements in economics. 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.
Edelman Financial Engines’ pros
- 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 up 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 2020, 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’ cons
- 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.
- No alternative investments: Clients looking for alternative investments, such as real estate, private equity 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 individuals and companies a fee 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.
- Potential conflict of interest for Ready Cash accounts: When clients participate in Edelman’s Ready Cash program, which lets them keep their cash reserves with UMB and participating program banks, the affiliated banks pay a fee to Edelman based on the aggregate daily closing balance of deposits held in the accounts. This presents a potential conflict of interest because of the benefits the firm receives from clients who participate in Ready Cash rather than other market alternatives.
What types of clients does Edelman Financial Engines serve?
The vast majority of Edelman Financial Engines’ clients are other investment advisors. However, the firm also works with a number of individual investors, the vast majority of whom are non-high net worth individuals (for reference, 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 can last them into their early 90s.
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, though certain services may require more.
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 exchange-traded funds (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 non-retirement accounts, or those not offered through the workplace.
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. 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. Specific investments typically include:
The team periodically rebalances as needed and strategically reallocates investments as conditions change.
Fees Edelman Financial Engines charges for its services
Fees for services through the workplace: When employers offer Edelman Financial Engines’ online advice program to employees, the employer may pay the fee. 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 1.35%, and a minimum quarterly fee of $225 may apply.
Fees for working with Edelman Financial Engines directly: When clients work directly with the firm’s planners, the fee is an annual percentage of assets under management. Rates are 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.
|Edelman Financial Engines Client Fee Schedule|
|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.
Fees for financial plans: 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.
Fees for online advice: For online advice, clients pay up to $300 per year, depending on the service.
Edelman Financial Engines disciplinary disclosures
Edelman Financial Engines discloses one disciplinary 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.
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.
For more on Edelman Financial Engines, go to the firm’s IAPD page.
Edelman Financial Engines onboarding process
To reach out to Edelman Financial Engines, potential clients have a couple of options:
- Call the firm directly at 888-PLAN-RIC
- 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. Clients using the online advice services are in charge of monitoring their own accounts. Any time changes occur, clients should proactively reach out to the firm.
Clients of the firm will receive quarterly written reports about their investment portfolios.
Where Edelman Financial Engines is located
Edelman Financial has over 150 office locations. Specifically, the firm has offices in the following states:
- New Jersey
- New Mexico
- New York
- North Carolina
- Rhode Island
- South Carolina
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 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 products, along with stocks and bonds, rather than alternative investments. Be sure to research multiple firms to ensure you find the right advisor for you.
The “Find a Financial Advisor” links contained in this article will direct you to webpages devoted to MagnifyMoney Advisor (“MMA”). After completing a brief questionnaire, you will be matched with certain financial advisers who participate in MMA’s referral program, which may or may not include the investment advisers discussed.