Insurance broker takes big leap into retirement plans

By Margarida Correia

Another insurance broker has plunged into the retirement plan business to leverage what it sees as natural synergies between employee health-care benefits and workplace 401(k) plans.

The latest entrant — Atlanta-based benefits broker OneDigital Health and Benefits Inc. — on Feb. 4 announced the acquisition of $45 billion registered investment adviser Resources Investment Advisors LLC and a slew of retirement adviser firms that were either affiliated with the RIA or became affiliated after they were bought. In total, the firms, which include such well-known retirement shops as Cafaro Greenleaf and Chepenik Financial represent more than $41 billion in assets under advisement.

The move is OneDigital's first major foray into the retirement plan and wealth management business. For the past 20 years, the company has been busy building what it refers to as an "employee-benefits only" operation, brokering health insurance plans and other employee benefits for more than 50,000 employers nationwide, but it now wants to expand into the business of retirement plans, said Mike Sullivan, OneDigital's co-founder and chief growth officer.

"This is our push into the marketplace," he said of the company's "initial collection of deals" in the retirement arena.

Mr. Sullivan declined to say how much OneDigital paid for the acquisitions.

The growing connection between health and financial wellness in the minds of many employers is driving the company's acquisition spree. "The market is asking for a more holistic and more integrated approach to health insurance and retirement," Mr. Sullivan said. "We're making a significant move into the retirement space because our employers are asking for it."

The acquisitions bring together some of the largest retirement adviser firms in the country, giving OneDigital the retirement expertise it is looking to offer clients.

In addition to Resources Investment Advisors, an Overland Park, Kan.-based firm that supports independent financial advisers focused on corporate retirement plans, OneDigital bought 10 benefits and retirement advisory firms — Bukaty Companies Financial Services, 401k Advisors Intermountain, Cafaro Greenleaf, Capstone Advisory Group LLC, Chepenik, SHA Retirement Group, Strategic Retirement Group Inc., Teros Advisors, i2i Benefits and Insurance Services LLC — and the remaining retirement business of Lincoln Insurance Services, which it initially acquired in 2017.

It also bought the San Diego-based adviser practice of Fulcrum Partners LLC and three California-based adviser practices of Retirement Benefits Group.

Industry convergence

To industry observers, the multiple acquisitions represent what they broadly define as the "convergence of health and wealth." The chief financial officers and leaders of human resources departments at organizations across the country are more aligned about how to help their employees achieve financial wellness and retire with dignity, said Dick Darian, the Charleston, S.C.-based CEO of M&A consulting firm Wise Rhino Group, which advised OneDigital and Resources Investment Advisors in the transaction.

"The plan sponsor is beginning to look at those things a lot more holistically," he said, referring to employee benefits and retirement plans. "Companies like OneDigital that have capability providing benefits, retirement and wealth will be able to approach those plan sponsors in a much more effective and holistic way."

Indeed, health insurance and retirement plan benefits have evolved in distinct silos, industry experts are quick to note.

"They've grown up as completely separate verticals not because that's what employers wanted but more because it's the way the two industries grew up," Mr. Sullivan said.

By combining health and wealth benefits under one umbrella, both OneDigital and the retirement adviser firms win complementary capabilities, according to industry observers. OneDigital gains a foothold in the retirement arena while advisers gain expertise in employee benefits and health insurance.

"I look at it as very complementary," said Dennis Gallant, a Boston-based senior analyst at research and consulting firm Aite Group. "It allows them to have a more unified front at looking at the benefits for any corporation that they're dealing with."

An integrated approach is especially helpful in the area of health savings accounts, he said, as decisions around HSAs are typically made by benefits groups without input from the people running the retirement plans. Collapsing the services would help decision-makers better determine which health plans and respective HSAs to bring in, giving advisers a chance to weigh in on HSAs, he said. Devenir research shows that more than $13 billion of the $61.7 billion in health savings accounts as of June 2019 was held in investment accounts, which observers say creates a potential new service offering for advisers.

Latest acquisition spree

OneDigital is the latest insurance broker to move aggressively into the retirement plan advisory market. Hub International Ltd. last year, for example, acquired 10 firms, including Global Retirement Partners, a $40 billion registered investment adviser through which many of the firms Hub acquired cleared their transactions. The company has been acquiring adviser firms since 2017. Other insurance brokers have been snapping up adviser shops for much longer, including National Financial Partners Corp., which began acquiring firms in the early to mid-2000s, and Arthur J. Gallagher & Co., which began doing so well before that, according to Wise Rhino's Mr. Darian

OneDigital distinguishes itself from rival brokers buying retirement adviser firms in that it focuses only on health and employee-related benefits and not on property and casualty insurance, he said.

"That's what makes them a little unique," Mr. Darian said, explaining that property and casualty is a "distant cousin to benefits" and has nothing to do with employees.

Now that OneDigital has established a beachhead in the retirement plan market, it plans to move aggressively to acquire more firms that fit with the company's brand in terms of culture, values and vision, Mr. Sullivan said. He declined to say how many firms the company is looking to buy this year.

"We think there's a tremendous opportunity to continue to scale this business," he said. "It's the single most strategic thing we have going on at the company right now. And we're 100% in."

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