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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.
| 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 Website: https://www.edelmanfinancialengines.com Phone: 408-498-6000 |
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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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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.
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.
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.
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:
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 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 | |
|---|---|
| Assets | Annual fee |
| 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 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.
To reach out to Edelman Financial Engines, potential clients have a couple of options:
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.
Edelman Financial has over 150 office locations. Specifically, the firm has offices in the following states:
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.
