What does it take to build a top-notch wealth management organization? In the case of PeoplesBank of York, Pa., it took a bold decision to dismantle a successful in-house program and turn its investment sales over to a group of outsiders.
PeoplesBank, a unit of the $835 million-asset Codorus Valley Bancorp, started selling investment products in 1999 and by 2002 the small program was thriving. Then an opportunity arose to buy a local investment brokerage and, though it wasn't shopping for one, PeoplesBank pounced. While the acquisition presented PeoplesBank with an opportunity to significantly boost assets under management, it made the in-house investment expendable.
"These guys had worked hard," PeoplesBank chief executive Larry Miller said of the 20 or so branch managers and other bankers who had been selling investment products to bank customers. Now they were being told to refer clients to the advisers at the newly acquired brokerage arm. "They said, my God, after all this, we're done?"
It was a painful decision at the time, but it has paid off handsomely.
Codorus Valley Financial Advisers, as the brokerage was renamed, reported $1.7 million in fees last year from the sale of mutual funds and annuities, which ranks it second in the nation among institutions with assets of between $500 million and $1 billion, according to Michael White Associates' Fee Income Ratings Report. The investment boutique's assets under management have grown nearly five-fold, to $147 million, since PeoplesBank bought it.
If PeoplesBank executives "had been rigid, they wouldn't have taken the chance when that opportunity arose," Michael White, head of the eponymous research and consulting firm, who has advised PeoplesBank over the years. "By going this way, they multiplied their revenues."
The deal came together in 2002, after the head of Market Street Financial Services, in York, mentioned to the bank's chairman - who was a client of the investment firm - that he might be interested in selling the boutique. After the sale closed, it wasn't long before all investment prospects were being directed to advisers, who had the training and the time to serve them in a more in-depth fashion.
Still, the bankers' investment sales training and experience did not go to waste: Because of their ability to spot likely investment customers, they have become a powerful referral engine to Codorus Valley Financial Advisors. The 18 remaining members of the original investment sales team account for a third of the referrals to the advisers, says Bill Thompson, that unit's executive vice president.
"They're familiar with what a prospect looks like," Thompson says.