Ex-Fidelity’s Reynolds aims for 401(k) market’s top stop

That was the jump start he was looking for. After the acquisition, the company will administer 401(k)-type accounts with a combined $387 billion in assets.

"Now all at once you have total market coverage," from small to large plans in all parts of the defined-contribution business, he said. "It's a scale game."

Fidelity isn't threatened by the consolidation of recordkeeping businesses under one of its own 401(k) architects, said Steve Patterson, head of sales for Fidelity's defined- contribution business.

"They have a lot of work in front of them," Patterson said. "Putnam and Great-West, they have to take care of those two distinct cultures and bring in a third group. That's a lot of work and that's good for us." 'Difficult' Business

Breadth is increasingly important for recordkeepers as fee- disclosure regulations and lawsuits have caused employers to scrutinize costs and negotiate to lower them, said David Halseth, principal at the Denver-based Strategies LLC, whose firm advises employers with a combined $2.2 billion in 401(k) assets. Providers need a wide base of participants to spread out the costs of technology improvements and services. They also usually need to sell other products such as mutual funds or insurance to make the economics work, said Halseth.

"It's very, very difficult to make money," he said. "Margins are razor thin."

Reynolds, who in 2006 was among a handful of finalists to become commissioner of the National Football League before the NFL selected Roger Goodell, has a history of tackling difficult situations.

Putnam Turnaround

He took over Putnam when it was hemorrhaging assets, with $44 billion in mutual-fund withdrawals from 2006 through 2008, according to data compiled by Chicago-based researcher Morningstar Inc., which excludes money funds, funds of funds and exchange-traded products. He stopped the bleeding and last year the company's flows turned positive, with its mutual funds attracting $3.8 billion. Putnam manages about $70 billion in mutual-fund assets compared with Fidelity's $1.2 trillion as of April 30, Morningstar data show.

Reynolds has insurance capabilities through Great-West to create products that offer guaranteed income at a time when concerns about retirees outliving their savings are mounting.

"We're in the second inning of that game," Reynolds said of solutions to help workers spend their retirement-account balances. "There's a huge opportunity for us."

Reynolds has called for more lifetime income products as options in 401(k)-type plans that would blend mutual funds with annuities, which are insurance contracts that can provide guaranteed monthly payments for life in exchange for upfront payments. The company is working on such a product with an annuity built in that could be available as soon as this year, he said.

'Mouse Trap'

Once the retirement businesses are combined, Reynolds said his priority is to target the full range of employers — from large to small — and to sell workers investments managed by Putnam as well as insurance products from Great-West.

"We're building a better mouse trap," he said. Great-West's acquisition of JPMorgan's retirement business is scheduled to close in the third quarter of this year. When it does, it will be ahead of competitors such as Vanguard Group Inc. and Prudential Financial Inc. as the second-largest recordkeeper by participants, serving about 6.8 million workers. Fidelity dwarfs all of them, administering accounts for more than 17 million workers.

Reynolds helped give Fidelity its long lead. On his watch, Fidelity Institutional Retirement Services Co. swelled to about $300 billion in assets by 2000, from $3 billion when Reynolds took it over in 1989. In his last seven years at Fidelity as COO, Reynolds continued to focus on the 401(k) profit engine, lobbying for federal legislation passed in 2006 letting employers automatically enroll workers into the accounts and default them into target-date mutual funds sold by money managers including Fidelity and Putnam.

Reynolds said his efforts to expand in the 401(k) market aren't about beating his former employer. It's about being No. 1.

"I'm a competitive person," he said.

–With assistance from Charles Stein in Boston.