IN THE PAST, we have focused on brand and distribution to determine who will be the survivors and winners in the 401(k) and DC market among the larger, national record keepers. More and more, these strengths are becoming table stakes just as technology and investments had become in the past. The providers that separate themselves must have a combination of technology, investments, brand and distribution along with the ability to continually drive down costs. Only by having fundamentally sound, stable and scalable systems will providers be able to efficiently process and service plans by more effectively leveraging expensive support people thereby lowering costs. Most providers will reach scale only through acquisitions.

In a recent interview with Jim Davey, head of The Hartford’s employee services group which includes retirement, Jim indicated that The Hartford is trying to separate itself from the pack through their recent acquisitions of Top Noggin (DB), MFS Retirement Services (Mid and Small Market DC) and the Princeton Retirement Group (Outsourcing). Hartford is clearly one of the leaders in the DC and retirement space with some very large and unique advantages including:

• One of the largest VA wholesaling groups through its subsidiary PlanCo with almost 300 wholesalers delivering leads to the retirement group

• A full-service retirement suite of products including a large 403(b) and 457 practice which shares technology resources and costs with the 401(k) group

• One of the largest 401(k) wholesaling forces

• Deep ties with major wire house broker dealers

• Flexible and mature services platforms selling bundled and TPA programs

• The recent acquisitions which give them:
  • Defined Benefit capabilities through Top Noggin which we think will continue to grow in the smaller plan market
  • Mid Market capabilities through MFS
  • Outsourcing resources through Princeton

We asked Davey about which platforms will survive and what his plans are for integration. Clearly, they cannot maintain the four platforms long term with DB on Top Noggin’s system, MFS on DST and The Hartford and Princeton on different versions of Omni. Not only does The Hartford face a technology challenge, but they also face an integration challenge from many different perspectives. The underlying technology and software must be flexible enough to support not only the different types of retirement plans, especially with changes to 403(b) plans coming soon, but they will also need to support different plan sizes. Though MFS had made some forays into the mid and large market with a notable $1 billion plan, there were not among the elite mid and large market providers; they had not invested in infrastructure over the past eight years which had been very tough for them because of performance issues and scandals. Davey clearly understood the challenge of integrating 300 applications that hang off the various systems that create the client experience and user interface. Though Davey claimed that the intent was not to cut back on staff and that the purchase of MFS in particular gave them access to talent in other locals, especially Boston, there will be issues with cultural differences, especially among sales people.

But with the imperative for most providers to grow through acquisition, the issues facing Davey and Hartford are not unusual. How they are handled will ultimately determine the fate of both. For advisors, The Hartford’s bold moves are signs of their commitment to the market and both broaden and deepen their support and service capabilities. In the interim, however, it would not be unusual for there to be service, support and technology issues. The question will be for how long and how bad.

The Hartford had been the “Fifth Beatle” of the insurance providers with the top four being Principal, John Hancock, ING and Nationwide. Like all providers with the vast reach that The Hartford enjoys, they need to sell and service through blind squirrels. Rather than abandon them, Davey indicated that the industry needed more advisors interested in focusing on corporate retirement and that they are committing resources to training and support.

Ultimately, providers of the size and ambition of The Hartford will not be successful just because they have good brand, distribution, technology and investments. Providers like The Hartford will need to continually drive down close in an era of full disclosure and sensitivity to fees. They will need to support the practice management needs of advisors while helping participants gather enough assets to retire. And finally, they need to have the deep balance sheets that only a few mutual fund companies and more insurance providers have to have to stand behind the guaranteed income products that individuals are looking for when they retire. The Hartford has all the ingredients to be successful, but their success will lie in their execution long term and the integration of their recent acquisitions short term.

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