Empower Reports Year-Over-Year Growth in Workplace, Wealth

Empower saw growth in both its workplace solutions and restructured wealth and asset management divisions in 2023, according to an earnings presentation by its parent firm, Great-West Lifeco Inc., on Thursday.

The recordkeeper and wealth manager reported defined contribution assets under administration grew 17% year-over-year in 2023 to $1.5 trillion.

“We’re continuing to see strong organic growth in 2023,” says Ed Murphy, Empower’s president and CEO, speaking after the investor call. “We’re also continuing to see a strong partnership with the adviser community. We see that on the workplace side with the number of [requests for proposal] and the new wins that we have, many of which are adviser-driven.”

Empower reported funded sales of $54 billion in its workplace solutions business in 2023, with pipeline sales of almost $2 trillion.

In its consumer wealth division, the firm reported assets under administration and management grew 31% year-over-year to $72 billion; that division, Empower Personal Wealth, was created last year under new head Carol Waddell to further connect workplace and consumer wealth management. The division grew out of Empower’s 2020 acquisition of Personal Capital and is still in “the first or second inning” of development, according to Murphy.

“We’ve done a really good job of standing up that business and investing in the brand and investing in technology and investing in people,” he says.

Murphy notes that the firm added more than 500 employees in 2023 for a total of more than 2,000 employees overall, including more than 1,000 advisers. He sees potential to add more talent to the division even as other wealth management firms are announcing layoffs, saying roles for which they will hire should range from financial advisers to engineers and product developers for consumer-facing products.

“A lot of the talent is coming to us through word of mouth and through employee referrals,” Murphy says. “We have found that to be a great channel for us in terms of new hires.”

M&A Potential

Empower’s head also said the firm is now an active acquirer in wealth management should opportunities arise, whether for distribution or product solution add-ons.

“If there’s a capability that we’re lacking and it makes sense for us to acquire versus build or partner, we’ll certainly do that,” Murphy says. “At this point, from a distribution standpoint, we’re growing organically in that regard. …. It’s also possible that at some point down the line, it makes sense for us to acquire distribution or even to partner in a particular area where we don’t have a meaningful presence in the marketplace.”

The CEO emphasized that, currently, the firm continues to be focused on inward development in terms of technology and building out the team.

When asked about conflicts with retirement plan advisories that also offer wealth management, Murphy says Empower, first, takes direction from its plan sponsor clients in terms of where to refer potential clients.

Second, when the “switch is turned on” and referrals are going to Empower, he notes that representatives first make sure that a participant would “benefit from rolling out of the plan” as opposed to staying in and maintaining institutional pricing. Representatives will also ask, he says, if a participant has a financial adviser already with whom they should partner.

Finally, Murphy notes, a little more than a year ago, the firm set up an adviser referral desk to triage participants depending on their need. Often, he says, other financial advisers do not offer services to investors with less than a certain dollar amount, in which case they may be good clients for Empower Personal Wealth.

“Around dollar amount, we are agnostic,” Murphy says. “We think people that have $30,000 in discretionary income, they want help too, and we believe we can help them in a way that addresses their needs. … But obviously, some advisers need to [have asset thresholds] because they just don’t have the bandwidth or capacity to support hundreds of lower-balance relationships. We’re in a better position to do that.”

Prudential Integration

The firm noted in its presentation that the integration of Prudential Financial Inc.’s retirement business is on track to be completed by the end of 2024, announcing that participant, asset and revenue retention are “ahead of expectations.”

In addition, the sale of the firm’s Putnam Investments division to Franklin Templeton on January 1 has resulted in “a modest gain upon disposal” to be recorded in the year’s first quarter.

In looking at the past four years from 2020 through 2023, Empower reported AUA growth of roughly two times from 2020 to the end of 2023, to $1.5 trillion from $726 billion. Total retirement plan participants grew at a similar rate, rising to 18.5 million participants in 2023 from 9.4 million in 2020, due in part to acquisitions.

Great-West Lifeco is based in Winnipeg, Manitoba, and operates in insurance, recordkeeping and wealth management in Canada, Europe and the U.S.

“We are very excited about our prospects in the U.S. retirement and wealth market,” Great-West LifeCo President and CEO Paul Mahon said on the call.

Fidelity Investments, the largest recordkeeper in the U.S. that also operates in personal wealth services, reported last week workplace retirement plan accounts rose 6% to 43.2 million in 2023, and retail accounts grew 3% to 38.7 million.