EVEN BEFORE THEIR acquisition of CitiStreet, ING was considered a top small-market, Defined Contribution and 401(k) record keeper as a member of the “Big Four” insurance carriers which include Principal, John Hancock and Nationwide with Hartford and Great West moving up not so slowly.  After the acquisition, which closed on July 1, 2008, ING is rivaling Fidelity as the top DC provider with the most DC plans at 60,000 plans, almost $400 million in US assets and 10 million participants, second only to the Boston-based mutual fund company.

Although ING has larger plans in the 403(b) and 457 markets, they are best known to advisors as a small-market 401(k) provider.  Over the past five years, it had seemed as if Principal and Hancock were eclipsing ING and Nationwide with Hartford, Great West and even Transamerica making great strides in the small market.  Principal has made very successful forays into the mid, large and even mega 401(k) markets while Hancock keeps outselling all others by focusing squarely on the TPA serviced, small 401(k) market.  Now, ING has nothing to be envious of and, in fact, may be able to set the bar that could be difficult for others to follow.  They instantly become a force in the advisor sold mid market giving MassMutual, NY Life, Prudential, Principal and Diversified another strong competitor among advisor focused providers and will show up well against the direct sold record keepers like Fidelity, Vanguard, T Rowe, Schwab and JP Morgan.  CitiStreet’s focus on low cost index funds will resonate strongly in today’s market.

CitiStreet was a graft of two companies that never really melded into a new, integrated organization.  Before the creation of CitiStreet, the NJ-based Copeland group known more for the 403(b) plans had taken over the Smith Barney DC program which was outsourcing to UPI (now Ascensus).  State Street’s Quincy, MA operation was focused on the large and mega markets primarily using State Street index funds enjoying a rich revenue-sharing arrangement while providing good, low-cost investments and quality service.  Rather than one plus one equaling three or more, the two groups struggled to find the necessary synergies to keep their joint parents happy especially with both of them struggling in the current credit markets.  The question now is whether ING can make the various moving parts from all of these companies or divisions into a well oiled machine that can overtake Fidelity and other industry leaders.

In an interview with Rick Mason, the President of the group focused on intermediary-sold DC plans with less than $150 million in assets covering 401(k) and 403(b) plans, the emphasis was clearly on bringing the best in class market practices now available to CitiStreet’s larger plans down to smaller plans serviced by advisors.  In CitiStreet’s defense, it had been difficult for them to reach out to advisors beyond Smith Barney because of their close affinity to that one wire-house and Quincy’s lack of experience with advisors given their market focus.  ING clearly gets the advisor market and seems to be driving the bus advisors will most likely board.  ING has all the tools and seemingly all the resources, including brand and distribution to not only compete with all small- and mid-market providers but even eclipse them.  They are trying to create tools and services for advisors to make it easier to do business with ING and have started to get the idea that advisors need and want help with practice management beyond record keeping, education and investments.  Advisor support between the NJ CitiStreet and ING will be combined as Smith Barney will continue to be a big focus as the new entity will now have to earn, not demand or expect, their business going forward.  ING will also become one of the few providers focused on advisors that serve all types and sizes of plans from small non-ERISA 403(b) plans to large and even mega 401(k) plans.

Only record keepers with state-of-the-art and flexible technology wrapped with smart processes to leverage the limited pool of highly skilled staff have a hope of surviving the forces that are making further consolidation inevitable.  Though both ING and CitiStreet use OmniPlus, the integration of the client interfacing applications is more important and advisors will be the judge of whether the process goes smoothly with minimal interruption.  ING’s last acquisition was the ReliaStar book almost 10 years ago. 

Advisors will also have to answer the question of whether ING has the right senior and field personnel to pull off this massive integration and whether they have the vision to move ING into an industry leadership role which is clearly their only measure of success.  Leveraging top DC intellectuals, academics from leading institutions as well as their almost 10 million participant base, ING is trying to stake claim to the growing field of behavioral finance.  With vast resources, the most DC plans, and almost $400 billion in assets behind only Fidelity and TIAA-CREF, ING has the horse power to become an industry leader. The question is whether they can direct these resources through what could be a very difficult transition, provide a leading platform for retirement advisors and make it home for dinner before six.

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