Tuesday, September 28, 2021

Empower achieves the fifth acquisition, Prudential’s record-keeping business, but is still no match for industry leader Fidelity, which is outperforming it only in organic growth.

Must Read

But despite a near decade-long spending spree that saw the merger in 2014 of Great-West Financial, JPMorgan Chase, and Putnam Investments into a single record-keeping subsidiary–Empower Retirement– their chief rival has proved to be an elusive target. See: Bob Reynolds strikes again in his 401(k) quest — this time buying JPMorgan’s retirement recordkeeping business Robert Reynolds and Edmund F. Murphy III both left long careers at Fidelity Investments with an eye on recreating the magic of the Boston giant’s retirement business at deep-pocketed Great-West Lifeco of Canada. 

Empower this week announced its fifth acquisition in a little over a year, a $3.55 billion deal for Prudential’s record-keeping business that will add more than 4,300 workplace savings plans, about 4 million plan participants and $314 billion in assets. 

Robert Reynolds, a former 24-year Fidelity veteran, now heads Putnam Investments. 

“  been looking to sell their recordkeeping business because they didn’t see it as an attractive business to retain,” says Shawn O’Brien, senior analyst with Boston-based Cerulli Analysts. 

Firms are getting rid of their 401k recordkeeping units because a ban on revenue sharing killed their margins and limitations on pushing proprietary products hurt their viability as loss leaders, he adds. 

“Record-keepers can’t deploy these revenue-sharing arrangements as they could five years ago.” 

Scale game

“We believe it’s highly regarded in the industry. It’s a very robust retirement plan. They have a terrific tenure of clients and the average was 17 years.”

Empower spokesman Stephen Gawlik says Prudential is plenty attractive for its ability to solidly serve a mature clientele.

The latest deal brings the Greenwood, Colo 401(k) record-keeper up to $1.4 trillion under administration, or just about where Fidelity’s retirement service was in… 2015. Fidelity has since grown to $3.2 trillion, an inside source says.

That leaves Empower still a distant second in what has become a purely scale game.

“There is very little differentiation in the services or in the pricing. The result is that ‘scale’ is the only growth path,” says Louis Harvey, president of Boston-based Dalbar Inc.

Time to reassess?

Reynolds is now president and CEO of Putnam Investments and Murphy is president and CEO of Empower Retirement. After 24 years, Reynolds left behind his job as Fidelity Vice Chairman and Fidelity Investments COO to join Putnam in 2008.

Lou Harvey: ‘There is very little differentiation in the services or in the pricing.’

Great-West Lifeco began its acquisition spree 2003 when it purchased Canada Life Financial for $4.7 billion and Putnam Investment Trust four years later for $3.9 billion. It added a health network in the mix but sold it to CIGNA in 2008.

Murphy, a 17-year Fidelity veteran, followed a year later. 

If wholesale acquisitions are the crux of its strategy to add scale; then it may have to reassess. 

Since 2014, the modern iteration of Empower Retirement has been an indirect wholly owned subsidiary of Great-West Lifeco US.

News Highlights Business

  • Empower achieves the fifth acquisition, Prudential’s record-keeping business, but is still no match for industry leader Fidelity, which is outperforming it only in organic growth.
  • Check all news and articles from the Business news updates.
Disclaimer: If you need to update/edit this article then please visit our help center. For Latest Updates Follow us on Google News

More Articles Like This

Latest News