“I’m like a fat kid in a candy store with a rich grandma,” Joe DeNoyior colorfully said when describing the growth and acquisition opportunities in the 401k space.
“We’re not a plug-and-play model. The firms that join us put their fingerprints all over what we continue to build.”
Joe DeNoyior
Initially reluctant to discuss the 401k advisory M&A environment due to its overplayed nature, the National President of the Retirement and Private Wealth division (HUB RPW) with insurance giant HUB International nonetheless had plenty to say.
“I don’t see the quality of the deals lessening [with the slowing economy], but I see the scope of the deals broadening,” DeNoyior explained. “Our approach is not only to migrate towards more wealth-centric firms but also to look for 401k specialists in either a niche or specialized market, or something that’s not a typical institutional 401k shop.”
The purpose is to diversify the division’s revenue streams, and he mentioned two recent acquisitions as examples; Texas-based TCG Group in July 2021, which serves the kindergarten through Grade 12 educators’ market, and New York-based Direct Advisors last September, which specializes in construction companies subject to the Davis-Bacon Act, Service Contract Act or state prevailing wage regulations.
“With the passage of all these different bills for infrastructure, we felt like that market was good to be in,” DeNoyior said of the latter. “We have a huge construction specialty group, and it’s a way to deepen our services in a vertical where we’re already very strong.”
Far from simply a sale, he sees acquisitions of this type as the next stage in an advisory firm’s evolution.
“There is so much opportunity beyond what we’ve seen in the past, not only from a cross-selling standpoint but really rounding out our services. HUB is a diversified service model that’s very strong in 12 different specialty groups, including P&C, employee benefits, HR consulting, etc. It’s allowed us to have tremendous opportunity in the 401k space.
“Think of it this way,” he added. “HUB has over 800,000 corporate clients, but there aren’t 800,000 retirement plans. So, yes, the opportunity is there.”
It’s a corporate culture that provides full service to clients, one the entire firm embraces, with an underlying entrepreneurial spirit protected by the company’s structure—31 different regions with their own presidents and P&Ls.
“We’re not a plug-and-play model,” DeNoyior emphasized. “The firms that join us put their fingerprints all over what we continue to build.”
We naturally wondered if there was ever a time when an acquisition didn’t work and if there was anything he learned.
“So far, there has not been one that has not worked out. We want to ensure that we’ve created environments for the acquired firm, its employees, and its clients to thrive. In the early stages of looking at an acquisition, we keep asking ourselves if the firm will be able to thrive with us. We keep drilling deeper if we don’t feel confident in the answer.”
There have been bumps, he conceded, but expected in an aggregator growing as fast as HUB.
“From your readers’ perspective, remember, I built a firm, Washington Financial Group (WFG), and sold it, so I see both sides. There are points when they say, ‘Should we have done this? Should I have sold my firm? Yet when we talk to the firms that joined when I joined in 2019, all of those firms are thriving. Organic growth is off the charts. The retention rate of their employees is super high, and we feel like we’re just scratching the surface of the opportunity that exists.”
Always looking ahead, DeNoyior mentioned the next generation of 401k leaders and how career paths will develop industry-wide to attract new talent.
“The 401k specialist industry is fairly new,” he said. “We used to be financial advisors that did 401K plans. I don’t see young people entering the industry like I used to. They used to wing it and see if it worked. Newer folks now demand more and should expect more. I think we as peers need to continue to spend time designing career paths for the next generation. We hired an HR lead for just HUB RPW. Her primary role will be human capital development and career path engagement.”
Ultimately, though, he’s optimistic about the future of 401k and related services and concluded, “I am excited to see the next evolution of our industry and honored to play a small part.”
SEE ALSO:
• Joe DeNoyior’s TAPO Redux: Becoming an Industry HUB
• What Aggregators Look for in 401k Advisor Firms
• Washington Financial Group’s Joe DeNoyior to Run HUB Retirement