Thomas X. Geisel faced his share of challenges early this year when he took over as president and chief executive of Sun National Bank in Vineland, N.J.
An overarching one was to improve the bank's efficiency ratio, reducing the cost of generating each dollar of revenue. But amid the challenges, Mr. Geisel said he also saw a clear opportunity: providing financial planning and wealth management to the bank's commercial and high-net-worth customers.
"One of my strategic focuses is to make sure we are providing the core products and services to our customers," he said in an interview last week. "And one of the voids for our commercial customers was a wealth tool and wealth products and wealth services."
Sun National, a subsidiary of Sun Bancorp Inc., filled that gap on Oct. 15, announcing a partnership with Northeast Planning Corp., a Cranford, N.J., agency, to create a Sun wealth management division in the bank.
It may seem a dicey time to start a business focused on investments. But Steven A. Ferrara, the chairman and CEO of Northeast Planning, said that fear and paralysis prevail among investors in such periods and "they are looking more for people like us that can give them advice."
"The timing could not be better," said Mr. Ferrara, a 34-year financial services veteran.
Community bank investment program revenue has been slowing, however, according to a report from Michael White Associates LLC and LPL Financial Institution Services. Second-quarter revenues dropped 1.1% from the previous quarter, to $120.1 million, according to the report.
And in the year's first half annuity sales were stronger than investment sales, it said. Annuity income was up 5.5% from the year earlier, and securities brokerage income fell 5.8%.
Yet the prospect of additional fee income is attractive as a counterweight to interest income, Mr. Geisel said. "There's no doubt that when you look at the core products and services, you need to have the right mix of fee-based products and margin-based products," he said.
The bank's main goal, however, is to fill out its offerings, he said. The partnership "allows us to now provide a more sophisticated and complex wealth strategy through our corporate banking relationships," he said.
Sun National is not a stranger to the investment business; it already had a retail investment arm, Sun Financial Services.
This business offers annuities and mutual funds, which are sold by 10 dedicated brokers and about 20 licensed bankers, Mr. Geisel said. The business generates more than $1 million in fees per year, he said.
The $3.4 billion-asset bank will now make a play for more business from a customer base that it considers a strength, said Mr. Geisel — owners of small and midsize businesses. Gross revenue in the wealth management operation's first year should be at least $1.5 million, said Mr. Ferrara. Revenues in the second year could hit $3.5 million and grow by $1.5 million per year after that, he said.
If market conditions are a hurdle for the wealth management business, trust is another. Because Sun National knew that it would be asking its bankers to share clients with investment and insurance reps, it made a thorough search for a comfortable partner, Mr. Geisel said.
A compatible culture was "the biggest thing we looked at" in assessing candidates, he said.
Northeast Planning and Sun are a good fit because each uses a "high-touch, high-relationship" model and because their geographies are very similar, he said.
"Our relationship managers are dealing with financial planning and investment experts who are in the same markets as they and their customers are," Mr. Geisel said.
Northeast Planning has agreed not to form partnerships with competing banks for two years, Mr. Ferrara said.
The insurance and investment firm is deploying half a dozen of its 71 advisers to work with Sun National's corps of about 30 commercial lenders, he said. Backing them up are experts in investment planning, estate planning, and pensions, he added.
Northeast Planning is an agency of Guardian Life Insurance Co. of America, but the 40-year-old firm is not limited to selling that company's insurance products, Mr. Ferrara said.