Deals & People May 17, 2024

Principal to Expand ESOP Business Via Acquisition from Ascensus

The firm will add 800 plans and more than 165,000 participants to its leading ESOP position in the U.S.

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Principal Financial Group announced Thursday an agreement to acquire Ascensus’ employee stock ownership plan business, further solidifying its leading position in the marketplace.

When the deal closes, which is expected by the end of the second quarter, Principal will add 800 ESOP plans and more than 165,000 participants. That will bring the retirement solutions provider’s total market representation to more than 2,000 ESOP plans and about 765,000 participants, according to the announcement. The firms did not disclose terms.

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The deal between Principal and Ascensus will merge two of the country’s largest ESOP providers by assets, according to the 2023 PLANSPONSOR DC Benchmarking Survey; PLANSPONSOR, like PLANADVISER, is owned by ISS STOXX. Blue Ridge ESOP Associates currently administers 1,600 plans, according to the firm, in part from growth after a 2022 acquisition of Crowe LLP’s ESOP business.”

Principal noted a growing market for ESOPs by companies in recent years, in part due to the tight labor market, for the acquisition. In research conducted by the National Center for Employee Ownership, a nonprofit membership association that supports the space, the group noted that employees with ESOP plans tend to believe they have an advantage in recruiting and retaining talent—with about 79% of such employers saying they do much better or somewhat better than competitors in recruiting and retainment. 

“Hundreds of new ESOPs are formed every year, and companies that already have ESOPs continue to outperform their markets— one reason for that growth is the bench depth of the service providers in the field,” says Loren Rodgers, executive director of NCEO. “The acquisition of Ascensus’s ESOP business by the Principal Financial Group is a sign of the field’s health—I see it as an investment in the resources available to ESOP companies, and I’m delighted that there are still a dozen administration firms that have large ESOP client bases and deep expertise.”

Principal also cited additional products and tools as impetus for the purchase. That will include adding Ascensus’ ESOP economics consulting group and its Telescope software, which provides clients with a forecast of ESOP repurchase obligations and alternative options, according to Ascensus’ website.

Andrew Matos

“The acquisition positions us to offer greater value, enhanced services, and stronger products to our ESOP clients, and the integration of strong talent from Ascensus will be essential to support the growth of our ESOP business,” Andrew Matos, head of stock plan services for Retirement and Income Solutions at Principal, said in a statement.

For Ascensus, the sale happens just after it has been making acquisitions in other areas under new President Nick Good.

In April, the tax-advantaged solutions provider acquired Vanguard’s individual 401(k), Multiple Participant SEP and SIMPLE IRA Plans divisions. That followed the March acquisition of Mutual of Omaha’s 401(k) recordkeeping business, which Ascensus had been operating as a vendor, but then took over to manage the more than 2,300 retirement plans.

Principal’s acquisition also comes as the DOL reportedly nears a proposal on adequate consideration rules for ESOPs in coming months. The ESOP provider industry has been awaiting the proposal to help shape up a more public market for the appraisal of the shares in ESOP plans in part to protect from regulatory and litigation risk due to lack of benchmarking.  

“It appears ESOPs are having a moment,” says NCEO’s Rodgers. “I keep hearing encouraging words not only from federal agencies and from members of Congress, but especially from state governments actively seeking to encourage employee ownership. They’ve seen the benefits to their constituents when employees own a share in the company, and they’re also seeing that rooting business ownership in communities makes those communities more resilient.”

Update: Story updated with new information on ESOP market coverage.

Products & Services May 16, 2024

Product & Service Launches – 5/16/24

Macquarie adds large-cap growth ETFs; Fiserv University rolls out learning and training tools for financial institutions; and Lincoln launches new annuity linked to Capital Group ETFs.

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Macquarie Expands ETF platform with Large-cap Growth Fund

Macquarie Asset Management has launched the Macquarie Focused Large Growth Exchange Traded Funds, adding to its first three active ETFs launched in November 2023.

Bradley Klapmeyer and Bradley Angermeier, Macquarie’s large-cap growth team, will be managing the funds. The latest active ETF is designed to expand access to active investments to “everyday” investors, according to the firm.

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“By adding LRGG to our platform, we’re excited to bring the expertise of our large-cap growth team and their capabilities to the ETF market,” Anthony Caruso, head of ETF strategy at Macquarie Asset Management, said in a statement. “This ETF complements our existing BILD, PWER and STAX solutions, as we offer a diverse suite of solutions to meet the evolving needs of today’s investors.”

The fund managers combine qualitative research with quantitative analysis to manage the ETF, according to the announcement.

“Our philosophy and investment approach are rooted in the belief that quality-first investing, through a focused portfolio, is the best path to durable compounding results,” Klapmeyer, senior portfolio manager at Macquarie Asset Management, said in a statement. “Our internal team of subject matter experts conduct rigorous fundamental research to identify companies we believe possess sustainable competitive advantages, the essential characteristic that enables persistent and superior levels of long-term profitability and growth.”

Fiserv University Launches Learning, Technology Training to Financial Firms

Fiserv Inc., a payments and financial technology solutions firm, has opened Fiserv University to provide training and consulting services to financial institutions aimed at boosting productivity through technology.

The university’s offerings include knowledge development, training for technology optimization and customized consulting. Methods include in-person training, on-demand content, virtual events and on-site sessions. The program includes a performance score card for financial firms to determine which education resource is most effective for their needs.

Components of the program include:

  • Role-specific learning and technology optimization training;
  • consulting services focused on efficiency gains, streamlining ways to grow and compliance and risk management; and
  • Fiserv technology certifications for coursework completion.

“The fast-paced nature of today’s banking environment and expanding customer expectations have eliminated the luxury of ramping up. The faster employees gain the knowledge they need, the more likely they are to excel,” John Gibbons, head of financial institutions group at Fiserv, said in a statement. “Importantly, Fiserv University provides the data-driven performance insights and consulting financial institutions need to optimize technology use and maximize employee effectiveness.”

Lincoln Adds Index-Linked Annuity with Capital Group ETFs

Lincoln Financial announced a new index-linked annuity designed to protect and grow assets.

The Lincoln Level Advantage 2 offers indexed accounts that track asset manager Capital Group’s active exchange-traded funds. It is a new version of the firm’s indexed variable annuity launched in 2018, and includes something the firm is calling Secure Lock+, providing a “lock-in” feature that allows investors to reset protection within the existing term for the annuity.

“Lincoln Financial consistently enhances its product suite to help meet investor needs and provide features they can’t find anywhere else,” Tim Seifert, senior vice president and head of retirement solutions distribution, said in a statement.

Investors will have access to indexed accounts that track the performance of Capital Group Growth ETF and Capital Group Global Growth Equity ETF.

The original Lincoln Level Advantage indexed variable annuity has been the firm’s best-selling product to date, with more than $23 billion in sales, according to the firm.

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