Can Ric Edelman Help Plan Your Retirement?

When selecting a financial advisor to help plan for retirement, it's important to choose one that is incentivized to put your interests instead of their own; Ric Edelman offers as a case in point.

Edelman has been ranked on multiple occasions over the years among the top independent financial advisors in the country. In 2012, RIABiz.com, a "highly regarded industry website," named him one of the "ten most influential figures" in the investment advisory field.

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The 57-year-old Edelman is currently the chairman and CEO of Edelman Financial Services, one of the largest independent financial planning firms in America. It manages over $15 billion for more than 28,000 clients, according to the company's website.

Edelman is also the author of numerous books, including:

• The New Rules of Money (1999)
• Ordinary People, Extraordinary Wealth (2001)
• What You Need to Do Now (2001)
• Discover the Wealth Within You (2003)
• The Lies About Money (2007)
• Rescue Your Money (2009)
• The Truth About Money (2010)
• The Truth About Retirement Plans and IRAs (2014)

The benefit to using Edelman's services, as opposed to, say, an investment advisor at your brokerage company, is that he charges a single annual fee based on the value of your account (see table below). This eliminates the incentive on his part to make money at your expense by "churning" the assets in your portfolio to generate trading commissions.

But the detriment is that Edelman's fees are high when you consider that Vanguard's largest exchange-traded fund charges only 0.05% of assets under management. The significance of this can't be overstated. For someone with only $150,000 invested with Edelman, it means their portfolio would have to outperform the broader market by 2% on an annual basis just to come out even with the average stock. That's a tough row to hoe to put it mildly.

As a registered investment advisory firm, moreover, Edelman Financial Services acts as a fiduciary. This means that its advisors put your interest before their own. This is more stringent than the suitability standard, which only requires an investment advisor to make recommendations that are "consistent" with your best interests. As the SEC explains: "When your broker recommends that you buy or sell a particular security, your broker must have a reasonable basis for believing that the recommendation is suitable for you. In making this assessment, your broker must consider your income and net worth, investment objectives, risk tolerance, and other security holdings."

"Our mission is to make professional financial advice and investment services accessible to everyone," notes Edelman Financial Services' website. "We believe that by putting our clients first, explaining complex financial topics in easy to understand language, and helping those in need, we can achieve that goal."

If this sounds enticing, Edelman Financial Services may be able to help you plan for retirement. In addition to financial planning advice, the company also provides investment management services to individuals and institutions.

Its trademarked Edelman Managed Asset Program, for instance, uses seven questions to identify the best investment strategy for you. The questions cover your experience with investing, risk appetite, and age, among other things. Based off your answers, it suggests how you should allocate your assets. In my case, it recommends a roughly even split between stocks and bonds, plus smaller investments in foreign securities and real estate, among other things.

In sum, if you're on the hunt for a company that can ease your path into retirement, Ric Edelman and his firm seem like worthy contenders. Before you do so, however, I'd encourage you to shop around for more economical options.