Publisher's Note: Many of you may have seen this article already in early July on our sister media property Financial Advisor but we thought it bore one more visit, since the transaction referenced in this piece has since closed.
SUNNYVALE, Calif.--(BUSINESS WIRE)--Jul. 19, 2018-- Financial Engines, Inc. (“Financial Engines”), America’s largest independent investment advisor1, and Hellman & Friedman, a leading private equity investment firm, today announced the successful completion of the acquisition of Financial Engines by funds affiliated with Hellman & Friedman. As part of the transaction, Financial Engines has been combined with Edelman Financial Services (“Edelman”), one of the nation’s largest independent financial planning and investment management firms. Hellman & Friedman owns a majority interest in Edelman. The acquisition was previously announced on April 30, 2018, and closed and became effective today.
Financial Engines + Edelman = LOVE By Gail Graham
July 2, 2018
When I think about the pending merger of Financial Engines and Edelman Financial Services, I get very excited about two things: consumer advocacy and marketing effectiveness.
I believe that all good marketing starts with a focus on consumers, and I will go further to say that today, to stand out, you must elevate that to consumer passion.
Brands that people love have more than customers. They have followers and ambassadors. We’ve seen such customer passion in other industries—think Whole Foods, Tesla and Apple. Now consider Edelman and Financial Engines together, forging a beloved financial services brand that helps people feel safer, more confident and secure in how they balance life and money. It would be an amazing step forward for everyone.
It’s super early yet. I have zero insider information, and every merger is bumpy and slow. The progress won’t be readily visible. We don’t even know the name of the new organization (for this article, I’ll simply refer to it as FE/E, for short). With those caveats, let me explain why I am so enthusiastic and hopeful about what may come.
A Great Family Tree
Companies that have been started by visionaries carry their founders’ DNA, and the parentage of FE/E is stellar. Bill Sharpe, the Nobel prize-winning economist, built Financial Engines to improve the ways people are served in retirement plans. While I was an executive at Fidelity, I had a chance to be part of a working group with him and other industry leaders talking about the challenges facing both consumers and retirement service providers during the Great Recession.
Frankly, it was a depressing session at first. The asset managers and 401(k) providers in the room wanted product solutions that were self-serving—forced auto-enrollment, mandated lifecycle funds—and all the focus was on technical issues. Bill (the smartest mathematician in the room) chastised this group for trying to solve a human problem with just numbers, rather than understanding the emotions of money. He shifted the entire meeting by being an advocate for consumers and injecting humility and thus setting a tone of empathy and responsibility in the conversation. I believe his good intentions are in the fabric of Financial Engines.
Similarly, Edelman Financial Services reflects founder Ric Edelman’s concern and respect for the average American investor. He has been an outlier among RIA leaders by focusing on the underserved smaller investor. At times brazen, he has had the courage to call out uncomfortable truths about topics like longevity, technology, student debt and the like. My sense of Ric is that he is driven by a personal mission to help people live secure financial lives, and his educational approach fits nicely with the learning programs that were at the heart of Financial Engines.
Serving plan participants as one of the first robo-advisors, Financial Engines excelled at digital engagement and has a younger, fresh vibe to how it does things. Conversely, both Edelman and the Mutual Fund Store, which was acquired by Financial Engines in 2015, were built to serve baby boomers. What’s interesting about the new entity is how the wisdom across generations could be very powerful. For Financial Engines, the opportunity to serve rollovers and retirees is greatly helped by a strong national footprint. In addition, it now has specialized and credible expertise for the issues facing retirees and older people—retirement income planning, Social Security, long-term care.
At first glance, the robo-business and the bricks and mortar distribution system might seem best suited to different segments—digital offered for the young, human advice for the older investor. What I hope to see is a much more integrated digital-plus-human approach for every generation, something that would benefit all consumers and help regenerate an RIA industry past its prime.
Modernizing The RIA Model
The registered investment advisor model faces a set of challenges that must be solved. To grow as boomer assets wane, the industry needs to find a way to reach more and younger investors, deliver the great digital experiences today’s consumers demand and serve them profitably at a lower price point. There has been very little progress on this front, and it should be a concern for everyone who feels that the fiduciary advisor model is good for investors.