The executive taking over as president of the benefits administrator CitiStreet said the Citigroup Inc.-State Street Corp. joint venture needs to augment organic expansion with acquisitions if it is to meet its goal of 10%-12% annual growth over the next three to five years.
"We are pretty much out there in front as a leader in terms of products and services, so any acquisition is going to be about scale more than anything else," the executive, Sandy McCarthy, said in an interview last week.
She said CitiStreet would be interested in record keepers that could help CitiStreet get more participants. No deals are imminent, she said.
CitiStreet, of Quincy, Mass., has nearly doubled its number of participants over the past seven years, to 11.62 million. It administers more than $230 billion of assets in the United States for defined contribution, defined benefit, and health and welfare plans of corporate, government, health-care, Taft-Hartley, and not-for-profit organizations. Outside the United States it serves more than 1 million participants and administers more than $20 billion of assets.
To generate additional business, CitiStreet organized its services into two major business units in July: retirement services and health and human resources services.
CitiStreet's chairman and chief executive, Phil Lussier, said those organizational changes were designed after a strategic review of how CitiStreet could best compete in the market. "We created these business units to be aligned with meaningful marketplace trends in retirement and health services. It also allows us to build upon the success we have had in developing solutions for our customers," he said.
Ms. McCarthy has been Citi- Street's president of retirement services since its inception in 2000. Last week the company announced she would succeed Jim Murphy as president when he leaves at the end of the year to pursue other opportunities. In that role she will continue to lead retirement services, including defined contribution, defined benefit, and pension payroll services, and will become a member of CitiStreet's board.
Mr. Murphy had been in charge of the health and HR services unit in Jacksonville, Fla., which consists of health and welfare administration and HR services, but that unit will now report to Mr. Lussier.
Ms. McCarthy, who was with State Street before joining Citi- Street, said CitiStreet has opportunities to expand its retirement services participants organically by continuing to pitch its total retirement outsourcing to employers. Its total retirement outsourcing integrates an employer's defined contribution, defined benefit, nonqualified plans, and stock options plans into one platform. CitiStreet provides the overlay management and advisory services capabilities across the retirement services products.
Ms. McCarthy said the Pension Protection Act passed last year presents CitiStreet with several opportunities to offer more defined contribution products and services to employers. "Providing overlay has been effective for us in terms of generating new customers," she said. "Individuals can call in and talk to our reps, who can advise them on how to invest. We started to build it out 10 years ago and are enhancing that."
CitiStreet is nation's second-largest provider of retirement services, according to the annual PlanSponsor Recordkeeping Survey. It has 6.997 million retirement services participants, trailing only Fidelity Investments of Boston, which has 13.481 million.
"I just want us to grow and continue to provide valued services to our customers. I don't think we have to catch anyone," Ms. McCarthy said. "I think that we vary a lot from" Fidelity. "We are very solutions-oriented. Fidelity's size and scale is really built around the brand and the value that they bring to the market, and their value is different than ours might be. They have been at this a long time."
CitiStreet will continue to look for ways to bolster its offerings and is now working on new products for retirees and pre-retirees, Ms. McCarthy said. "Retirement income solutions products," including retirement reimbursement accounts and health savings accounts that can be tailored for individual customers, will be critical, she said.
"We want to continue to find ways to help individuals from their earliest working days through their career and into retirement," she said. "We are seeing a demographic shift. We want to continue to prepare employees as they move into retirement."
