We have all witnessed the convergence of wealth, retirement and, to a lesser extent, benefits at work. Although the promise of serving over 80 million defined contribution participants is evident, as is the potential to elevate advisors and providers who may, like most changes, progress may be slow. There are several events that create quantum leaps almost overnight, which could characterize Hightower's acquisition of NEPC adding a fourth and comprehensive dimension to the convergence of retail and institutional sales.

The key moment in the convergence of wealth and retirement began with Captrust acquiring more wealth than retirement advisors by marrying them to participants to fuel their wealth practice. Most RIA aggregators have been more focused exclusively on growing and acquiring wealth firms until Creative Planning shook up the industry by acquiring Lockton's $100 billion+ DC practice for a reported $500 million.

The NEPC/Hightower combination could immediately become the dominant wealth and pensions firm by combining high-end individual retail investment capabilities with institutional investment and DC practices. Combined, the new firm will have $1.81 trillion under advisement and $258 billion under management with $156 billion from Hightower managed by 642 advisers.

Both Hightower and NEPC are giants in their respective markets with a rich customer base and long critical histories of moving markets. Hightower Advisors will have unique access to institutional investment capabilities in the private markets at a price that none of their wealth competitors can match. They can also serve the retirement planning needs of their 50,000 wealth clients, most of whom oversee or influence the DC plans of their organizations from the smallest to the largest, by providing the most the best of both worlds – high-end funds, fees and reliability. combined services with world-class investment management and financial planning.

“Four years ago, we started looking at our level of interest in the OCIO space to bring more institutional capabilities to the retail estate. It was hard to find the right fit.” Said CEO of Hightower, Bob Oros. “Many of the people we were talking to were too young to fit us well and create a transformative outcome. We engaged a third party to understand the market and met NEPC a year and a half ago. It was a very natural process.”

According to NEPC managing partner Mike Manning, “The RIA space was really attractive to offer our research, but we were cautious about distribution and didn't want to commit to a bunch of RIAs.”

The retail and institutional worlds have converged over the years, with RPAs consistently moving upmarket and institutional investment consultants attempting to move downmarket through PEPs. Manning noted, “The move toward fee-based financial planning brings the retail market closer to institutional market alignment incentives.”

Each market excels in certain services, with institutional consultants skilled in investment analysis and portfolio construction, bringing pension investment practices to the DC world, as well as the highest level of fiduciary and fee services. RPAs, especially larger firms, may be able to maintain their services in Triple F as well as assist, but they lack access to alternatives and do not have the same investment analytical resources.

RIAs like Hightower do well with investments, but their most valuable assets are the relationships and trust with clients that serve their many needs while outsourcing portfolio construction.

The Hightower/NEPC combination could lift them above not only institutional competitors, but also immediately make them a force in the DC retail market that few firms can match.

The NFP/AON deal may be significant, but not transformative. NFP has a thriving wealth practice at Wealthspire, but is one-fifth the size of Hightower. And while AON may be competitive in the institutional DC space, NFP's core business is benefits and P&C which will require most of the integration's attention and energy.

The world of RPA, RIA and IIC has largely consolidated as a scale game that has resulted in good but not transformative results. Not only do Hightower's advisors get access to institutional investment analysis, including alternative investments at a lower price than competitors due to NEPC's scale, but also the ability to serve the retirement plan needs of their client organizations rich overnight, they also have access to millions of participants in plans managed by NEPC.

Although NEPC may not have strong relationships or brand awareness with their participants, they not only enjoy the trust of plan sponsors, but they also have power with data controllers to obtain and use participant data appropriately. for sure, which is the holy grail.

NEPC now has an army of well-heeled advisors that none of their competitors can match as the DC industry looks to move beyond declining plan-level fees to participatory services.

Oros stated, “Within the first two weeks of the deal being announced, a $1 billion DC plan came from one of our advisors—we were never going to win that plan. Now, we've brought in NEPC, and we can win it.” plan. A $20 million DC plan that came into NEPC that was going to be too small for them to bid on. There was a $2.5 million client that NEPC will not serve them, which is our bread and butter.”

What could go wrong? Mergers and acquisitions fail not because of faulty logic, but because of poor execution. Can Hightower and NEPC manage the huge cultural gap between institutional and retail advisors who come and exist in different universes.

Although Hightower can serve wealthy participants, no one has figured out how to provide advice to the masses at scale. While it likely won't be a top priority during the onboarding process, which takes anywhere from 18-36 months, plan sponsors want to help all employees and will favor firms that do.

“Cost synergies are not a priority,” Oros said, but there is a lot of low-hanging fruit like overlapping investment analysts, as well as, ultimately, the question of which firm takes the strategic lead, which is not always the overlapping buyer. C-suite professionals.

Regardless, the momentum behind this dynamic Hightower/NEPC combination riding the wave of convergence of wealth, retirement and workplace benefits while adding a fourth retail and institutional dimension will be a force to be reckoned with , as well as the potential to help plan sponsors and improve participant outcomes. Will we see copycat moves by other RIAs like we saw with Mariner buying Andco, or will institutional consultants look to buy RIA or RPA aggregators? Perhaps, but first movers generally have the advantage if, of course, the execution is done well.