Thanks to its acquisition of an employee benefits consulting firm, Bank of New York Corp. is serving 150,000 retirement plan participants, up from about 12,000 a year ago.
In May the bank bought Stanwich Benefits Group Inc., a benefits consulting and actuarial services firm in Purchase, N.Y. The acquisition brought some 250 clients-companies that sponsor retirement plans-raising the bank's total to 300.
It also gave the bank the confidence to target plans with more than 5,000 participants. Before, Bank of New York mostly worked with sponsors who employed about 1,000 eligible workers.
Stanwich "expanded to take advantage of our client base," said John Pugliese, a Bank of New York senior vice president. "This allows us to actually complement and build off our relationships with companies we have throughout the middle-market area."
Stanwich Benefits, now a division of the bank, has $21 billion of assets under administration.
A string of banks have made similar moves to expand their retirement business with record keeping, consulting, and other services. Just last week J.P. Morgan & Co. signaled its interest in the retail retirement market by announcing it would take a 45% stake in American Century of Kansas City, Mo, a mutual fund company that has been beefing up its own 401(k) services.
Mellon Bank Corp., Pittsburgh, recently closed its deal to acquire New York-based Buck Consulting. And Northern Trust Corp. set the pace by picking up the former Hazelhurst Associates in 1994.
Banks are not the only ones expanding in the retirement plan business. Coopers & Lybrand, for instance, acquired Kwasha Lipton, an employee benefits consulting firm in Fort Lee., N.J., earlier this year.
"This is a trend we've been talking about in the industry for several years-the increasing consolidation of providers," said Jeffrey Close, vice president of Access Research Inc., Windsor, Conn., a division of Spectrem Group.
"It's all being driven by the same things. You need critical mass, technology, and the people," he said.
There is more than $900 billion of assets in 401(k) plans today, up from $810 billion at yearend, according to Access.
In addition to bringing in clients and experience in the business, these deals have boosted the banks' ability to take on many more clients, because the firms had the extensive computer systems needed for customer service. But Bank of New York was looking primarily for the market expertise, Mr. Pugliese said.
"We had the technology on board," he said, referring to the bank's huge accounting and custody systems. He added that Stanwich's consulting muscle would beef up the bank for the 401(k) competition.
Stanwich brings to Bank of New York consultants, employee educators, and customer service representatives. The bank-which did not have a voice-mail system-is now using Stanwich's voice-response system to allow plan participants to call a toll-free number to get information on their 401(k) accounts. If customers want to transfer funds or take a loan against their assets, Stanwich employees pick up.
"These people are experienced in employee benefit plans to respond to all questions that could be asked of them" Mr. Pugliese said.