Transamerica’s recent acquisition of Mercer’s defined contribution administration book of business helps move Transamerica “further into the mega-market of retirement plans,” says Kent Callahan, president and CEO, investments and retirement division of Transamerica.
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Callahan shares what it means for participants and Transamerica’s current and future relationship with brokers.
Why did you form a partnership with Mercer?
Mercer is a highly respected organization whose business and experience complement our capabilities as a provider that serves all market segments. Both of us are committed to a great customer experience and both bring considerable passion to helping participants achieve their financial goals. From Mercer’s perspective, our acquisition of its DC business and ongoing preferred provider arrangement would allow the company to continue to offer a market-leading total benefits and total retirement solution to clients.
We are very excited to bring two great teams together to leverage our collective capabilities and talents for our clients and participants. I am looking forward to working with our new colleagues to bring even better service and support to DC retirement plan customers when the transaction closes.
How will it strengthen your business?
I expect the consolidation of the retirement plan business to increase in velocity over the course of the next three to five years. Acquiring Mercer’s DC business would add 917,000 participants and $71 billion in plan assets to Transamerica, meaning that we would provide plan administration and/or recordkeeping services for nearly 5 million participants and $216 billion in retirement plan assets — putting us firmly in the top 10 for both those measures. In the competitive landscape we’re in, becoming a larger provider, with enhanced scale, is mission critical. Adding this level of scale helps reduce per-participant costs, fueling future pricing power. And the ongoing relationship with Mercer provides us with additional opportunities for new business. We view the pending acquisition and alliance as a very positive strategic move to fuel continued top-line growth.
What impact will it have on plan participants?
They will benefit from enhanced retirement planning and reporting tools, including mobile account management, that will help them better gauge their retirement readiness and actions that can be taken to improve it. They also will be able to take advantage of our comprehensive retirement counseling services.
I’d like to note that the acquisition will have no impact on existing Transamerica participants and plan sponsors, who will continue to be served by their same teams. We anticipate that Mercer DC employees will join Transamerica after closing and also continue to serve their current clients.
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What is your role working with brokers?
The book of business we have built in the small, mid- and large markets has been heavily driven by independent brokers, advisers, TPAs, consultants, RIAs, etc.
Regardless of affiliation, intermediaries have been an important piece of our business model. We provide plan administration, recordkeeping, education and investment platforms, and the role the broker plays is complementary to our products and services. With brokers, advisers and consultants providing critical investment advice and plan consulting, we jointly are able to meet all the needs of a plan sponsor.
Do you see that relationship changing in the future? If so, how?
The acquisition of the Mercer block of business moves us further into the mega-market of retirement plans. This effectively allows us to market to and service all segments of the market, from start-up plans to multi-billion dollar plans. But what we do in the small and mid-markets will not be changing. We are as committed as ever to those segments, and we do not expect to change the way with work with and distribute through brokers and advisers. If anything, the acquisition will improve our relationship, as we will be able to leverage scale to bring more innovative and cost-effective solutions to our partner brokers and advisers.
