Empower derails its fifth acquisition – Prudential’s record-keeping business – but it’s still no match for industry leader Fidelity, which is just outpacing organic growth

Empower derails its fifth acquisition – Prudential’s record-keeping business – but it’s still no match for industry leader Fidelity, which is just outpacing organic growth

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

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.  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

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. 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.

“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.

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  • Empower derails its fifth acquisition – Prudential’s record-keeping business – but it’s still no match for industry leader Fidelity, which is just outpacing organic growth
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