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Great-West Moves into Second Place in DC Administration Market

In the last several months, Great-West Financial has undergone a major transformation, restructuring its DC administration business (Great-West Retirement Services) to provide a more holistic offering.

While it’s clear that Fidelity dominates the DC administration market in terms of revenues, recordkeeping assets, and participants, it is a much tighter race thereafter.  Consequently, the recent changes by Great-West Financial demonstrate the company’s desire to move up the totem pole and create some distance from its competitors. 

Prior to the recent activity, Great-West Retirement Services was focused on providing DC administration services including 401(k) and 457 deferred compensation plans to SMEs.  In October, the company added support for 403(b) plans for small and mid-market non-profits.

In 2013, total recordkeeping participants for Great-West Retirement Services were ~4.6m, and total recordkeeping assets were ~$178bn distributed approximately as follows:

  • 57% 401(k)
  • 33% 457
  • 10% 403(b). 

Great-West Retirement Service’s client base includes both private and public entities such as Flagler Hospital and the State of Indiana.  Its renewal rate is strong, averaging around 4 years; recent renewals include the City of Houston and the State of Alabama.  

In late March, Great-West Lifeco, the parent company of Great-West Retirement Services and Putnam Investments, reorganized and decided to merge the DC administration businesses of both companies, but continue operations under separate brands. 

In general, Putnam’s business is much smaller in terms of participants (~250k) and assets under administration (~17bn), but focuses on mid and large market clients.  Therefore, the merger creates a more unified business with offerings available for all market segments.

The restructuring alone would have been beneficial, but Great-West didn’t stop there.  On April 3, it acquired J.P. Morgan Retirement Plan Services (RPS) business.  This acquisition adds ~200 clients and 1k employees and importantly strengthens Putnam’s large market 401(k) client base.  

Across the three companies, the total number of participants served is ~6.94m and assets under administration are ~$390bn.  While it’s a far cry from Fidelity’s 16.7m participants and $1.3 trillion in assets, it is enough to secure second place for the time being.   

There are many aspects of the recent changes and activity that position the company well for future growth.  And in addition to providing a comprehensive offering including 401(k), 403(b), and 457 plans, the new portfolio of clients, including the acquisition, strikes a better balance between SMEs and large organizations.  In terms of participants, it’s approximately a 70/30 split, and in terms of assets it’s nearly 50/50 with SMEs ahead.

For the meantime, all three businesses will operate as separate brands.  These extended capabilities and resources are positioning the company nicely for long-term growth with the potential to pull away from the pack.   

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