Deal With Warburg Pincus Values Edelman Financial Engines at $7.3 Billion

Hellman & Friedman remains the majority owner of the mega RIA entering a new business phase.

Boston, Massachusetts, home of Edelman Financial Engines. (Scott Eisen/Bloomberg)

Boston, Massachusetts, home of Edelman Financial Engines.

(Scott Eisen/Bloomberg)

Private equity giant Warburg Pincus has struck a deal with Edelman Financial Engines, valuing one of the country’s largest RIAs at more than $7 billion.

Warburg Pincus will become a minority owner of Edelman Financial Engines, the companies announced Monday. The private equity firm did not disclose how much it invested in the RIA but said the deal valued the wealth manager at over $7.3 billion. Michael Martin, a managing director and the head of the Financial Services group at Warburg Pincus, also plans to join Edelman’s board of directors.

The deal is expected to close in the second quarter of this year.

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In a way, the deal is a reinvestment. In 2015, Warburg Pincus invested in Financial Engines as it combined its workplace retirement solutions with more comprehensive, advisor-led wealth management. Three years later, private equity firm Hellman & Friedman privatized Financial Engines and merged it with Edelman Financial Services. Since the merger, the new company, Edelman Financial Engines, has expanded its services and grown its assets under management by nearly $100 billion, the company said. It now manages $260 billion for 1.2 million clients and has more than 150 offices across the U.S.

Hellman & Friedman remains the majority owner of Edelman Financial Engines.

“We have a strong history with Edelman Financial Engines and are thrilled by this opportunity to invest in its continued growth in partnership with Hellman & Friedman,” Martin said.

“We believe that the Edelman Financial Engines business model, which spans workplace retirement plan advice and traditional financial planning and investment management services, uniquely positions the firm to help millions of Americans reach their financial goals.”

The new investment and willingness for the private equity firms to work together shows the “abundance of opportunity ahead for our business,” Edelman Financial Engines President and CEO Larry Raffone said in a statement about the deal.

The RIA says it achieved record growth in 2020 and maintained that momentum. In December, after years of mergers and acquisitions, Edelman came to the end of a digital integration road years in the making. It was managing about $230 billion at the time and has since added another $30 billion. The recapitalization by Warburg Pincus will be used to fund the phase of growth.

“We are excited to continue working with Larry and team as they seek to protect and enhance the financial well-being of so many Americans, and we look forward to partnering with Michael and the Warburg Pincus team. They bring great expertise in the financial services industry and will be a great addition to the Board as we support the Company’s bright future together,” Allen Thorpe, a partner at Hellman & Friedman, said.

Last fall, Warburg Pincus, which manages $58 billion in assets, led a group of investors in a $25 million Series B round of funding for Facet Wealth, a startup that connects investors with financial advisors and quadrupled to 6,000 in 2020.

Michael Thrasher (@Mike_Thrasher) is a reporter at RIA Intel based in New York City.

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