Record keeper consolidation, which went into hyper-drive with the combination of Putnam, Great West and JP Morgan, continues with the Oct. 15 acquisition of the Newport Group by the holding company that owns Verisight. The holding company will be renamed Newport Group Holdings.
The two firms will continue to operate their own brands. Together, Newport and Verisight (which purchased DailyAccess earlier this year) now boast $100 billion in AUM, nearly 1 million participants, 1,000 employees and deep expertise in DC, DB and non-qualified plans covering small to mid to larger plans. It has instantly become a real force in the market, with an outside chance of becoming one of the five or six dominant players in the advisor-sold corporate retirement market.
Look for another big merger of major providers by year's end.
Verisight is a roll-up of independent record keeping TPAs, having started with a modest firm in Sacramento that partnered with Franklin Templeton years ago. In time they then purchased Jerry Bramlett’s NextStep (formerly BenefitStreet), McGladrey’s qualified plan business and then DailyAccess in January.
Verisight will continue to be led by Greg Tschider, who helped a family business based in Chicago roll up trust and custody firms before they sold that and moved on to the record keeping industry. The capital behind Verisight is Stone Point, a hedge fund in Greenwich, Conn. that bought out the Chicago family office a couple of years ago. With $13 billion of capital, they have the resources to keep growing and investing in the competitive and capital-intensive record keeping business.
Newport Group, founded by Peter Cahall, who will lead the new entities’ executive benefits and investment consulting business, made their fortune in the non-qualified business. They purchased a DC record keeper out of North Carolina more than 10 years ago thinking that a combined DC/non-qual platform would take off like DC/DB systems had done. Though important, non-qual is a niche business, with fewer than 10% of DC plans offering it. Newport has earned a good reputation in the mid-large DC sold market. Tschiders will lead the new entity’s qualified plan business, with Dennis Sain, head of DC sales for Newport, reporting to him.
Verisight now rivals Ascensus as one of the largest independent record keeper in the DC market. Neither relied on proprietary investments — meaning they actually must make money on record keeping and administrative fees. Ascensus is the back office for Vanguard’s small market product, which is quickly picking up momentum and is a serious threat to the small market insurance providers.
Verisight faces the usual post-acquisition challenges of integrating various record keeping systems, cultures and staff. But they do have the key characteristic that will determine which providers survive the under-$500 million advisor-sold market: a strong presence in all market segments. Mid- and large-market providers without a small-market presence have no foundation — and small-market providers without a mid-market service have no future.
