What a difference a day makes! Just when you figured it was going to be a leisurely holiday season -- bam! -- comes the kind of news that has retirement professionals working late into the night trying to develop a new marketing strategy. That's right, Virginia, there is another large vendor in the 401(k) market! It goes by the name of
CitiStreet, and it is a joint venture between
Citigroup (
C) and
State Street Corporation (
STT).
Under the terms of the agreement, the two firms will own Citistreet 50/50. The company will focus on providing defined contribution and total benefits administration. CitiStreet will provide administrative, outsourcing, and investment management services with the company headquarters in Quincy, Massachusetts.
Further, CitiStreet will be comprised of State Street's
Retirement Investment Services (RIS) business and
Wellspring Resources, the company's benefits administration business as well as
The Copeland Companies.
"It's a complimentary as opposed to integrate opportunity,"
Robert C. Dughi, founder of Copeland and president of CitiStreet, told InvestmentWires. "State Street has focused on the high end of the market and has created customized plans for that space. At Copeland, we have served the small and mid-sized markets with prototypical plans. Together, we offer a full spectrum of service."
"We will be offering all the services both firms currently have available. This makes a formidable vendor. We can offer bundled plans across the market both in the commercial and not-for-profit sector," Dughi contended.
The firm will also be offering annuity products to the smaller marketplace. State Street also has an alliance with
Financial Engines, and the services of that alliance will be available to clients of CitiStreet.
"CitiStreet will help us to achieve a greater scale and lower unit cost in the long-term across our existing recordkeeping and administration business platforms; solidify a defined contribution administration competency that can be leveraged in selected non-U.S. markets; and expand our already successful worksite marketing initiatives in collaboration with selected corporate clients," stated
Thomas W. Jones, chairman and ceo of Citigroup's Global Investment Management and Private Banking Group.
"We have to be as effective as other organizations in offering Internet, voice-response systems, and other participant-directed features," Dughi added.
"This joint venture extends the sophisticated, proprietary technologies that State Street has long applied to meeting the needs of large institutional investors into what is called the 'instividual' market - the market comprising individuals who are investing actively through defined contribution plans sponsored by their employers," the official continued.
For Dughi, this move will accelerate the business strategies of both firms. The distribution power of the two combined will increase exponentially. For Dughi, the old axiom of "the whole is greater than the sum of the parts" is most appropriate in describing this new joint venture. "We will coordinate access to the marketplace, and thus accelerate that access quite dramatically," he opined.
From the firms' perspectives, this new joint venture is in a unique spot. On the one hand, it is enjoying the buzz that any new company might experience, but it is built on the "veteran" status of two long-time providers in the market.
"Both enterprises have a track record in the retirement services business, but our branding will be new with all the excitement associated with that," Dughi added.
Down the road, look for CitiStreet to leverage its position with the two firms to penetrate the global defined contribution marketplace as well.
James S. Phalen has been appointed as CitiStreet's chairman and chief executive officer. He is an executive vice president of State Street and head of its Retirement Investment Services (RIS) business and Wellspring Resources.
3,000 employees will work at CitiStreet. Along with Quincy, Massachusetts, there will be offices in East Brunswick, New Jersey (current HQ of Copeland); Jacksonville, Florida (Wellspring); Minneapolis, Minnesota; and New York, New York.
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