Boyertown, Pa.-based National Penn Bank has its eye on more fee income, and it is using its checkbook to help get it.
The bank, a subsidiary of $4.95 billion-asset National Penn Bancshares Inc., announced Monday that it had bought Resources for Retirement Inc., a retirement plan investment advisory firm. In addition to fee income, the purchase of the Newtown, Pa., company gave National Penn entrée into the 401(k) advisory market for large businesses.
“Fee income is important to us, and the whole investment side and wealth side of the business is critical for us,” said Bruce G. Kilroy, the parent company’s group executive vice president, financial services, and chairman of its National Penn Insurance Agency Inc.
Fee income accounts for nearly 28% of National Penn’s income, a spokeswoman said. Bank officials would not say how much that share would rise as a result of the acquisition.
The banking company is no stranger to dealmaking. Since 1999, it has bought 10 other financial services companies, including banks and three insurance agencies. Mr. Kilroy said that National Penn remains in the market for more fee-generating businesses but declined to name any potential target.
Resources for Retirement technically was bought by National Penn Capital Advisors Inc., a subsidiary of the bank that sells investment advisory and retirement planning services for individuals and businesses. The deal’s price was not disclosed. It will give the bank access to the “large plan” 401(k) market, a segment missing from National Penn’s existing advisory business.
The company has high hopes for the defined contribution business, said E. Vaughn Landes, a senior vice president at National Penn Capital Advisors.
“That environment has become very, very hot because of some of the due diligence requirements that are associated with the scandals and corporate malfeasance over the past few years,” he said. “We’re really looking to provide a full menu of services.”
Resources for Retirement is strong in clients that employ 100 to 1,000 employees, he said. In 2004, the advisory firm’s clients had $800 million in retirement plans, he added, and its clients’ average plan size now is about $45 million.
Among National Penn’s businesses are investment management units that manage a combined $2 billion of client assets.
The opportunity for cross-selling is part of the equation. National Penn and Resources for Retirement executives described in a statement the marriage as one in which the advisory firm’s clients will gain access to wealth management and banking services.
The acquired company will operate as a division of National Penn Capital Advisors and will keep its name and leadership team. But executives from the banking company declined to say whether the Resources team had agreed to remain for a specific period.
Keeping Resources’ top management in place is important for making the deal work, said David Darst, an analyst at FTN Midwest Securities Corp., a Cleveland investment research firm.
The company’s president and founder, Trisha Brambley, has garnered publicity for being among the first handful of 401(k) investors. She worked in the early 1980s at the employee benefits consulting firm outside Philadelphia whose co-owner, Ted Benna, is credited with creating the retirement product. Ms. Brambley and her colleagues signed up to save for their own retirements. She later helped launch some of the country’s first plans.
Mr. Darst added that, though buying banks is “pretty expensive” at the moment, advisory firms remain attractive. “This is a way for them to improve their fee income business rather quickly,” he said.
WFG Capital Advisors, a Harrisburg, Pa.-based investment banking firm specializing in the insurance industry, was the financial adviser to Resources for Retirement.
