Executives at Barclays Global Investors, San Francisco, and Merrill Lynch & Co. Inc., New York, aren't saying anything about a possible alliance that would allow Merrill to use the record-keeping system of Barclays' Masterworks.
Masterworks is a full-service program for defined contribution plans. The record-keeping portion serves about 165 Barclays clients with $16.5 billion in assets and has about 365,000 employee accounts with balances.
Merrill has dozens of mutual fund products and its own internal record-keeping system, but the firm also contracts with several outside record keepers.
Industry watchers say an alliance between the companies would make sense in several ways.
"Merrill has an army of sales people across the United States selling a huge number of 401(k) plans, bringing in more than they can handle," said Steve Butler, president of Pension Dynamics Corp., Lafayette, Calif.
"Barclays wants to work with large plans but that's a zero sum game because most large companies already have 401(k) plans.
"So Barclays isn't growing as fast as they were and they don't have the extensive marketing arm to generate new business," Butler said.
Merrill could contract with Barclays for record-keeping services to cover its burgeoning business; Barclays could benefit from using current staff for new business.
Because Merrill is making a large profits these days, it might even be able to subsidize some of the cost to offer plan sponsors a more competitive per-participant fee, Mr. Butler said.
