Provident Financial Services Inc. of Madison, N.J., plans to double its wealth management assets under advisement over the next three years, to $600 million, by targeting wealthy customers as many small and midsize banking companies divest similar businesses.
James Nesci, the banking company's chief wealth management officer, said in an interview last week that it plans to increase its marketing through print and other channels, as well as to hire "seasoned" wealth advisers.
It has two advisers and wants to add four in the next three years, said Nesci, who was the chief operating officer for Wilmington Trust Corp.'s national wealth management division before joining Provident in March.
"Our marketing has been pretty light, because wealth management was just not a core focus for us," he said. "But the bank made the decision in the last six months to really push wealth management. This is the beginning of that push. We are really going to ramp up in the next 18 to 36 months."
Provident is seeking organic growth for its wealth management business, which offers an array of open architecture products and services, Nesci said.
Now is the best time to expand, he said, because the difficult economic environment has forced some competitors to divest their wealth management businesses. This has put a lot of advisers and customers on the sidelines and made them available for small providers like Provident, he said.
"I think, when you look back thru history — for example, in the 1980s Provident expanded into commercial lending during the S&L crisis — the bank has a history of looking at tumultuous times and seeing an opportunity," Nesci said. "Some banks retract services when times are tough, but we think that this is the best time to get deeper into wealth management."
Most analysts said it is difficult for a small banking company to develop a strong wealth management business. Many have sold their wealth management arms to raise capital.
But Nesci said that Provident, which had $6.5 billion of assets as of March 31, remains committed to its wealth management business, despite the industry's recent trends.
"I believe that it is important in banking to diversify our revenue stream to develop more fee-related services," he said. "This is a great way to expand revenue without the use of our balance sheet."
Alois Pirker, a senior analyst with the Boston consulting firm Aite Group LLC, said that small banking companies like Provident can still generate assets through their wealth management business.
"Some of these smaller banks have better cards than the big guys were dealt," he said. "They have good customer relationships and can still attract wealthy individuals. There is an opportunity, but banks have to work hard and take that opportunity seriously if they want their wealth business to succeed. Wealth management can't be an also-ran. They have to invest in these businesses if they want it to succeed."
Provident, which has offered trust services since the 1980s, added wealth management in 2007, when it bought First Morris Bank and Trust, which had its own trust business. Nesci said that Provident has been able to accumulate $300 million of assets under advisement "without a strong focus on sales."
The company offers asset allocation, financial planning and trust, fiduciary and custodial services to individuals with more than $1 million of investable assets.
"We want to start by focussing on our own wealthy customers," Nesci said. "We have a strong presence in New Jersey, and we think we can enhance what we are offering them with additional wealth management services."
For example, he said Provident plans to cross-sell wealth management services to its small-business borrowers.
Ultimately, the company hopes it can develop new relationships and draw wealthy customers to its bank with its wealth management services.
Nesci said he thinks Provident's wealth management division can compete by delivering strong customer service.
"We have a 'low-voicemail' policy. Our clients can get through to us when they need us," he said. "At some larger banks and specialty firms, investors with less than a certain amount of money will get lip service, if they are lucky."
Provident has 82 branches in 10 counties in northern and central New Jersey. It plans to open branches this year in Passaic, Monmouth and Essex counties.
"Provident is a company that has always looked to take advantage of opportunities in uncertain times," Nesci said.
