Great-West Financial to acquire J.P. Morgan retirement unit

Business includes 200 clients with 1.9M participants, $167B in assets; acquisition puts GWF at No. 2 in retirement services

By Darla Mercado

Apr 3, 2014 @ 2:06 pm (Updated 5:21 pm) EST

great-west financial, j.p. morgan retirement plan services, recordkeeping, acquisition
Robert L. Reynolds president and CEO of Great-West Lifeco U.S. (Bloomberg News)

Great-West Financial will acquire J.P. Morgan Retirement Plan Services, further boosting its profile as a retirement plan record keeper.

J.P. Morgan Retirement Plan Services brings with it some 200 clients, 1.9 million participants and $167 billion in assets, plus more than 1,000 employees in a variety of functions including sales and relationship management, according to an announcement from Great-West.

Once the entities are combined, Great-West Financial's participant base will rise to 6.8 million, and its record-keeping assets will grow to $387 billion, according to the company. Following the deal, Great-West will be the second-largest retirement services provider, based on the number of participants in the defined-contribution market.

“The goal is to build a world-class retirement services company, and that's what we're gunning to do,” said Robert L. Reynolds, chief executive of Great-West Lifeco U.S. and Putnam Investments. “We're gunning to be the best and to have great clients who are satisfied with us.”

Terms of the deal weren't been disclosed, but the transaction is expected to close in the third quarter, pending regulatory approval.

David Musto, CEO of J.P. Morgan Retirement Plan Services, will continue to oversee that block of business and will report to Mr. Reynolds. Together with Charles P. Nelson, president of Great-West Retirement Services, and Ed Murphy, head of defined contribution at Putnam Investments, the three will coordinate with Mr. Reynolds to integrate the businesses and work on segmentation.

“[Mr. Musto] will have a very senior role in the company, but his primary charge is to continue to run the J.P. Morgan business at a very high quality and with high client satisfaction,” Mr. Reynolds said.

Michael Falcon, head of retirement at J.P. Morgan Asset Management, will remain with his firm.

In a statement, he noted that clients of J.P. Morgan Retirement Plan Services should have a “seamless” transition and will continue to work with the same consultants, specialists and staff members.

“We believe this is a great development for our large-market record-keeping clients and our RPS employees, with Great-West Financial as an ideal acquirer for the business,” Mr. Falcon noted in the statement.

Dan Marchon, a senior equity research associate at Raymond James and Associates, suggested that J.P. Morgan may have decided to spin off the retirement unit because it hasn't yielded many profitable cross-selling opportunities.

“For the past two years or so, they've been trying to deliver the cross-sell across the bank,” he said. “They want to be able to establish one relationship with a customer and from that, offer what they need in terms of banking services.”

“This is one point of contact that doesn't lead to a much more profitable relationship with the customer,” Mr. Marchon added.

Mr. Falcon disagreed.

“The driving force behind this is our focus on investments, providing investments to the retirement marketplace, and making sure that our clients have access to scale in a provider that can meet their needs going forward,” he said in an interview.

“What's behind the decision is, what's in the best interest for the clients: It's a business that lives off of scale, investment, capability and resources,” Mr. Falcon said. “This combination [with Great-West] provides that.”

Going forward, J.P. Morgan Asset Management will continue to focus on retirement plan investments, where it's a player in the defined-contribution investment-only space and a major provider of target-date funds.

News of the J.P. Morgan deal follows Great-West's decision to combine its retirement business with that of its sister company Putnam Investments.

That deal, announced in late March, diversified Great-West's clientele, as the insurer primarily operated in the 457 retirement plan space. The carrier is also in the 403(b) market and works mostly with small-to-midsize plans on the 401(k) side. Putnam, meanwhile, works mostly with medium to large retirement plans.

“The U.S. retirement market is enormous, and we have a chance and opportunity to be a major part of it,” Mr. Reynolds said. “We're going to take advantage of that opportunity.”