In a relatively quick timeframe, MassMutual announced today that it has completed its acquisition of The Hartford’s retirement business. The acquisition was originally announced last September.
There are only a few providers with significant business in the small (<$10 million) and mid-sized ($10-$100 million) advisor-sold markets and, with the acquisition, MassMutual joins their ranks. The key issue is being able to effectively serve more plan advisors, most of whom have plans in both markets. Smaller plan providers like John Hancock often miss out on larger opportunities from good advisor clients, and mid-sized providers are not able to help advisors with their smaller plans.
With the acquisition, the providers that are now poised to fully serve plans from start-ups to $100 million include MassMutual, Transamerica (including Diversified), Fidelity, ING and Principal. Nationwide is moving up market; GreatWest has significant market share with larger 403(b) and 457 plans; and Wells Fargo outsources smaller plans. Putnam and Prudential do not seem interested in the smaller market, with Hancock making a major move into the mid-market this year.
Issues to look for going forward regarding the MassMutual/Hartford integration include:
• Systems. How long will they run small plans on the DST systems? MassMutual’s home-grown record keeping system was created for mid-sized and larger plans, but does it make sense to have two systems forever?
• Sales forces. MassMutual does really well in the mid-sized and larger markets, while Hartford specializes on smaller plan advisors that are strong with broker dealer home offices, especially wirehouses. Will the Hartford sales infrastructure, management and people survive and run the small market for the integrated organization?
The integration should be helped by the fact that the people involved are located within 30 miles of each other. Clearly, retirement is a major focus for MassMutual (their position in so-called “401kHeaven” is firmly secured) — which means the company will not hesitate to keep investing in people, technology and even more acquisitions. The announcement ends the state of limbo and should stop the bleeding for Hartford clients — which may lead some small market providers to ponder where their growth will come from this year, after winning over so many Hartford plans in 2012.
