Edelman Financial Engines Cuts Fees

Edelman Financial Engines, the country’s largest RIA by AUM, has modified its fee structure following its merger with Financial Engines, which was completed in late July.

According to the firm’s latest Form ADV, Part 2, filed on Nov. 1, the annual wrap fee for retail accounts, known as EMAP for Edelman Managed Asset Program, has been cut, but only slightly for accounts with AUMs above $150,000.

For new accounts with $150,000 or less in assets, the annual fee is 1.75% versus 2% previously, as seen below in the charts from the ADV filing.

The fee cuts for accounts with more than $150,000 are negligible. For example, new accounts with $400,000 in assets will pay 1.75% versus 1.78% for legacy accounts, based on calculations using the new asset breakpoints. New accounts with $1 million in assets will pay 1.3875% versus 1.4% previously. It’s expected that legacy accounts will move to the new fee schedule in early 2019.

In addition to the fees above, which include costs for trading and custodial services, clients pay roughly another 30-35 basis points for the mutual funds or ETFs in which their accounts are invested. The EMAP accounts consist primarily of no-load mutual funds and ETFs in several asset classes and market sectors including domestic and international stocks, global bonds and alternative investments with strategies that range from conservative to aggressive.

Ric Edelman, the founder of Edelman Financial Services, now founder and chairman of Financial Education and Client Experience at Edelman Financial Engines, says the firm’s fees are “highly competitive in the marketplace” and most of its clients don’t pay the maximum 1.75% fee given the size of their accounts. The top fee is set at 1.75% because the firm has a low minimum account size of just $5,000, unlike most other RIA firms, says Edelman.

The top 1.75% fee, however, is at the higher end of financial advisory fees. According to Cerulli Associates, the annual AUM-based fee charged by advisors averaged is 1.22% for accounts with $300,000 in assets, 0.95% for accounts with $1.5 million and 0.76% for accounts with $5 million. These numbers exclude fund fees, fixed financial planning fees or administrative fees charged by broker-dealers.

Edelman Financial Engines charges 1.18% for accounts with $1.5 million in assets and 0.82% for accounts with $5 million. The firm has a total $205.6 billion in assets from approximately 1.41 million accounts, according to its latest Form ADV. This includes $23.2 billion in wrap fee accounts.

— Related on ThinkAdvisor:

• Edelman, Financial Engines Rebrand Retail Presence
• Ric Edelman: Retirement Crisis Is 14 Years Away
• Financial Engines-Edelman Deal: Where Are the Synergies?