Sun National Bank's wealth management business is off to a slow start thanks to the recession, but executives at the Vineland, N.J., bank say they remain committed to the business.
Sun's year-old wealth business focuses on cross-selling investment products, financial planning and insurance to its commercial customers. Because of the recession, said Brad Fouss, a senior vice president and the director of specialized banking at Sun, "the last thing clients were thinking about was wealth management, insurance and estate planning. That was a big challenge for us."
A year ago, Steven Ferrara, the chairman and chief executive officer of Northeast Planning Corp., which is Sun's partner in the wealth management business, projected revenues of at least $1.5 million in its first year and $3.5 million in the second year.
Revenues have fallen short of the mark so far, said Fouss, who declined to give specific figures. But Sun, a subsidiary of Sun Bancorp Inc., has laid the foundation for growth in a business it deems "indispensable," he said.
"This is a necessary product to have when you're doing middle-market banking in New Jersey," he said.
The wealth management business is "critical" for the bank, Fouss said, because it complements the lending operation. "If you just focused on the loan side, you would not be diversifying, and you'd have no fee income," he said.
What is more, clients who needed wealth management services would have no choice but to look outside the bank, he said.
Sun's home turf is not the only place where small businesses have been hunkering down. As a group, they have been hit harder than their larger peers in the past 18 months, according to Christine Barry, a research director at Aite Group.
An Aite survey conducted this summer said small businesses were less interested in new products than in ways to save money and operate more efficiently.
"I'm not surprised that wealth management and estate planning" were not top priorities, Barry said.
Sun's wealth unit was introduced after Thomas Geisel was named president and chief executive officer of the bank in 2008. It had had a retail investment business but was not organized to do financial planning or wealth management for its commercial and high-net-worth customers.
To remedy that, Sun went into partnership with Northeast Planning, a Cranford, N.J., financial planning unit of Guardian Life Insurance Co.
Through the partnership, Northeast Planning has put six financial advisers to work with Sun's commercial lenders.
The partnership was begun during a trend for banking companies to focus more on small businesses. To win their business — and hold it — banks are offering more financial advisory services, as Sun is doing, Barry said.
Sun spent much of this year forging relationships between the six advisers and its bankers. Advisers met with regional lending groups to learn "what we do in the commercial banking world," Fouss said, and the bankers learned about the products and services the advisers offered.
"A lot of education needed to go on in the first half of this year," he said. Bankers "had to get a comfort level with the financial advisers before they brought them in the door with their customers."
The "getting-acquainted" period, Fouss said, consisted of a series of formal product information meetings as well as "a lot of informal lunches and breakfasts."
Bank executives have said that it is tricky to develop the trust needed to cross-sell wealth management products effectively. To overcome any reluctance by its bankers to share customers, Sun sought out a partner staffed with veterans who knew the local terrain, Fouss said.
Most of the advisers Sun has worked with have 20 to 30 years of experience in Sun's market, he said.
"That gave them a lot of instant credibility," he said. "And they were willing to spend time up front meeting with relationship managers and talking about products and services."
Referrals started to come by last spring and gathered momentum around midyear, Fouss said. The wealth management effort has produced "a lot of referrals across every region of the bank," he said.
Though the recession hampered things, building bridges between advisers and bankers has "set us up real well for next year," he said. "We're hoping the economic year is going to be better than 2009."