After gaining critical feedback from failed sale, Edelman Financial Engines shifts to Orion software, and will apparently try M&A market again with its gleaming new engine

After years of sideways drift and a recent M&A fizzle, Edelman Financial Engines (EFE) is shifting into high gear with a new CEO and a new technology engine.

The old agglomeration of The Mutual Fund Store, Financial Engines and Edelman Financial is apparently replacing mostly Envestnet software with an Orion bundle and will apparently also avail itself of the Orion investment platform to manage $302 billion in assets. 

The effort is being led by new EFE CEO Ralph Haberli, who  joined the company last July, and was appointed Chief Executive  in October. He's a Capital Group, BlackRock and Boston Consulting Group veteran and Yalie who took the reins a few months as president. 

EFE will get the innovation it's seeking with Orion, says Natalie Wolfsen, CEO of Orion in an email to RIABiz.

“We’re proud to support Edelman Financial Engines with Orion’s connected wealthtech and investment platform," she wrote. 

“Orion's flexible wealthtech ecosystem is a force multiplier that helps advisors scale efficiently, deepen client relationships, and unlock new opportunities through connected technology and expert support.”

Slow growth

Haberli comes from the institutional – namely 401(k)-- side of Capital Group, the Los Angeles fund giant and owner of American Funds.

Much of his charge in taking over EFE is to finally deliver like clockwork 401(k) rollovers to retail wealth management inside its RIA.

The Santa Clara, Calif., investing, financial planning services, wealth management, and retirement planning company has struggled to grow for nearly a decade. but glaringly more so in the past five years.

It started 2022 with $291 billion and ended the first quarter of 2023 with $241 billion. See: Edelman Financial Engines new CEO will face challenges after AUM plummets $50 billion (since start of 2022) and DOL throws wrench in its business model, complicating efforts to convert robo-advised 401(k) assets to an 'Edelman' RIA

The firm's assets were $191 billion in 2018 at the time Edelman Financial and Financial Engines merged. 

It currently lists $293 billion of assets under management but only $66 billion, or 22.5%  comes from about 37,000 high-net-worth clients. It manages an additional $91 billion for 447,000 investors, according to the most recent EFE ADV.

High touch

The company has been looking for years to use technology to break out of it torpor, and hired Jay Shah as CEO in 2023 because of his reputation as a software-forward executive.  

He resigned last October, after little more than two years in the executive suite. Haberli, then president, replaced him as acting CEO. 

Shah had been CEO at Personal Capital, which grew up in Silicon Valley during the robo-advisor craze under Founder Bill Harris. See: Taking the helm from famous founder, Jay Shah gets Personal Capital out of Vanguard's shadow with new shape, new deals and a 70% leap in assets

“[Shah] has a proven track record of providing financial planners with innovative technology so they can deliver high-touch services,” founder and ex-CEO Ric Edelman.  said when Shah was hired. See: Ric Edelman removes a major impediment to his firm's future growth--himself--the last act in a 36-year career that will leave Edelman Financial Engines to fend for itself

Failed cash-out

Haberli credits Ric Edelman for serving as his “thought partner” while upgrading the company, Citywire reported today (Jan. 23).

"Very nice of him to say, and I’m happy to be helpful to him,” Edelman confirmed in an email. 

The company's failed attempt last summer to cash out its private-equity holders – Warburg Pincus and Hellman & Friedman – apparently galvanized the EFE revamp.

The PE investors are now more than seven years into ownership-- with seven years the rule-of-thumb for a PE sell-by-date.

Sale talk

Haberli acknowledged the M&A aspect of the revamp's impetus in his Citywire interview. Still, before retesting the robust RIA M&A market, he said he'd like to prove his “thesis” that EFE can take an investor from plan-participant to high-net-worth retiree under one RIA roof.

“Haberli did not rule out another go at a sale process in the near future, partially attributing the anticlimactic result of last year’s process to ‘timing,'” the article stated. 

“He added that, if anything, given the rapidly changing M&A marketplace, EFE will benefit ‘from a bit more time to have that thesis really come to fruition in the way that we know it can.”

“'Hard for me to get into specifics there,' Haberli said, regarding the possibility of EFE attempting to sell itself again this year."

Fully onboarded

Wolfsen declined to answer specific RIABiz questions about Orion's big EFE win, but her statement made a compelling case that Orion is battle-tested.

“As a leading Mega RIA, EFE exemplifies the scale and ambition of the firms Orion is built to serve,” she said.

“Fast-growing firms are choosing Orion: 17 of Barron’s top 20 RIA firms, including 8 of the 9 Mega RIAs, trust Orion to power their businesses.” 

The deal has been in the works for a long time and, in fact, is fully implemented.

“We’re fully onboarded to Orion’s platform and excited to accelerate our efforts in the year ahead, said Matt George, senior vice president and head of product at Edelman Financial Engines in the release.

“This collaboration gives us an opportunity to better integrate our systems, strengthen the tools our planners rely on, and enhance the experience we deliver to our clients," 

‘Orion ’Cement' truck

It's a front-runner message that the company is relying to apparent success and put out a press release with the provocative headline: "Orion Clients Grew Faster Than Peers in 2024 and Utilized More of Their Tech Stack, Cementing Firm’s Leadership as It Rockets Beyond $5 Trillion Asset Milestone.” See: Orion's prideful 'cementing' release and its '$5-trillion' milestone prompts rivals -- Black Diamond, Tamarac, Addepar, Advyzon -- to counter with performance data and stories of triumph and momentum of their own