The fight for dominance among record keepers intensified this month as Empower Retirement stepped forward with plans to acquire Prudential Financial Inc.'s retirement business for $3.55 billion.
The deal, announced July 21, will add more than 4,300 workplace retirement plans with about 4 million participants and $314 billion in assets to Empower's rapidly growing platform. When the deal closes as anticipated in the first quarter of 2022, Empower will have 16.6 million participants, narrowing the gap with its next nearest rival — and record-keeping industry leader — Fidelity Investments, which as of Sept. 30 had 25.7 million participants, according to Pensions & Investments data.
Empower's record- keeping assets will swell to approximately $1.4 trillion administered in some 71,000 workplace retirement plans. By comparison, Fidelity had $2.58 trillion in assets in almost 30,000 plans as of Sept. 30.
To be sure, the transaction will solidify Empower's position as the No. 2 record keeper in the U.S. The company will widen its lead over TIAA-CREF, which as of Sept. 30 had 6.4 million participants and $656.5 billion in assets. It will also leave fourth-ranked Vanguard Group Inc., with 5.5 million participants and $592.7 billion in assets, further in the dust.
"We will continue to leverage our scale and resources to challenge the status quo and be uniquely positioned to serve the retirement and wealth management needs of millions of retirement savers in every phase of their retirement journey," Empower President and CEO Edmund F. Murphy III said in the news release announcing the transaction.
The acquisition comes as record keepers continue to consolidate amid growing pressure to lower fees. Empower's purchase of Prudential's record-keeping and administration business will give the firm "more negotiating power with asset managers," said Philip Chao, a consultant to insurance carriers and asset managers who is also founder and principal of Experiential Wealth Inc., a registered investment adviser firm in Vienna, Va.
"They need as many people on their platform as possible," Mr. Chao said, referring to Empower.