Edelman Financial Engines Review

Edelman Financial Engines was formed in November 2018 when Edelman Financial Services, LLC (founded by Ric Edelman in 1986) merged with Financial Engines Advisors, L.L.C. (established in 1997.)

Based in Sunnyvale, CA, Edelman Financial Engines has $205,600,000,000 under its management, 467 advisors across its 180 branches nationwide, and over 1.15 million clients as of Q2 2019.

They offer a variety of services including:

  • Financial planning,
  • Investment management,
  • Retirement and estate planning,
  • Money management,
  • Homeownership and mortgage,
  • Insurance, taxes, credit,
  • And debt management.

The firm’s goal is to “…make Wall Street and the rest of the financial world understandable and accessible.

They do this by providing clients with investment strategy tools that are simple to use while empowering them with sophisticated financial advice.

Who Uses Edelman Financial Engines?

Edelman Financial Engines serves a wide range of clients, including:

  • Non-high-net-worth,
  • And high-net-worth individuals,
  • Estates and trusts,
  • Investment advisors,
  • Small to mid-size businesses,
  • Employer-sponsored defined contribution plan participants,
  • Pension plans, profit-sharing plans,
  • Retirement plans, associations,
  • And charitable organizations.

The firm focuses on working with individuals who want personalized services and advice on long-term financial goals. It also works with corporations to help employees manage their employer-sponsored defined contribution accounts.

Its financial planning strategies are based on asset diversification, cost-effective investment choices, as well as periodic and purpose-driven rebalances and reallocations.

How Does Edelman Financial Engines Work?

When you work with advisors from Edelman Financial Engines, they will consider your unique financial goals, risk tolerance, liquidity needs, time horizon, and preferred investment types or styles to devise an investment strategy.

Most programs combine financial education with the service of a financial planner who can answer personal finance questions, offer personal financial advice, provide strategic guidance on various financial matters, and adjust your investment plan over time as a response to life events, evolving life goals, or changing risk tolerance level (e.g., based on age.)

Edelman Financial Engines offers a wide range of services in areas including financial planning, investment management, and retirement account management:

  • Financial planning: goal-based financial planning, retirement savings planning, retirement income planning, insurance analysis, credit, and debt advice, as well as homeownership and mortgage analysis.
  • Investment management: fiduciary services and investment recommendations for various investment vehicles (e.g., mutual funds, exchange-listed equities, CDs, bonds, annuities.)
  • Portfolio forecasting analyses for foreign exchange stocks, options, and warrants.
  • Retirement income solutions such as company-sponsored defined contribution plans (i.e., 401(k), 457, 403(b),) IRAs, and taxable accounts.

Edelman Financial Engines offers different types of programs with varying minimum account sizes or requirements. For example, the Edelman Managed Asset Program® (EMAP) has a minimum asset value of $5,000 for individuals and $500,000 for institutions, the independent IRA management service requires a minimum asset value of $50,000, and the EFS Edelman Retirement Program has no account minimum.

Fees Charged By Edelman Financial Engines

For most services, Edelman Financial Engines charges on a quarterly basis, and the fees are typically a percentage of the account value, calculated based on the average daily balance of the account during the prior quarter. Occasionally, there may be other fee types, such as hourly fees and fixed fees.

Client fees start at 1.75% for the first $400k and the fee rate goes down to 0.5% at $15MM asset value. The EMAP Institutional Fees start at 1.4% for the first $999,999 and the fee rate drops to 0.5% at $25MM asset value.

If you access Financial Engines’ services via your employer, the fee will vary between 0.20% and 0.60% of the value of your retirement portfolio, with an average of around 0.40%. There’s no account minimum for this service and it’s available to you for as long as you have a retirement plan with the employer. Services include professional management, personalized plans, retirement readiness planners, and online advice.

The Pros And Cons Of Investing With Edelman Financial Engines

Here’s what to consider if you’re planning to invest with Edelman Financial Engines:

Pros Of Investing With Edelman Financial Engines

  • Prior to the 2018 merger, both Edelman Financial Services and Financial Engines Advisors have received accolades from reputable financial publications.
  • For instance, Barron’s ranked Edelman Financial Advisors as the top U.S. independent financial advisor in 2018 and Financial Times ranked both firms on its top U.S. registered investment advisors (RIAs) list.
  • The firm has no legal or regulatory issues in its record.
  • It’s easy to find a local office in most states. They have over 180 branches across the country. So, again, getting personalized services from a financial advisor is easy.
  • Edelman Financial Engines is a fiduciary, which means its advisors are required by law to act in the clients’ best interests under all circumstances. In fact, it has topped the InvestmentNews interactive RIA rankings and is recognized as the country’s top fee-only investment advisory firm.
  • Financial Engines works with many companies within the retirement arena, including Delta Airlines, Ford, IBM, Kraft Foods, and Microsoft. The firm has extensive experience in managing employer-sponsored defined contribution accounts and has arrangements with over 500 employer retirement plans so it can control the investment selections and allocations.

Cons Of Investing With Edelman Financial Engines

  • The fees charged by Edelman Financial Engines is generally higher than the national median advisory fee. For example, it charges an estimated $8,250 for $500,000 worth of assets, compared to the $5,000 national median.
  • Edelman Financial Engines participates in E*TRADE’s and TD Ameritrade’s client referral programs. The firm doesn’t receive any direct financial compensation from either company, but its participation in the programs could mean a conflict of interest. This is because it has incentives for recommending clients to select E*TRADE or TD Ameritrade as their account custodian.
  • There are some grey areas in using the term “fiduciary” since the firm makes suggestions (e.g., insurance providers) with which its parent or sister companies have affiliate relationships. As such, the recommendations may be biased.

Conclusion: Is Edelman Financial Engines Right For Me?

With its wide range of services, Edelman Financial Engines offers convenient one-stop-shop financial management programs. All with a high-tech and high-touch approach that combines technology with personalized services in financial planning and investment advice.

Besides professional services, the firm also offers a wealth of educational content, which is great for empowering yourself with in-depth information so you can make informed decisions.

The various types of services offered by the firm suit different types of investors. You can either have it take complete control of your account or work with you in an advisory capacity. All while you take an active role in managing your investments.

The fees and other costs associated with frequent trading can lower a portfolio’s return potential. So, Edelman Financial Engines isn’t suitable for those seeking short-term investment opportunities.

Its services are best for investors who are looking to take a long-term approach to investment and wealth management.

Edelman Financial Engines’ fees are relatively high for smaller asset values compared to robo-advisors. But the annual management fee of 0.50% for accounts with balances greater than $25MM is quite competitive. This allows you access to personalized and customized investment services. All without paying much more than you would for other options.

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