Ascensus acquisition spree builds on goal of national TPA firm

In the world of record keepers, Ascensus LLC's third-party administration business is quick to liken itself to Switzerland. It's neutral, working with some 30 record-keeping firms, said Jerry Bramlett, head of FuturePlan by Ascensus, the company's growing TPA business.

It's a message that FuturePlan is driving home as Ascensus looks to acquire TPAs and build a national firm that will serve the administration needs of retirement plan sponsors locally. Proximity matters when it comes to providing personalized service, he said.

Assuring TPAs that the financial advisers to their plan sponsor clients will call the shots regarding the record keeper they want to work with is crucial, Mr. Bramlett said. "The adviser is the primary partner that we have in going to market," he said. "We think that it's very important that the advisers understand from us that we have no bias toward Ascensus record keeping or toward any record keeper."

In fact, of the 44,000 plans that FuturePlan serves as third-party administrator, less than 5% are with Ascensus, according to Mr. Bramlett.

"It's all about adviser choice," he said. "We want to make it crystal clear that we're very much focused on utilizing whichever record keeper the adviser would like to use."

That pitch has been central to Ascensus' aggressive acquisition strategy, allowing it to acquire TPA firms that might otherwise have been reluctant to disrupt adviser relationships with their record keepers. Over the past two years, the firm has snapped up more than two dozen TPAs throughout the country, including most recently United Retirement Plan Consultants, a large Dublin, Ohio-based firm that the company acquired in June.

"We're building a truly national TPA," Mr. Bramlett said, explaining that Ascensus has the technology, cybersecurity and economies of scale to help FuturePlan do so.

Indeed, the TPA market, which is made up of thousands of small TPA providers, is ripe for consolidation, industry observers said. As plan sponsors and participants have raised their expectations of service providers, small firms haven't been able to keep up with higher compliance, regulatory and client-service demands, said Dennis Gallant, senior analyst at research and consulting firm Aite Group LLC in Boston. "It's a scale game," he said.

What's more, with greater fiduciary demands, many firms are looking to get out of the business. "It's going to be a much more stringent, fiduciary-oriented marketplace, so there are a lot of firms saying, 'Do we have the resources to compete?'" Mr. Gallant said.

Lew Minsky, president and CEO of the Defined Contribution Institutional Investment Association in Palm Beach Gardens, Fla., echoed similar views. "Staying competitive requires massive investments in HR, technology and cybersecurity that small TPAs cannot afford."

While some firms have made attempts to scale up over the years, none have done so to the extent of Ascensus, said Fred Barstein, founder and CEO of The Retirement Advisor University in Jupiter, Fla. "It's a little unprecedented," Mr. Barstein said.

Indeed, United Retirement Plan Consultants, the firm Ascensus recently bought, had gone through its own acquisitive phase, purchasing some 18 firms from 2005 to 2009, Mr. Bramlett said. The firm stopped acquiring businesses because "it felt it had reached a point where it could act as a national firm and didn't need to acquire more companies," Mr. Bramlett said. The firm agreed to be bought because the private equity firm that owned it — Stonehenge Partners Inc. — was looking to cash out on its investment.

The URPC acquisition was by far Ascensus' biggest TPA acquisition, scooping up 8,000 plans with more than $10 billion in assets under administration. The firm also had 13 offices, which gave URPC regional sales coverage from "coast to coast," Mr. Bramlett said.

FuturePlan aspires to go much further than URPC and become the first firm that Mr. Bramlett describes as "truly national." It will be national not only from a sales perspective but from a client service perspective by combining the capabilities of local TPA professionals with the strength, security and scalability of Ascensus.

"It's important to have sales consultants in those local markets but we also think it's important to have service in those markets," Mr. Bramlett said.

Industry observers applauded the strategy.

"FuturePlan is separating itself from everyone else by focusing on being a TPA partner that can offer nationwide expertise and support for multiple types of plans and services, fully scalable and adaptable for the needs of record keepers, advisers and plan sponsors," Mr. Minsky said.

FuturePlan nevertheless still has a while to go before it builds the national sales and service workforce it envisions. With more than 40 offices and 50 sales consultants, it has national sales coverage but is only "halfway" to being national from a servicing standpoint with its more than 1,200 retirement plan professionals, Mr. Bramlett said.

FuturePlan is already the nation's largest retirement TPA by plan count, serving more than 48,000 retirement plan sponsors, Mr. Bramlett said. As of March 31, it had more than $57 billion in assets under administration. Ascensus had $72.8 billion in defined contribution assets under record keeping with nearly 58,000 plans as of Sept. 30, according to Pensions & Investments data.

Some of the firm's TPA competitors are nowhere near that. Retirement Advantage, a TPA firm based in Appleton, Wis., for instance, serves more than 8,500 plan sponsors with more than $8 billion in assets under administration. While it has only four offices, the firm considers itself to be a national firm because it supports advisers nationwide, a spokesman said.

For its part, FuturePlan is keeping its focus on advisers in a bid to woo TPA firms and propel its strategy forward. By remaining neutral on record keepers, FuturePlan helps ease concerns that record keepers might lose their business to Ascensus in a TPA acquisition, according to Mr. Barstein.

TPA firms often rely on their record keepers to refer new business, Mr. Barstein said. "If the record keeper feels like the referral or current business could be at risk to go to Ascensus, they may be less likely to refer new business," he said.

To draw a clear distinction between the record-keeping and TPA businesses, Ascensus in April renamed the TPA side of the house FuturePlan. "It's not only a separate name and separate division but it also operates with separate systems," Mr. Bramlett said.

The "Chinese wall" between the record-keeping and TPA information systems, he said, ensures that information about record keepers will not be shared with Ascensus.

Ascensus is mindful of the challenge of integrating the new firms. The company has averaged more than one TPA acquisition per month for the past two years, making the integration process daunting, Mr. Bramlett said.

"That's probably our largest challenge but one that we feel very good about in terms of having a handle on it," he said.