As expected, the deal announced last April by Great-West to acquire JP Morgan’s Retirement Plan Services large-market recordkeeping business closed last week, giving the combined companies almost 7 million participants and close to $400 billion in plan assets covering 457, 403(b) and 401(k) plans.
The deal came on the heels of the combination of Putnam’s retirement business, an entity already owned by Great-West, with Putnam’s CEO Bob Reynolds leading the charge. JP Morgan remains active in the DC business, both in plan administration in the small-to-medium market (through RetirementLink), and through their suite of target date funds and custom DC funds.
Questions remain about the new entity’s brand and management team, as well as the implications for the market. When the JP Morgan deal was announced, Charlie Nelson (Great-West), Ed Murphy (Putnam) and David Musto (JP Morgan) were said to report to Reynolds. Speculation is that one person will lead operations and one will lead sales, leaving one man out. Insiders have questioned whether Nelson, who built a hugely successful retirement business at Great-West and is used to being in charge, will be comfortable in the long term reporting to Reynolds.
The JP Morgan brand will probably be unavailable for the new entity, leaving Great-West and Putnam as options. Since Great-West is stronger in the retirement business, it is the likely new brand — unless they decide to create a new one. Word to the wise: “Voya” is already taken.
The acquisition of JP Morgan, the tuck-in of Putnam, and putting Bob Reynolds back in charge of an industry giant that serves all markets and plan types, as well as a recovering asset management business, has caused major tremors throughout the market. No longer can a record keeper serve only one of the sub-markets in the under-$250 million advisor-sold DC space, causing some giants thought to be in “401(k) Heaven” to scramble to acquire or partner.
There are five or six seats available in that market. Vanguard seems likely to hold one of them, with the successful launch of their advisor-sold small-market product leveraging Ascensus’ record keeping services. Who will the others be? Certainly Fidelity, which has shifted its distribution strategy to focus on advisors in the under-$100 million market, will occupy a seat. MassMutual and Transamerica are well positioned as well. Of the remaining candidates, Principal stands out, having forayed into the mid and larger market years ago.
So with Fidelity, Great-West, MassMutual, Transamerica and Principal already successfully serving multiple advisor-sold DC markets and Vanguard looming, there are only one or two seats left at the table and many candidates vying for them. The ones with the best chances are John Hancock, ING, Nationwide and Prudential, who have built big, profitable retirement businesses — but do not necessarily span all markets. Also in the mix: T Rowe Price, which is starting to make a serious run at advisors, and Wells Fargo — not to mention the payroll companies. Of the smaller record keepers looking to grow, OneAmerica seems best positioned.
Stay tuned — it just gets more interesting from here.
