Could mergers of equals keep some players in the wealth game?. Insurance and retirement-plan distributors Lincoln Financial and Jefferson Pilot plan to merge, partly in a bid to capture more wallet share from well-to-do baby boomers. According to a new report by PricewaterhouseCoopers, such combinations could become more common, as financial-service providers move to make their wealth-management propositions economically viable in the face of increasing competition.

“By joining forces we will create a company with enhanced scale, a comprehensive and balanced product portfolio, greater distribution penetration and geographic and market diversity,” says Lincoln chairman and CEO Jon Boscia, who will serve as chairman and CEO of the merged company. “Specifically, as baby boomers continue to mature, opportunities in the retirement income segment of the market become even more attractive.”

Stayin’ alive

The boomer generation – those born between 1945 and 1963 – takes in one of every three Americans. Some of them have been slipping into retirement over the last decade or so. But as the leading edge of this demographic wave hits age 65 at the end of this decade, a trickle of retirees will become a flood – and continue that way for another 20 years. As boomers sell businesses, roll over retirement plans and exercise employee stock options, the amount of investable consumer assets in circulation in the U.S. could go from about $17 trillion at the end of 2004 to around $30 trillion by 2010, says Tiburon Strategic Advisors, a San Francisco-area consultancy to financial-service companies.

Capturing the high-end portion of those assets, however, calls either for high-touch service delivery – the traditional province of boutique wealth managers and white-shoe private banks – or, for more diversified companies, sufficient economies of scale to make the effort worthwhile. And, as Boscia underlines, “enhanced scale” is at the heart of the merger between Lincoln and Jefferson Pilot.

Jefferson Pilot CEO Dennis Glass reiterates that point. The merger with Lincoln “presents a tremendous value-creation opportunity through marketing synergies, a powerful distribution network, broad product mix, and business efficiencies” that add up to “a larger, more dynamic enterprise with greater resources and significant growth potential,” he says. Glass is in line to become president and COO of the merged company.

Same boat

Wealth management isn’t the only reason for a merger, like this one, of mass-market insurers. But it’s figuring more prominently in every such deal, as financial-service companies of all stripes jockey for position in against a backdrop of increasing consolidation.

“We believe there will be significant repositioning in the market,” says Bruce Weatherill head of PricewaterhouseCoopers’ private banking and wealth management practice. “More and more, size, in terms of assets under management and number of employees, for example, will matter as international banks go on [the] acquisition trail and local and national banks look to achieve scale through less costly growth strategies.”

Among strategies mentioned as alternatives for smaller-than-huge institutions feeling pressure from multi-national players are “hiring top performing teams from competitors or seeking joint ventures,” says PricewaterhouseCoopers, which bases its findings on a survey CEOs from 130 financial service companies around the world.

But the deal between Lincoln and Jefferson Pilot suggests that mergers of approximate equals might be another tactic for mid-tier companies looking to compete in the wealth market.

Click here to learn more about the merger between Lincoln and Jefferson Pilot.

Click here to see an executive summary of PricewaterhouseCoopers’ 2005 Global Private banking/Wealth Management Survey. –FWR

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