Empower to Acquire Full-Service Retirement Business of Prudential

Empower will acquire Prudential’s DC, DB, non-qualified and rollover IRA business, in addition to its stable value and separate account investment products and platforms.

Empower Retirement and Prudential Financial Inc. announced they have entered into a definitive agreement for Empower to acquire Prudential’s full-service retirement business.

The announcement says the acquisition will add significant expertise, a broader set of capabilities and an expanded product portfolio to Empower’s existing business. The transaction, which is expected to close in the first quarter of 2022 pending customary regulatory approvals, will increase Empower’s participant base to 16.6 million and its retirement services recordkeeping assets to approximately $1.4 trillion administered in approximately 71,000 workplace savings plans.

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Empower ranked No. 2 in PLANSPONSOR’s 2020 Recordkeeping Survey by total 401(k) assets.

Prudential’s full-service retirement recordkeeping business comprises more than 4,300 workplace savings plans, through which approximately 4 million plan participants have saved $314 billion in assets. It also includes more than 1,800 employees who provide a suite of retirement recordkeeping and administration services to financial professionals, plan sponsors and participants.

Empower will acquire Prudential’s defined contribution (DC), defined benefit (DB), non-qualified and rollover individual retirement account (IRA) business in addition to its stable value and separate account investment products and platforms.

The company says it expects the acquisition to benefit retirement plan participants by combining two client-focused businesses with retirement expertise on a single state-of-the-art technology platform. The acquisition will allow Empower to expand services to the broadening spectrum of workplace savings plans it now serves, which includes mega, large, midsize and small corporate 401(k) plans; government plans ranging in scale from state-level plans to municipal agencies; not-for-profit 403(b) plans; and collectively bargained Taft-Hartley plans.

Leveraging new capabilities from its 2020 acquisition of Personal Capital, Empower will offer a personalized digital experience that can integrate the elements of any individual’s financial plan to help them better understand their current financial needs through financial advice and goal setting.

Prudential will continue to participate in the institutional and individual retirement plan market, serving retirees, annuitants and employers through its institutional investment products business, as well as through income and investment solutions provided by its individual annuities business and PGIM, its global asset management subsidiary. Following the close of the transaction, Prudential’s retirement business will consist of pension risk transfer, international reinsurance, structured settlements and institutional stable value wrap product lines.

“Empower and Prudential share a commitment to serving the financial needs of working Americans, their advisers and employers. This transaction will create an even stronger service organization at Empower, fueled by technology and the expertise of our deep talent pool,” says Ed Murphy, president and CEO of Empower. “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 financial journey.”

“Today’s announcement is a significant milestone in Prudential’s transformation and the execution of our strategy to become a higher growth, less market sensitive, more nimble business,” says Prudential Chairman and CEO Charles Lowrey.

Natixis Studies Investment Outlooks for 2021

Investment experts said changes in supply and labor, rising wages and housing prices are key trends to keep watching, along with ESG investing and cryptocurrency.

A Natixis Investment Managers webinar examined what’s been happening in the investment market over the past year and trends to watch ahead of 2022. The investment experts at the 2021 “Natixis Strategist Midyear Market Outlook” also detailed their expectations for investors as the globe prepares to head into a recovery phase post-pandemic.

Esty Dwek, head of global market strategy for the dynamic solutions team at Natixis, began the panel by observing that the U.S. has had a slow path to recovery, given new coronavirus variants and the initial gradual rollout of the vaccine in the first half of 2021. As the Delta variant becomes more widespread and COVID-19 infection rates rise among Americans, Dwek said she does not foresee an immediate recovery in the short-term. “We knew it wasn’t going to be a smooth, straight-line recovery and these past few weeks have shown this to us,” she said.

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Lynda Schweitzer, vice president and portfolio manager at Loomis, Sayles & Co., pointed to changes in supply and labor as a disruption to the economy. As more people are hesitant to return to work, companies are promoting jobs by raising wages. Dwek said she does not anticipate a return to normal wages as a result.

“We know that some people are not so keen to come back to the labor market,” Dwek noted. “Does that mean that wages will go back? I don’t think so, but it is something we will need to watch.”

Schweitzer agreed, adding, “We weren’t expecting the U.S. to slow in growth, but we were expecting the rest of the world to catch up on the vaccination front. It will probably take longer to play out. Delta variants and supply chain disruptions prolong this growth.”

Schweitzer also said high housing prices and wages are two key pieces to watch in the market. Among with supply and labor chains, a surge in demand for housing and rising wages are contributing to increased inflation, she said. 

The panelists also identified emerging market trends throughout 2020 and into 2021, saying environmental, social and governance (ESG) investing and cryptocurrency are continuing to be major points of interest for the market. According to Natixis’s Strategist Midyear Outlook Survey, almost half of participant say ESG strategies have become mainstream, and 26% say an ESG strategy is a must-have investment.

Dwek said ESG investing options are no longer niche and now permeate across asset classes and conversations with clients across the globe. “Asia is catching up quickly, while the U.S. is slowly catching up. In Europe, regulation is making this a must-have and is leading investors into this direction,” she said.

“ESG is just going to become one of the initial parts of the conversation with investors across asset allocation in the coming years,” Dwek continued.

Clients are also inquiring about ESG outcomes, not just sustainable reporting, Schweitzer said. “They want outcomes and engagement and to show that we are being participatory on ESG issues,” she explained. “It will continue to evolve and become an essential part of any investment process.”

While 17% of respondents in the survey believed cryptocurrency to be a fad and 12% said it’s a “disaster waiting to happen,” Dwek said she believes digital assets will succeed without removing power from central banks or countries; however, she admitted that there’s still some uncertainty regarding crypto’s risks.

“I do have some degree of skepticism as well. I do think the risks are underappreciated,” she said. “But I do think it’s here to stay.”

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