Empower said Wednesday that it had retained 20,000 MassMutual clients and 2.3 million participants as of Aug. 31, a 92% participant retention rate.
The Colorado-based company, the nation’s No. 2 retirement plan recordkeeper behind Fidelity Investments, also retained approximately $174 billion in client assets, or 91%, as well as 87% of the plans.
Empower President and CEO Ed Murphy noted the retention rate was above the firm’s “pretty aggressive” internal targets, estimating that low-to-mid 70% is typical for a deal of this type.
“I would say these results are fairly consistent with what we’ve been able to achieve in the past,” Murphy said. “We would have similar expectations with respect to the Prudential migration effort, which is kicking off in the fourth quarter and first quarter of next year. Relatively speaking, we’ve got a fair amount of experience in doing this. Many of the individuals working on this transition have been part of all the prior acquisitions as well, dating back to 2015 when we acquired the JPMorgan business.”
Empower closed its acquisition of MassMutual’s retirement plan business in December 2020. It then embarked on what it called a comprehensive integration program consisting of eight “waves” of plan integrations, which launched in mid-2021 and are set to conclude in October.
Murphy credited the stability and continuity of service provided by the 1,850 Mass Mutual employees that came with the acquisition, which created a seamless transition process. He also credited Empower’s overall value proposition, user experience, commitment to the retirement plan business, and investment in technology as additional factors.
While the transition was a success, MassMutual moved its corporate 401k plan to rival Fidelity, something Murphy dismissed as a plan sponsor simply doing what’s best for its employees.
“In the case of Principal’s acquisition of Wells Fargo’s [institutional retirement business], Wells Fargo then moved their plan to us,” he countered. “If the question is, did it impact our ability to retain the business and continue to have a successful transition, I think the answer is it had no impact, as evidenced by the numbers we shared. You respect every plan sponsor’s decision, and they must decide what they think is best for their employees.”
When asked if inflation and possible recession will hamper similar deals in the near future, as well as industry M&A activity overall, Murphy said valuations are decreasing, and there is less liquidity and capital to be deployed.
“That said, though, I think a market like this, where you’re seeing a downward trajectory, has implications to all providers, but it particularly exposes the subscale players,” Murphy concluded. “Irrespective of what’s happening in the financial markets, you’re still going to see this trend towards consolidation continue.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
