There are a variety of opinions on how the deal will work out.
"From Merrill's viewpoint, there is not too much overlap," said Michael Weddell, a consultant in Watson Wyatt Worldwide's Southfield, Mich., office. "AMVESCAP has a fair amount of work they do for banks and other intermediaries where they just do record keeping, and Merrill was not in that business."
"Merrill has been in this business in fits and starts," said another consultant who did not want to be named. He said Merrill tried to make a big push several years ago, but neither it nor AMVESCAP has been a major player in defined contribution plan record keeping.
"You look at any of the major 401(k) plan searches being conducted now, and Merrill is not on the short list," he said.
Merrill was record keeper for about $87 billion in DC assets as June 30, 2004, putting it in sixth place in Pensions & Investments' ranking of the largest defined contribution record keepers (P&I, Nov. 29). Adding the $21 billion in assets record kept by AMVESCAP, Merrill would remain in sixth place in the listing, behind The Vanguard Group, Malvern, Pa., which had about $155 billion in record keeping assets. The largest record keeper was Fidelity Investments, Boston, with $561 billion.
According to information supplied to P&I, Merrill was the record keeper for 1,870 defined contribution plans, 31 of which had more than 10,000 participants each. But 746 plans had fewer than 100 participants each. AMVESCAP was the record keeper for 1,122 defined contribution plans, with only nine plans having more than 10,000 participants each. Most of its plans, 611, have less than 100 participants each.
The AMVESCAP business will become part of Merrill's new Princeton Retirement Group, which will be based in Atlanta. AMVESCAP has 430 employees in its retirement services business and Merrill intends to keep almost all of them, said Cynthia Hayes, first vice president, Merrill Lynch Retirement Group, Pennington, N.J.
Robert O'Connor, AMVESCAP Retirement's president and CEO, has announced he'll retire within a year, but other high-ranking executives — including Mark Jones, head of sales; Barbara March, head of operations; and Gregory Hyde, head of strategic partnerships — have all been asked to stay.
Merrill intends to keep open the AMVESCAP Retirement business' offices in Winston-Salem, N.C., and Providence, R.I. Only AMVESCAP's Denver office, with three employees, will be closed. Those employees will move to Merrill's Denver office.
DC record keeping "is one of the major growth initiatives at Merrill," she said. "We intend to be the dominant player in the retirement business over the coming years."
As to whether AMVESCAP's clients will stay with Merrill, the jury is still out.
"We have several big clients with AMVESCAP, and in all cases they are taking a wait-and-see attitude," said Ted Disabato, senior vice president and chief investment officer, Clark Consulting Inc., Chicago.
James Worrell, senior human resources manager with Georgia Gulf Corp., Atlanta, which uses AMVESCAP as the record keeper for its $174 million 401(k) plan, said: "We've already received a number of communications from AMVESCAP. We think we've got plenty of time. We're making no assessment (of the deal) whatsoever at this time."
AMVESCAP was the DC record keeper for clients of FleetBank before its parent, Fleet Boston Financial Corp., Boston, was acquired by Bank of America Corp., Charlotte, N.C., and still retains those assets. A source from another record keeper, who did not want to be named, questioned what might happen if Bank of America, which reportedly made an unsuccessful bid to buy the AMVESCAP business, decided to take the business away.
"We've had initial conversations with Bank of America and we're excited at the idea that we can serve as their outsourcing partner," said Ms. Hayes.
Bank of America spokesman Jon Goldstein, in a prepared statement, said: "AMVESCAP provides back-office functionality to some Bank of America defined contribution retirement plan clients. All other aspects of our defined contribution platform, including available investment options, client service and comprehensive risk management, are provided directly by Bank of America.
"Our current relationship with AMVESCAP remains in place, and we anticipate no change in the level of service to which our clients have become accustomed. We will continue to monitor AMVESCAP's performance against our service level standards, as is our typical practice with all of our partners and will work closely with Merrill Lynch to ensure that this transaction has little or no impact on our clients."