May 29, 2008

A New Retirement Heavyweight

With CitiStreet under its belt, ING becomes the third-largest player in the defined contribution business

With its recent acquisition of CitiStreet LLC, one of the largest providers of retirement plans and benefit services in the U.S., ING Group is set to become a heavyweight in the retirement services industry--an area that Rick Mason, the president of ING U.S. Wealth Management's retirement services market, believes is set for great growth going forward.

"We are focused on being a long-term market leader in retirement services as this is a key focus for ING globally," Mason says. "We're really in a position to grow and expand and with the acquisition, our value propositions will greatly increase in the small-, mid-, and large-size corporate space, as well as in healthcare and education."

With CitiStreet under its belt, ING becomes the third-largest player in the defined contribution business and the second largest in the number of plan participants it services. Following the $900 million CitiStreet acquisition, ING will have $351 billion in assets under management and assets under administration and it will be serving more than 14 million plan participants.

The combined entity will be able to focus on looking at "total ideas" in the retirement finance area, says Sandy McCarthy, president of CitiStreet, particularly in the small- and mid-sized corporate arena, as this is where the greatest demand for defined contribution plans is likely to come from in the near-term. Companies in these segments are looking for functionality and for retirement plans that are consistent with what their larger peers enjoy, McCarthy says. ING/CitiStreet, with the volume of business it already has, its extensive distribution network, and its penetration into the smaller end of the corporate space, will be in a position to offer them that.

But even if the defined contribution business is the primary goal of both ING and CitiStreet, the combined company, McCarthy says, can still play a key role in the defined benefit space. The trend is to phase out DB plans, but there are still plans around that need to be administered for which CitiStreet has the capability, she says. Sponsors are also revisiting DC plans as they freeze DB plans and they need help in enhancing those DC plans to make them more attractive, she says, which is where ING can help.

But in developing meaningful retirement savings plans in the DC space, the overarching goal is to really service the end user and to make sure that these people are ready for retirement, Mason says. For this, advisors need to be well equipped and positioned correctly, and ensuring this is the case continues to be a priority for ING and CitiStreet, both of which have always had a customer-centric focus, Mason says.

"Advisors are looking for tools, particularly in the small end and lower end of the mid-market segment, and we make sure we give them those tools," he says. According to McCarthy, plan sponsors are also looking for guidance, particularly in coming up with more holistic solutions to ensure that individual retirees maximize their potential savings, and this is where a tie-up between CitiStreet and ING can perhaps be most effective.

"Demographics are creating the need for more products earlier on, and I think that ING can really help to build out something that is like an income solutions product, where plan sponsors can evaluate investment products that are offered and see whether they would be useful to employees in their retirement," McCarthy says.

Sponsors have shied away from this in the past because they didn't want to have specific products marketed to them, according to McCarthy. Now, however, they're finding that more and more people are losing money when they retire because of having to pay high brokers' fees, so if sponsors have the ability to comb through products at an early stage and see how they would best suit individuals when they retire, this would go a long way toward minimizing losses in retirement, she says, noting that looking for help increasing income solutions is a growing need among sponsors.

The CitiStreet acquisition fits in with ING's long-term strategy of supporting the organic growth of the group through suitable add-ons that are aligned with its core banking, investments, life insurance, and retirement services businesses, the company said in a statement. CitiStreet--jointly owned by Citigroup Inc. and State Street Corp.--has approximately 3,700 employees and provides recordkeeping and administrative services, counseling and advice programs, and a range of other benefit plan services.

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