Doubling-Down On The TPA Sales Channel

By Cyril Tuohy

InsuranceNewsNet

Some big insurance carriers are beefing up their management ranks in the third-party administrator (TPA) channel as firms compete to lower costs and raise revenue for retirement and pension services.

Earlier this month, Great-West Financial appointed two new directors, Jo Wetherille and Kevin Spaeth, to serve the TPA channel, which the carrier says is growing. And last month, following the acquisition of The Hartford’s Retirement Plans Group, MassMutual’s Retirement Services Division added Echo Robinson and Kevin Catineau to the TPA sales team.

MassMutual’s two new hires will bring “momentum and tremendous value” to the company’s TPA relationship, MassMutual head of TPA market development Lynn Banziruk said in a statement last month.

Similarly, in April, Security Life Insurance Co. announced the addition of Michelle Petersen as the company’s new TPA relationship manager.

Granted, a trio of announcements a trend does not make, but it’s worth taking a closer look at TPAs as a sales channel for retirement and pension services, particularly if the channel is growing. What, exactly, are TPAs? Who runs them? What do they do? Who represents them? How do they differ from financial advisors?

“Many of these firms are gaining share because of the focus on costs and their ability to offer plans at lower costs,” Kevin Chisholm, associate director of Cerulli Associates, told InsuranceNewsNet.

In addition, TPA-influenced assets will increase to 22.5 percent of all 401(k) assets in 2014, according to a Cerulli study published last year.

Chisholm calls TPAs a “unique group,” about which it is difficult to generalize. TPAs can function as a partner, distributor or even competitor to an insurance company that sells 401(k) record-keeping services. A TPA may only provide plan administration services, in which case the TPA functions as a partner to an insurance company that sells 401(k) record-keeping services.

TPAs also may offer advisory services and be associated with a broker-dealer, in which case the TPA would be similar to a financial advisor, Chisholm said. TPAs, however, are not a new channel, he said.

The largest TPAs, such as Sentinel Benefits & Financial Group, can compete with insurance companies in the small plan 401(k) market, Chisholm said.

Another TPA, Angell Pension Group, retains Certified Pension Consultants (CPCs), Qualified Pension Administrators (QPAs), Qualified 401(k) Administrators (QKAs), actuaries, attorneys and other benefit specialists, “all of whom understand the importance of integrating their individual disciplines within the larger scope of the firm's services,” the firm says on its website.

A TPA marketplace breakdown provided by Cerulli notes that there are fewer than 40 firms considered “elite” TPAs that offer a full suite of benefit and advisory services on a national level. These TPAs also are responsible for selling retirement products and for record-keeping, but don’t rely on vendors to do so.

In the next tier are what Cerulli calls “standard plus” TPAs, of which there are fewer than 200 firms nationwide. These companies offer a full complement of services on a metropolitan or regional level, as well as partial advisory services. Some of these companies may be responsible for selling and record-keeping around retirement plans, while others may be responsible for either selling or record-keeping. The TPAs in this group may rely on vendors.

The third or “standard” tier is populated by small, local firms, of which there are an estimated 1,500 around the country. These companies are responsible for servicing retirement accounts on a local level and provide limited advisory services. Some may be involved in selling retirement products and record-keeping, while others may be involved in record-keeping only. Still others may not be involved in selling or record-keeping at all.

Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].

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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].