Beware of the Mergers

An article in InvestmentNews this week titled “Mergers of Advisers and Benefit Firms Seen as a Natural Fit” ( talks about the natural synergies of those two types of organizations coming together with the increase in baby-boomer retirements.

According to the article there seems to be little regulatory issues standing in the way to prevent this merger activity. In fact, they note that New York based Lenox Advisors has merged with Murphy Todd Group, a Chicago based employee benefit group.

Although there may be synergies involved, it is likely that some of the fiduciary aspects may be overlooked. Many times when benefit plans, especially insurance focused ones bundle products there tends to be a lot of hidden fees that investors are unable to detect.

The article points out that there may be a conflict between the investment advisor wanting to promote more aggressive, higher fee products, thus generating more income while the benefit advisor or insurance company may be promoting more conservative, lower fee producing fixed income products.

In addition to the competing investment guidance, it is likely that the investor will have less investment options to choose from. In other words, they may only have access to one investment advisor who manages various disciplines, thus depriving the investor of being able to invest in “best of breed” products. For example, the investor would not be able to choose products from different fund families and hone in on specialized talent in each asset class.

Although there may be many synergies in these upcoming mergers, in the end, it may ultimately be at the investor’s expense.

ArticlesSteven Karsh