John Hancock to Acquire NYLife Retirement Division

Fred Barstein

And the beat goes on for DC record keeper consolidation, as John Hancock announced Dec. 23 that it has agreed to acquire the retirement division of NYLife. The combined entity will have $135 billion of AUM, 2.5 million participants and 55,000 plans.

The combination seems to be very complementary — the two firms’ sales groups, systems and service people have very little overlap. Hancock is famous for their small market unbundled TPA DC service, while NYLife focuses on bundled services for mid and larger plans.

One of the worst-kept secrets in the recent history of the DC industry, the combination made too much sense not to be done. Competitors had thrown down the gauntlet, combining small and larger market providers — including the recent combination of Putnam, Great-West and JP Morgan (renamed Empower-Retirement), which followed the acquisition of Hartford by MassMutual and the merger of Diversified into Transamerica.

Like the airline industry, the DC record keeping market is consolidating at a rapid pace, with the Hancock/NYLife deal the 13th major industry move in 2014. There are an estimated seven to nine seats at the advisor sold DC market table covering plans with $1-$250 million, and providers are scrambling to claim one of them. Fidelity, Empower, MassMutual, Transamerica, Principal and now Hancock are in the lead, with other providers like Voya and Nationwide close behind. 

Traditionally direct sold providers like Vanguard (which partnered with Ascensus in 2012 and is picking up momentum), T Rowe Price (which is hiring external wholesalers) and possibly Schwab are still on the outside looking in. Payrolls like ADP and Paychex, as well as outsourcers like Ascensus and Pai, seem secure in their niche; Verisight made some big waves this year with deals involving DailyAccess and Newport.

Not only does the acquisition of NYLife’s retirement division give Hancock instant entrée and credibility with mid-market advisors and plans, it opens up other markets like DB and Taft Hartley plans which further leverage fixed assets. Many bigger advisors and groups that have accumulated 20 or more record keeping relationships through Advisor-of-Record sales will likely be consolidating down to five or six, each of which must be able to service large, mid and smaller plans. 

The question now is whether the consolidation heats up. Will those without a secure seat at the advisor sold DC table (defined by the ability to serve multiple markets and plan types) seek to acquire smaller fish? Will those who have a seat look to build up their assets and keep others out? 

Regardless, the stakes are getting higher, with only high rollers allowed at this high-stakes game — although niche players and smaller, nimbler providers could enjoy opportunities that are too small or beyond the sight of larger competitors.

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