Update 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 firmâ€™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 Enginesâ€™ 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
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, â€śThe Truth About Money.â€ť In 2019, he was inducted into Barronâ€™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 itâ€™s registered as an investment advisor under Financial Engines Advisors.
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 firmâ€™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 firmâ€™s discretion. For employees to work with the firm through their workplace, clients usually need only $5.
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 whatâ€™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:
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 householdâ€™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 clientâ€™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.
Edelman Financial Engines is a fee-only firm, meaning its planners donâ€™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 firmâ€™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 firmâ€™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 firmâ€™s discretion. Most fees are automatically deducted from the clientâ€™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 programâ€™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 â€śRic Edelmanâ€™s Inside Personal Financeâ€ť newsletter for $439.95 a year. The newsletter is free to clients.
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 clientâ€™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 Edelmanâ€™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 firmâ€™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.
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.
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 firmâ€™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.