The acquisition of JP Morgan’s record keeper business by Great-West and the merger with Putnam continues to draw attention. RIABiz notes that the new firm will likely use the Great-West name, which is least known of the three.
The firm has come a long way in its five years in the 401(k) market. In 2009 it was just jettisoning its health care business and starting up its focused retirement sales force, which it has beefed up through hires from notable competitors. It has also made significant inroads into the BD world, where it was mostly absent — most notably with Merrill Lynch two years ago. The new firm will boast big name clients such as Southwest Airlines, American Airlines, Cisco, Walgreens, Towers Watson, Wyoming and Philadelphia, as well as JP Morgan’s $16.4 billion plan. (Note that Fidelity lost the Bank of America plan recently to, who else, Bank of America.)
Reuters notes that while Bob Reynolds, who helped build Fidelity’s retirement business, may have his eye on his former employer, that hurdle is very high. Fidelity has three times as much assets as the new G-W, which has grown from $678 billion on AUM in 2008 to the current $1.3 trillion. Fidelity had record growth last year in the under-$50 million DC market, signaling its successful foray into the advisor-sold market as well as the launch of a separate DCIO effort with 10 wholesalers in the field who are very aggressive with advisors.
JP Morgan had tried to leverage relations with their small and mid-sized bank clients to use Great-West’s FASCore engine. Will the bank support the new entity in this effort?
The bottom line is that whether G-W can overcome Fidelity or not (probably not), there is now a strong competitor covering all markets and plan types that has more experience in the plan advisor market, is less reliant on proprietary funds (Fidelity has 30% of assets in prop funds versus 11% for JP Morgan), is privately owned and may be more technologically nimble, with newer systems. And it’s led by the person who built Fidelity’s business. Who else would know their vulnerabilities better? At Putnam, Reynolds was fighting for survival, not competing with Fidelity. Now?
