Edelman Financial Engines has acquired Danville, Calif.–based Herrmann & Cooke Wealth Management, an SEC-registered investment advisor providing financial and wealth management services to approximately 600 clients with around $490 million in assets under management.
The transaction follows the August acquisition of Smart Investor, also in Northern California, as the firm has ramped up acquisitions as part of its growth strategy. In 2021, Edelman acquired Washington-based Viridian Advisors, which added tax practice capabilities in addition to growing its advisor network in the larger Northwest.
The head of Edelman’s wealth management business told WealthManagement.com in August that Edelman will be stepping up mergers and acquisitions activity over the coming months, but will be “very selective” in the process.
“We like to think of three Cs as we're looking for firms to integrate with Edelman Financial Engines,” Jason Van de Loo said Tuesday. “Firms that have the right clients, the right capabilities and, maybe most importantly, the right culture.”
Herrmann & Cooke has developed a similar client roster, he said, focused on mass affluent investors with between $500,000 and $3 million to invest, and are also a “planning-centric” and growth-oriented firm.
“This isn’t an asset management firm. These aren't alpha seekers; they aren't stock pickers,” he said. “These are planners, and they were delivering really high quality, comprehensive financial planning to their clients—and they have been for years. And they're not resting on their laurels. They're looking for new ways to reach more people, to help more people and to find growth.”
It didn’t hurt that the firm is located in California’s Bay Area, where Edelman already has corporate partnerships and established organic growth opportunities, said Van de Loo, but geography and targeting specific markets have become lesser considerations in the post-COVID economy.
“Our team’s long relationship with [Edelman] helped make it clear to us that our clients would see real benefits from the increased depth in all areas of wealth planning,” said Herrmann & Cooke CEO David Herrmann. "We are very excited to grow with the leading firm in our industry.”
Edelman is currently working to build out additional services for its high-net-worth clients, including in-house tax, estate planning and insurance capabilities.
“We’re also doing a lot of research and development and looking at new investment management offerings as well,” Van de Loo said. “That is a space where we see firms doing some interesting things and, over time, may be a capability that we look to add to our value proposition through acquisition.”
In July, the firm introduced a new platform meant to create a bridge between Edelman’s 401(k) managed accounts business and the investment advisory business Van de Loo runs. The Momentum by Edelman Financial Engines platform, which is available to employers outside the Edelman network, engages with retirement account owners at specific moments in their lives to offer support through common transitions and foster ongoing advisory relationships.
“Hopefully at some point we'll be able to talk specifically about named rollouts and what we're seeing in terms of adoption,” said Van de Loo. “But a couple of our larger workplace partners have committed to deploying the Momentum product. We also have two new employer partners who have made that commitment and are rolling the offering out.”
Van de Loo said that Edelman is currently in "active conversations" with other potential acquisition targets but declined to give specific names or numbers.
“I think (future acquisitions) will look a lot like Smart Investor, a lot like Herrmann Cooke,” he said. “You're not going see us all of the sudden become an aggregator. You're not going see us become a big rollup firm. We want to be very strategic. We want to be very targeted.”
“Because we have such a strong organic growth engine, we don't have to use M&A to fill that need,” he said. “We can use M&A in a more strategic way and I like the flexibility and the freedom that that gives us.”
Edelman’s wealth management business currently manages around $49 billion, serving more than 90,000 clients through around 370 advisors, per Van de Loo.