In case you have not noticed, industry consolidation is happening at a fevered pitch, led by record keepers, but also affecting DCIOs, BDs and even advisors.
In the latest news, a private-equity-led record keeper with $150 billion in DC and nonqualified plan assets has rebranded and now stands ready to threaten more well-known traditional powerhouses in a race to become one of the survivors in the advisor-sold record keeping market.
Verisight, Daily Access and Newport Group announced that the combined entity will be known as Newport Group, which signals efforts to consolidate all three companies’ technology, sales and service models. Stone Point, a well-heeled PE firm in Greenwich, Conn., was behind the acquisitions by Verisight of Daily Access and Newport in 2014. Verisight, based in Walnut Creek, Cal., is a roll-up of a few record keeping TPAs, including McGladrey’s DC group and NextStep (formerly Benefit Street). Verisight CEO Greg Tsider will become the CEO of the newly branded entity.
With $150 billion of assets, Newport is already larger than many better-known providers, and today serves both small and larger DC plans as well as nonqualified plans, where they are already a leader. They also act as outsourced record keeper for many other institutions, competing with groups like Ascensus, which gives them a larger base of clients to leverage.
More Consolidation Coming
Though it has not yet happened to a significant degree, plan advisors are likely to start consolidating their books, limiting the number of record keepers they work with to streamline operations. When this movement does occur, they will be betting that the providers they choose to work with are not likely to exit the market. Though PE firms buy to sell, when record keepers get really big, the transition is most likely to another provider or a financial buyer, and does not cause much, if any, disruption.
The DC market is maturing and is becoming the engine for the entire retirement industry. We’re starting to see DCIO consolidation (Victory and RS Investments, TIAA and Nuveen), as the pool of money outside of passive and TDF strategies continues to shrink. The anticipation around the DOL fiduciary regulation is forcing some BDs to examine their entire business, and the move to DC specialty groups like CAPTRUST, SageView, NFP and now GRP is just one form of advisor consolidation.
So advisors should watch the Newport Group carefully – they are big enough to be one of the surviving providers in the advisor sold market. Now it comes down to the right technology, execution and people – no small task.
Opinions expressed are those of the author, and do not necessarily reflect the views of NAPA or its members.
