Edelman snaps up $1.5B firm, one of its largest recent deals

Registered investment advisor juggernaut Edelman Financial Engines has closed one of its biggest acquisitions in recent years, adding to a string of other RIA purchases. 

Edelman announced Thursday that it purchased Providence, Rhode Island-based New England Pension Plan Systems, a retirement-plan consulting firm for employee benefit plans, and its affiliated RIA New England Investment Consultants, which is also based in Providence. Together those firms managed around $1.5 billion for over 500 clients, including individuals, trusts, estates and charities, according to a press release Thursday. 

The deal will give Edelman, whose headquarters are in Santa Clara, California, a bigger footprint in the Northeast. It also extends the robo-advisor and 401(k) firm's reach among small businesses offering retirement plans. 

"This is also (Edelman's) largest acquisition based on assets under management since the firm began executing its current M&A strategy in 2021," the firm said in the release. 

READ MORE: Edelman Financial Engines acquires $425M RIA 

Edelman is backed by private equity firms Hellman & Friedman and Warburg Pincus. In 2021, Warburg acquired a minority stake in the firm that recapitalized it at a valuation of $7.3 billion. The firm did not respond to questions about private equity backing of the deal from this week. 

The move follows another in October by Edelman to buy Align Wealth Management, an Oklahoma City, Oklahoma-based fee-only RIA that managed $425 million of assets. The firm also swallowed up PRW Wealth Management (2023), Erman Retirement Advisory (2022), Herrmann & Cooke (2022), Smart Investor (2022) and Viridian Advisors (2021) in recent years, it said in the release. 

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Summer courtship, winter wedding 
Suzanne Van Staveren, the executive vice president, chief financial officer and chief operating officer at Edelman, said in an email that the choice to buy NEPPS reflects growing demand from small business owners on how to manage their corporate retirement plans. 

"They have a strong practice in small business retirement plans, an area where we are seeing additional demand," Van Staveren, a Goldman Sachs alum who joined Edelman in 2022 to ramp up its M&A activity, said of NEPPS. "This line of business dovetails nicely with our retirement plan division for small businesses." 

DeVoe & Company introduced the two parties and they met during the "early summer," Van Staveren said. 

"Because of the strong cultural alignment, the process progressed quickly from diligence to the closing this week." 

The deal closed on Dec. 12, Van Staveren said. She declined to share the terms. 

Sergio DeCurtis, CEO of NEPPS, said in the release that a shared approach to client service made Edelman a strong fit as a buyer. 

"Like EFE, we promote the same client-first focus for our retirement plan clients and our individual wealth planning clients," he said. 

Van Staveren declined to comment when asked if New England Pension Plan Systems will keep its brand name going forward. 

"Our priority right now is to make sure that the acquisition news is not a disruption for the NEPPS clients and employees," she said in an email. 

Deals in the new year brewing 
Edelman will prowl the deal market in 2024, where Van Staveren said she expects more transactions. 

"We continue to be selective in our approach to M&A and regularly engage with sellers and intermediaries," she said.

READ MORE: 7 ways independent wealth management firms are consolidating

The Federal Reserve's signal this week that it will hold interest rates steady and likely cut them three times in 2024 could be a further spur to deals in the U.S. wealth management industry, according to Shaun Hauser, an M&A expert who is the founder and CEO of Canadian private wealth management firm Wellington-Altus Financial. Wellington-Altus is based in Winnipeg but has a U.S.-based unit. 

"The more affordable it is to take on debt to do purchases, the more purchases that you might see," Hauser said in an interview. "This will probably be favorable information for the deal market in fiscal 2024." 

Edelman's total AUM as of Sep. 30 was $245 billion with 1.3 million clients, and workplace represents $192 billion of the total AUM, a company spokesperson said in an email. The firm reported 10.4 million plan participants and 720 plan sponsors, including 103 Fortune 500 companies, as of the second quarter of 2023.